<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 1998.
REGISTRATION NO. 333-51617
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNION PACIFIC CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
UTAH 13-2626465
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
1717 MAIN STREET
SUITE 5900
DALLAS, TX 75201-4605
(214) 743-5600
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
UNION PACIFIC CAPITAL TRUST
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 75-6521817
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
1717 MAIN STREET
SUITE 5900
DALLAS, TX 75201-4605
(214) 743-5600
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
RICHARD J. RESSLER, ESQ.
ASSISTANT GENERAL COUNSEL
1717 MAIN STREET
SUITE 5900
DALLAS, TX 75201-4605
(214) 743-5600
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
COPY TO:
PHYLLIS G. KORFF, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NY 10022
(212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JULY 24, 1998
30,000,000 CONVERTIBLE PREFERRED SECURITIES
UNION PACIFIC CAPITAL TRUST
6 1/4% Convertible Preferred Securities
(Liquidation Amount $50 per Convertible Preferred Security)
Guaranteed to the extent set forth herein by,
and convertible into common stock of,
Union Pacific Corporation Logo
This Prospectus relates to the 6 1/4% Convertible Preferred Securities (the
"Convertible Preferred Securities"), which represent undivided preferred
beneficial ownership interests in the assets of Union Pacific Capital Trust, a
statutory business trust formed under the laws of the State of Delaware (the
"Trust" or the "Issuer"), and the shares of common stock, par value $2.50 per
share (the "Company Common Stock"), of Union Pacific Corporation, a Utah
corporation (the "Company"), issuable upon conversion of the Convertible
Preferred Securities. The Convertible Preferred Securities were issued and sold
(the "Original Offering") on April 1, 1998 (the "Original Offering Date") to the
Initial Purchasers (as defined herein) and were simultaneously sold by the
Initial Purchasers in transactions exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), in the United
States to persons reasonably believed by the Initial Purchasers to be qualified
institutional buyers as defined in Rule 144A under the Securities Act, to a
limited number of institutional "accredited investors" (as defined in Rule
501(a) (1), (2), (3) or (7) under the Securities Act) and outside the United
States to non-U.S. persons in offshore transactions in reliance on Regulation S
under the Securities Act. The Company owns all the common securities issued by
the Trust (the "Common Securities" and, together with the Convertible Preferred
Securities, the "Trust Securities"). The Trust was formed for the sole purpose
of issuing the Trust Securities and using the proceeds thereof to purchase from
the Company the Convertible Junior Subordinated Debentures Due 2028 (the
"Convertible Junior Subordinated Debentures") having the terms described herein.
The holders of the Convertible Preferred Securities will have a preference with
respect to payments in respect of distributions and payments upon liquidation,
redemption or otherwise over holders of the Common Securities of the Trust.
The Convertible Preferred Securities, the Convertible Junior Subordinated
Debentures and the Company Common Stock issuable upon conversion of the
Convertible Preferred Securities (collectively the "Offered Securities") may be
offered and sold from time to time by the holders named herein or by their
transferees, pledgees, donees or successors (collectively, the "Selling
Holders") pursuant to this Prospectus. The Offered Securities may be sold by the
Selling Holders from time to time directly to purchasers or through agents,
underwriters or dealers. See "Plan of Distribution" and "Selling Holders." If
required, the names of any other Selling Holders, agents or underwriters
involved in the sale of the Offered Securities and the applicable agent's
commission, dealer's purchase price or underwriter's discount, if any, will be
set forth in an accompanying supplement to this Prospectus (a "Prospectus
Supplement"). The Selling Holders will receive all of the proceeds from the sale
of the Offered Securities and will pay all underwriting discounts and selling
commissions, if any, applicable to any such sale. The Company is responsible for
payment of all other expenses incident to the offer and sale of the Offered
Securities. The Selling Holders and any broker-dealers, agents or underwriters
which participate in the distribution of the Offered Securities may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commission
received by them and any profit on the resale of the Offered Securities
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" for a description of
indemnification arrangements.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER MATTERS DISCUSSED UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 1.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July , 1998.
<PAGE> 3
As used herein, (i) the "Indenture" means the Convertible Junior
Subordinated Indenture, between the Company and The Bank of New York, as trustee
(the "Debenture Trustee") relating to the Issuer, (ii) the "Declaration" means
the Amended and Restated Declaration of Trust relating to the Issuer among the
Company, as Depositor (the "Depositor"), The Bank of New York as Property
Trustee (the "Property Trustee"), The Bank of New York (Delaware) as Delaware
Trustee (the "Delaware Trustee"), and the individuals named as Administrative
Trustees therein (the "Administrative Trustees") (collectively with the Property
Trustee and the Delaware Trustee, the "Issuer Trustees") and (iii) the
"Guarantee" means the Guarantee Agreement between the Company and The Bank of
New York (the "Guarantee Trustee").
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "SEC" or the "Commission"). Such reports, proxy statements, and
other information filed by the Company can be inspected and copied at the public
reference facilities of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street,
NW, Washington, DC 20549, and at the following Regional Offices of the
Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511;
and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of
such material may also be obtained from the Public Reference Section of the SEC
at Judiciary Plaza. 450 Fifth Street, NW, Washington, DC 20549, at prescribed
rates. Such material can also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. Such material may also be
accessed electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the Offered
Securities. This Prospectus, which forms a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Trust and the
Offered Securities, reference is made to the Registration Statement. Any
statements made in this Prospectus concerning the provisions of certain
documents are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission.
No separate financial statements of the Issuer have been included herein.
The Company does not consider that such financial statements would be material
to holders of the Convertible Preferred Securities because (i) all of the voting
securities of the Issuer will be owned, directly or indirectly, by the Company,
a reporting company under the Exchange Act, (ii) the Issuer has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Issuer and investing the
proceeds thereof in Convertible Junior Subordinated Debentures issued by the
Company and (iii) the obligations of the Issuer under the Trust Securities are
fully and unconditionally guaranteed by the Company to the extent that the
Issuer has funds available to meet such obligations. See "Description of
Convertible Junior Subordinated Debentures" and "Description of Guarantee."
CAUTIONARY INFORMATION
CERTAIN INFORMATION INCLUDED IN THIS PROSPECTUS UNDER THE CAPTIONS "RISK
FACTORS" AND "THE COMPANY" CONTAINS, AND OTHER MATERIALS FILED OR TO BE FILED BY
THE COMPANY WITH THE COMMISSION INCORPORATED BY REFERENCE HEREIN (AS WELL AS
INFORMATION INCLUDED IN ORAL STATEMENTS MADE OR TO BE MADE BY THE COMPANY)
CONTAIN OR WILL CONTAIN, FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. SUCH
FORWARD-LOOKING INFORMATION MAY INCLUDE, WITHOUT LIMITATION, STATEMENTS THAT THE
COMPANY DOES NOT EXPECT THAT CLAIMS OR OTHER MATTERS WILL HAVE A MATERIAL
ADVERSE EFFECT ON ITS CONSOLIDATED FINANCIAL CONDITION, RESULTS OF OPERATIONS OR
LIQUIDITY AND OTHER SIMILAR EXPRESSIONS CONCERNING MATTERS THAT ARE NOT
HISTORICAL FACTS, AND PROJECTIONS OR PREDICTIONS AS TO THE COMPANY'S FINANCIAL
OR OPERATIONAL RESULTS. SUCH FORWARD-LOOKING INFORMATION IS OR WILL BE BASED ON
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INFORMATION AVAILABLE AT THAT TIME, AND IS OR WILL BE SUBJECT TO RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN THE STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, WHETHER UNION PACIFIC RAILROAD COMPANY IS FULLY
SUCCESSFUL IN OVERCOMING ITS CONGESTION-RELATED PROBLEMS AND IMPLEMENTING ITS
SERVICE RECOVERY PLANS AND OTHER OPERATIONAL AND FINANCIAL INITIATIVES, INDUSTRY
COMPETITION AND REGULATORY DEVELOPMENTS, NATURAL EVENTS SUCH AS FLOODS AND
EARTHQUAKES, THE EFFECTS OF ADVERSE GENERAL ECONOMIC CONDITIONS, FUEL PRICES,
LABOR STRIKES AND THE ULTIMATE OUTCOME OF SHIPPER CLAIMS RELATED TO CONGESTION,
ENVIRONMENTAL INVESTIGATIONS OR PROCEEDINGS AND OTHER TYPES OF CLAIMS AND
LITIGATION.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference herein its Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, its Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998, its current reports on Form 8-K
dated January 23, 1998, February 26, 1998, March 20, 1998, March 25, 1998, March
31, 1998, April 1, 1998, April 20, 1998, April 23, 1998, May 29, 1998 and July
23, 1998, and the description of capital stock of the Company that is contained
in the registration statement filed under the Exchange Act under File No.
1-6075, including all amendments or reports filed for the purpose of updating
such description.
All documents filed by the Company with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the filing of a post-effective amendment which indicates the
termination of the offering hereunder shall be deemed to be incorporated by
reference in this Prospectus and to be a part of this Prospectus from the date
of filing of such documents.
Any statement contained in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the above documents incorporated or deemed to be
incorporated herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates) and any other information requested thereby as
described above under "Available Information." Written or oral requests should
be directed to the Company's principal executive office at: Union Pacific
Corporation, 1717 Main Street, Suite 5900, Dallas, Texas 75201-4605, Attention:
Corporate Secretary (telephone 214-743-5600).
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<PAGE> 5
RISK FACTORS
Prospective purchasers of the Offered Securities should carefully review
the information contained elsewhere in this Prospectus and should particularly
consider the following matters.
RISK FACTORS RELATING TO THE COMPANY
CONGESTION AND SERVICE ISSUES; IMPACT ON RESULTS OF OPERATIONS
In the third quarter of 1997, congestion began to have a serious adverse
effect on the operations and earnings of Union Pacific Railroad Company
("UPRR"), the Company's principal rail subsidiary. System congestion started in
and around Houston and the coastal areas of Texas and Louisiana (the "Gulf Coast
region") and spread throughout the system as UPRR shifted resources to help
mitigate the problem in the Gulf Coast region. The Company reported a decline in
net income from continuing operations of approximately 41%, from $733 million
for 1996 to $432 million for 1997. Moreover, the Company incurred a net loss of
$152 million ($.62 per diluted share) in the fourth quarter of 1997 (which
included a $40 million after tax loss recognized in connection with Company's
planned sale of Skyway Freight Systems, Inc. ("Skyway")) and a net loss of $62
million ($.25 per diluted share) and $419 million ($1.70 per diluted share) for
the first and second quarters of 1998, respectively. Second quarter results
included a $261 million loss from discontinued operations arising from the
expected sale of Overnite Transportation Company ("Overnite"), the Company's
principal trucking subsidiary. See "The Company." This decline in earnings is
primarily the result of UPRR's service and congestion problems. The Company
estimates that the combined effects of lost business, higher costs associated
with system congestion, and costs associated with the implementation of the
service recovery plan described below, alternate transportation and customer
claims had a negative effect on net income for 1997 of approximately $450
million, after tax, and a negative effect on net income for the first and second
quarters of 1998 of approximately $260 million, after tax, and $434 million,
after tax, respectively. Although progress has been made in improving service,
UPRR expects these problems to continue to have an adverse impact on 1998
results.
The Company has adopted certain measures to alleviate the congestion
problems, including the implementation of a Service Recovery Plan (the "Plan")
on October 1, 1997. The Plan focuses on reducing the number of cars on the
system and restoring system velocity, which, in turn, results in more reliable
service to customers. In addition, the Company has taken other measures to
address the service and congestion problems, including (i) a concentrated effort
to hire more train and engine employees, (ii) the implementation of directional
running, which provides for the movement of trains primarily in opposing
directions on parallel lines and results in the avoidance of numerous daily
train "meets" on those lines, on parallel tracks between Houston and St. Louis,
and (iii) the establishment of a coordinated dispatching center in Houston,
which is designed to provide close coordination of operations of UPRR and The
Burlington Northern and Santa Fe Railway Company ("BNSF") in the Houston area
and ensure the best possible handling of all rail traffic there. Recently,
service in UPRR's Central Corridor between Chicago and Utah has been slowed by
track maintenance and capacity expansion work which is expected to be completed
by year end. In addition, UPRR has recently experienced congestion on its lines
in the Los Angeles basin and on the Sunset Route west of El Paso, Texas, caused
in part by two derailments, tight crew supply and limited track capacity in that
region, and the learning curve associated with the integration of the computer
system of Southern Pacific (defined herein) in the region into UPRR's computer
system, which commenced July 1, 1998. UPRR has been working to reduce this
congestion by rerouting trains from this region to other portions of its system.
While the Company believes that it will ultimately be successful in
alleviating the congestion-related problems experienced by UPRR and returning
the Company to profitability, there can be no assurance that the recovery will
not be delayed for a substantial period, which would have a continuing adverse
effect on the Company's financial results, or that additional measures will not
be necessary to resolve such problems. The timing of the Company's return to
profitability will be determined by how rapidly it is able to eliminate
congestion and return to normal operations throughout its system. As a result of
operating losses at UPRR and in order to fund its capital program, the Company
has incurred substantial incremental debt since December 31, 1997, most of
which has been repaid from the proceeds of the issuance of the Convertible
Preferred Securities.
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<PAGE> 6
RAIL SERVICE PROCEEDINGS AND RELATED MATTERS
UPRR is currently subject to an emergency service order issued by the
Surface Transportation Board of the U.S. Department of Transportation (the
"STB") on October 31, 1997, as an outgrowth of a proceeding initiated by the STB
on October 2, 1997 to investigate rail service problems in the western United
States. The original service order, which, among other things, imposed several
temporary measures designed to reduce congestion on UPRR's lines in the Houston
area, was modified and extended by a supplemental order dated December 4, 1997.
On February 25, 1998, the STB, citing the gravity of UPRR's congestion problems
and characterizing them as "not yet close to being resolved," further modified
the emergency service order and extended it until August 2, 1998, the maximum
period allowable under law for the original order. Requests by two shippers to
modify the emergency service order to grant BNSF the right to serve their plants
are pending. On July 17, 1998, three shipper organizations filed a petition with
the STB asking that the emergency service order be renewed following August 2,
1998. UPRR intends to oppose that petition.
On March 31, 1998, the STB initiated a proceeding under its continuing
oversight jurisdiction with respect to the merger of Southern Pacific
Transportation Company and its affiliated railroads ("Southern Pacific") and
UPRR, to consider proposals for new remedial conditions to the merger as they
pertain to service in the Houston, Texas/Gulf Coast area. The proceeding was
initiated in response to submissions by Texas Mexican Railway Company ("Tex
Mex"), Kansas City Southern Railway Company ("KCS") and the Greater Houston
Partnership ("GHP"), proposing that UPRR be directed to transfer certain lines
and facilities in the Gulf Coast region to other rail carriers, that a "neutral"
switching operation be established in the greater Houston area and that
provisions in the STB's emergency service order that expanded Tex Mex's right to
handle traffic to and from Houston be adopted permanently. The STB's decision
announcing the proceeding established a procedural schedule for the submission
of evidence, replies and rebuttal. Separately from this proceeding, a shortline
railroad, the Arkansas, Louisiana and Mississippi Railroad ("AL&M"), has filed a
request that an additional condition be imposed on the merger allowing AL&M to
interchange with BNSF.
On July 8, 1998, various parties filed applications for conditions in the
remedial conditions proceeding. For example, BNSF sought trackage rights over
UPRR's line between San Antonio and Laredo, Texas, trackage rights on UPRR's
line between Taylor and Milano, Texas, "neutral switching supervision" on
certain branches in the Houston and Beaumont areas, and a variety of other
conditions. KCS and Tex Mex, in a joint filing with the Railroad Commission of
Texas, the Chemical Manufacturers Association, the Society of the Plastics
Industry and several other parties, sought a number of conditions, including the
opening to other railroads and switching by a "neutral switching company" of
numerous industries now exclusively served by UPRR in the Houston area, the
compulsory sale or lease to Tex Mex of a UPRR yard in Houston, the compulsory
sale to Tex Mex of a former Southern Pacific line between Rosenberg and
Victoria, Texas, the compulsory transfer to KCS and Tex Mex of UPRR's Beaumont
Subdivision between Houston and Beaumont in exchange for a track that KCS and
Tex Mex propose to construct on the right-of-way of the Southern Pacific line
between those cities, and the adoption on a permanent basis of the provision of
the emergency service order allowing Tex Mex to handle traffic moving between
Houston and points other than Tex Mex's own lines, and of certain other
provisions of that order. A number of shippers, including Dow Chemical Company,
Formosa Plastics Corporation and E.I. DuPont de Nemours and Company, also
individually sought various conditions. UPRR's response in opposition to the
condition requests is due on September 18, 1998. UPRR believes that the
applications are without merit and intends to contest them vigorously.
There can be no assurance that the proposals advanced by BNSF, Tex Mex,
KCS, GHP or other parties in the remedial conditions proceeding or other
condition requests such as the request of AL&M will not be approved in some
form.
SHIPPER CLAIMS
Certain customers have submitted claims to UPRR for damages related to the
delay of shipments as a result of congestion problems, and certain customers
have filed lawsuits seeking relief related to such delays. The nature of the
damages sought by claimants includes, but is not limited to, contractual
liquidated damages, freight loss or damage, alternative transportation charges,
additional production costs, lost business and lost profits. In addition, some
customers have asserted that they have the right to cancel contracts as a result
of
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<PAGE> 7
alleged material breaches of such contracts by UPRR. While the Company does not
believe that such claims will have a material adverse effect on its consolidated
financial condition, it is not possible to determine fully the effects of all
asserted and unasserted claims. In the second quarter of 1998, the Company took
a $155 million after-tax charge for the resolution of customer claims. The
Company will continue to evaluate the adequacy of its reserves for claims and
may add to such reserves if appropriate.
SHAREHOLDER LITIGATION
The Company and certain of its officers and directors are currently
defendants in two purported class action securities lawsuits. The class action
suits allege, among other things, that management failed to disclose properly
UPRR's service and safety problems and thereby issued materially false and
misleading statements concerning the Company's acquisition of Southern Pacific's
parent corporation and the safe, efficient operation of UPRR's rail network.
These lawsuits were filed in late 1997 in the Federal District Court for the
Northern District of Texas and seek to recover unspecified amounts of damages.
The Company believes that these claims are without merit and intends to defend
them vigorously.
RAIL ACCESS AND COMPETITION
Acting pursuant to requests from two members of Congress and responding to
shippers' concerns about railroad service quality, railroad rates and allegedly
inadequate regulatory remedies, the STB on April 17, 1998, following two days of
hearings, issued a decision opening inquiries into certain elements of rail
regulation. The STB noted that no parties to the hearings had shown how
aggressive remedies designed to produce lower rates and enhance competition
would permit the industry to cover system costs and support reinvestment.
Nevertheless, it (a) directed a panel of disinterested economic experts to
recommend appropriate standards to measure railroad revenue adequacy, which is
used to determine whether rates are lawful (this portion of the decision was
subsequently modified to permit, as an alternative, discussions of this issue
between railroad and shipper representatives); (b) initiated a rulemaking
proceeding to consider revisions to "competitive access" regulations in order to
address quality of service issues; (c) ordered interested parties to identify
modifications to regulations governing access on non-service-related grounds;
(d) began a rulemaking proceeding to consider eliminating product and geographic
competition as factors to be considered in deciding whether a railroad has
market dominance over rail traffic; (e) ordered large and small railroads to
negotiate arrangements that would increase the role of short-line rail carriers;
and (f) directed the railroads to establish "formalized dialogue" immediately
with large and small shippers and rail labor. The rulemakings described in
clauses (b) and (d) of the preceding sentence are pending. Meetings between
railroad and shipper representatives under the supervision of an administrative
law judge on the topics described in clauses (a) and (c) of the foregoing
sentence have failed to produce agreement, as have discussions between
representatives of the large railroads and smaller railroads on the topics
described in clause (e). The dialogues described in clause (f) of the foregoing
sentence are ongoing. Should the STB or Congress take aggressive action (e.g.,
by making purportedly competition-enhancing changes in rate and route regulation
and "access" provisions), the adverse effect on UPRR and other railroads could
be material.
RISK FACTORS RELATING TO THE CONVERTIBLE PREFERRED SECURITIES
RANKING OF OBLIGATIONS UNDER THE GUARANTEE AND THE CONVERTIBLE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company arising and accruing under the Guarantee
issued by the Company for the benefit of the holders of Convertible Preferred
Securities and under the Convertible Junior Subordinated Debentures are general
unsecured obligations of the Company which are subordinate and junior in right
of payment, to the extent and in the manner set forth in the Guarantee and the
Indenture, to all Senior Debt of the Company. At February 28, 1998, the
aggregate outstanding Senior Debt (as defined under "Description of Convertible
Junior Subordinated Debentures -- Subordination") of the Company was $7.0
billion.
Since the Company is principally a holding company, the right of the
Company to participate in any distribution of assets of any subsidiary upon such
subsidiary's dissolution, winding-up, liquidation or reorganization or otherwise
(and thus the ability of holders of the Convertible Preferred Securities to
benefit indirectly from such distribution), is subject to the prior claims of
creditors of that subsidiary, except to the
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<PAGE> 8
extent that the Company may itself be a creditor of that subsidiary and its
claims are recognized. There are various legal limitations on the extent to
which certain of the Company's subsidiaries may extend credit, pay dividends or
otherwise supply funds to, or engage in transactions with, the Company or
certain of its other subsidiaries. Accordingly, the Convertible Junior
Subordinated Debentures and the Guarantee will at all times be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of Convertible Junior Subordinated Debentures and the
Guarantee should look only to the assets of the Company for payments on the
Convertible Junior Subordinated Debentures and the Guarantee. None of the
Indenture, the Guarantee and the Declaration places any limitation on the amount
of secured or unsecured debt, including Senior Debt, that may be incurred by the
Company or the amount of debt that may be incurred by the Company's
subsidiaries. At February 28, 1998, the Company's subsidiaries had Debt and
other liabilities of approximately $7.7 billion. See "Description of
Guarantee -- Status of the Guarantee" and "Description of Convertible Junior
Subordinated Debentures -- Subordination." The ability of the Issuer to pay
amounts due on the Convertible Preferred Securities is solely dependent upon the
Company making payments on the Convertible Junior Subordinated Debentures as and
when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
Provided that no Event of Default (as defined in the Indenture) has
occurred and is continuing with respect to the Convertible Junior Subordinated
Debentures (a "Debenture Event of Default"), the Company has the right under the
Indenture to defer the payment of interest on the Convertible Junior
Subordinated Debentures accruing at any time or from time to time for successive
periods (each, a "Deferral Period") not exceeding 20 consecutive quarters with
respect to each Deferral Period; provided that no Deferral Period may extend
beyond the Stated Maturity (as defined herein) of the Convertible Junior
Subordinated Debentures. See "Description of Convertible Junior Subordinated
Debentures -- Option to Extend Interest Payment Date." As a consequence of any
such deferral, quarterly Distributions on the Convertible Preferred Securities
by the Issuer will be deferred (and the amount of Distributions to which holders
of the Convertible Preferred Securities are entitled will accumulate additional
Distributions thereon, compounded quarterly from the relevant payment date for
such Distributions) during any such Deferral Period. During any such Deferral
Period, the Company may not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock (which includes common stock and preferred
stock) other than stock dividends paid by the Company which consist of stock of
the same class as that on which the dividend is being paid or (ii) make any
payment of principal of or interest or premium, if any, on or repay, repurchase
or redeem any debt securities of the Company that then rank pari passu in all
respects with or junior in interest to the Convertible Junior Subordinated
Debentures (other than (a) dividends or distributions in Company Common Stock,
(b) any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) purchases or acquisitions of shares of Company
Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plan or any other contractual obligation
of the Company (other than a contractual obligation ranking pari passu with or
junior to the Convertible Junior Subordinated Debentures), (e) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock or (f) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged).
A Deferral Period will terminate upon the payment by the Company of all amounts
then accrued and unpaid on the Convertible Junior Subordinated Debentures
(together with interest thereon compounded quarterly, to the extent permitted by
applicable law). Prior to the termination of any such Deferral Period, the
Company may further defer the payment of interest; provided that no Deferral
Period may exceed 20 consecutive quarters or extend beyond the Stated Maturity
of the Convertible Junior Subordinated Debentures. Upon the termination of any
Deferral Period, and subject to the foregoing limitations, the Company may elect
to begin a new Deferral Period subject to the above conditions. There is no
limitation on the number of times that the Company may elect to begin a Deferral
Period. See
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<PAGE> 9
"Description of Convertible Preferred Securities -- Distributions" and
"Description of Convertible Junior Subordinated Debentures -- Option to Extend
Interest Payment Date."
Because the Company believes that the likelihood of its exercising its
option to defer payments of interest is remote, it will treat the Convertible
Junior Subordinated Debentures as issued without "original issue discount"
("OID") for United States Federal income tax purposes in accordance with
applicable Treasury regulations. As a result, holders of Convertible Preferred
Securities generally will include their allocable share of the interest on the
Convertible Junior Subordinated Debentures in taxable income under their own
methods of tax accounting (i.e., cash or accrual). Under applicable Treasury
regulations, however, if the Company were to exercise its right to defer
payments of interest, those Convertible Junior Subordinated Debentures would be
treated as reissued for OID purposes with OID in an amount equal to the
remaining interest payments thereon and would remain OID instruments for as long
as the Convertible Junior Subordinated Debentures remained outstanding.
Consequently, for United States Federal income tax purposes, holders of the
related Convertible Preferred Securities would be required to include their pro
rata share of OID in gross income as it accrues in advance of the receipt of
cash attributable to such interest income. Such holders would not receive the
cash related to such income if they dispose of the Convertible Preferred
Securities prior to the record date for payment of distributions thereafter. See
"United States Federal Income Tax Consequences -- Interest Income and Original
Issue Discount" and "-- Sales of Convertible Preferred Securities."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Convertible
Junior Subordinated Debentures. However, should the Company elect to exercise
such right in the future, the market price of the Convertible Preferred
Securities is likely to be adversely affected. A holder that disposes of its
Convertible Preferred Securities during a Deferral Period, therefore, might not
receive the same return on its investment as a holder that continues to hold its
Convertible Preferred Securities. In addition, as a result of the existence of
the Company's right to defer interest payments on the Convertible Junior
Subordinated Debentures the market price of the Convertible Preferred Securities
may be more volatile than the market prices of other securities on which
original issue discount accrue, that are not subject to such deferrals.
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Tax Event (except in certain limited
circumstances) or Investment Company Event (each as defined under "Description
of Convertible Preferred Securities -- Tax Event or Investment Company Event
Redemption"), the Company will cause the Issuer Trustees to liquidate the Issuer
and cause Convertible Junior Subordinated Debentures to be distributed pro rata
to the holders of the Convertible Preferred Securities. In certain limited
circumstances upon the occurrence of a Tax Event, the Company will have the
right to redeem the Convertible Junior Subordinated Debentures, in whole, but
not in part, for the principal amount thereof plus accrued and unpaid interest
thereon, in lieu of a distribution of the Convertible Junior Subordinated
Debentures, in which event the Convertible Preferred Securities will be redeemed
in whole at the liquidation amount of $50 per each of the Convertible Preferred
Securities plus accrued and unpaid Distributions. In the case of a Tax Event,
the Company may also elect to cause the Convertible Preferred Securities to
remain outstanding and pay Additional Sums on the Convertible Junior
Subordinated Debentures. See "Description of Convertible Preferred
Securities -- Tax Event or Investment Company Event Redemption or Distribution"
and "Description of Convertible Junior Subordinated Debentures -- Additional
Sums."
There can be no assurance as to the market prices for Convertible Preferred
Securities or for Convertible Junior Subordinated Debentures that may be
distributed in respect of Convertible Preferred Securities if a liquidation of
the Issuer occurs. Accordingly, the Convertible Preferred Securities, or the
Convertible Junior Subordinated Debentures that a holder of Convertible
Preferred Securities may receive upon liquidation of the Issuer, may trade at a
discount to the price that the investor paid to purchase the Convertible
Preferred Securities offered hereby. Because holders of Convertible Preferred
Securities may receive Convertible Junior Subordinated Debentures upon
termination of the Issuer, prospective purchasers of Convertible Preferred
Securities are also making an investment decision with regard to the Convertible
Junior Subordinated
5
<PAGE> 10
Debentures and should carefully review all the information regarding the
Convertible Junior Subordinated Debentures contained herein. See "Description of
Convertible Junior Subordinated Debentures."
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES
The Company, as holder of all of the outstanding Common Securities, has the
right at any time to terminate the Issuer and, after satisfaction of liabilities
to creditors of the Issuer in accordance with applicable law, to cause the
Convertible Junior Subordinated Debentures to be distributed to the holders of
the Convertible Preferred Securities and Common Securities in liquidation of the
Issuer, provided that the Issuer Trustees shall have received an opinion of tax
counsel to the effect that holders of Convertible Preferred Securities will not
recognize any income, gain or loss on such distribution for United States
Federal income tax purposes.
RIGHTS UNDER THE GUARANTEE
The Bank of New York will act as the Guarantee Trustee and will hold the
Guarantee for the benefit of the holders of the Convertible Preferred
Securities. The Bank of New York will also act as Debenture Trustee for the
Convertible Junior Subordinated Debentures and as Property Trustee under the
Declaration. The Guarantee guarantees to the holders of the Convertible
Preferred Securities the following payments, to the extent not paid by the
Issuer: (i) any accumulated and unpaid Distributions required to be paid on the
Convertible Preferred Securities, to the extent that the Issuer has funds on
hand available therefor at such time; (ii) the Redemption Price (as defined
herein) with respect to any Convertible Preferred Securities called for
redemption, to the extent that the Issuer has funds on hand available therefor
at such time; and (iii) upon a voluntary or involuntary termination, dissolution
or liquidation of the Issuer (unless the Convertible Junior Subordinated
Debentures are distributed to holders of the Trust Securities), the lesser of
(a) the aggregate of the liquidation amount and all accumulated and unpaid
Distributions to the date of payment, to the extent that the Issuer has funds on
hand available therefor at such time, and (b) the amount of assets of the Issuer
remaining available for distribution to holders of the Convertible Preferred
Securities on liquidation of the Issuer. The Company's obligations arising or
accruing under the Guarantee will be general unsecured obligations and will be
subordinated as described under "-- Ranking of Obligations Under the Guarantee
and the Convertible Junior Subordinated Debentures." The holders of at least a
majority in aggregate liquidation amount of the outstanding Convertible
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust power conferred
upon the Guarantee Trustee under the Guarantee.
Any holder of the Convertible Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Issuer, the
Guarantee Trustee or any other person or entity. If the Company were to default
on its obligation to pay amounts payable under the Convertible Junior
Subordinated Debentures, the Issuer will lack funds for the payment of
Distributions or amounts payable on redemption of the Convertible Preferred
Securities or otherwise, and, in such event, holders of the Convertible
Preferred Securities would not be able to rely upon the Guarantee for payment of
such amounts. Instead, if a Debenture Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
any amounts payable in respect of the Convertible Junior Subordinated Debentures
on the payment date on which such payment is due, then a holder of Convertible
Preferred Securities may institute a legal proceeding directly against the
Company for enforcement of payment to such holder of any amounts payable in
respect of such Convertible Junior Subordinated Debentures having a principal
amount equal to the aggregate liquidation amount of the Convertible Preferred
Securities of such holder (a "Direct Action"). In connection with such Direct
Action, the Company will have a right of set-off under the Indenture to the
extent of any payment made by the Company to such holder of Convertible
Preferred Securities in the Direct Action. Except as described herein, holders
of Convertible Preferred Securities will not be able to exercise directly any
other remedy available to the holders of the Convertible Junior Subordinated
Debentures or assert directly any other rights in respect of the Convertible
Junior Subordinated Debentures. See "Description of Convertible Junior
Subordinated
6
<PAGE> 11
Debentures -- Debenture Events of Default" and "-- Enforcement of Certain Rights
by Holders of Convertible Preferred Securities" and "Description of Guarantee."
The Declaration provides that each holder of Convertible Preferred Securities by
acceptance thereof agrees to the provisions of the Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Convertible Preferred Securities will have limited voting rights
relating generally to the modification of the Convertible Preferred Securities
and the Guarantee and the exercise of the Issuer's rights as holder of
Convertible Junior Subordinated Debentures. Holders of Convertible Preferred
Securities will not be entitled to appoint, remove or replace the Property
Trustee or the Delaware Trustee except upon the occurrence of certain events
described herein. The Property Trustee and the holders of all of the Common
Securities may, subject to certain conditions, amend the Declaration without the
consent of any holders of Convertible Preferred Securities to cure any ambiguity
or to make other provisions not inconsistent with existing provisions of the
Declaration or to ensure that the Issuer will not be classified for United
States Federal income tax purposes as an association subject to taxation as a
corporation or will be classified as a grantor trust. See "Description of
Convertible Preferred Securities -- Voting Rights; Amendment of the Declaration"
and "-- Removal of Issuer Trustees."
TRADING CHARACTERISTICS OF THE CONVERTIBLE PREFERRED SECURITIES
If the Convertible Preferred Securities are subject to the OID rules, a
holder who disposes of its Convertible Preferred Securities between record dates
for payments of Distributions thereon will be required to include OID on the
Convertible Junior Subordinated Debentures through the date of disposition in
income as ordinary income, and to add such amount to its adjusted tax basis. To
the extent the selling price is less than the holder's adjusted tax basis (which
basis will include all accrued but unpaid OID), a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States Federal income tax purposes.
See "United States Federal Income Tax Consequences."
ABSENCE OF PUBLIC MARKET
There is no existing market for the Convertible Preferred Securities (or
the Convertible Junior Subordinated Debentures) and there can be no assurance as
to the liquidity of any markets that may develop for the Convertible Preferred
Securities (or the Convertible Junior Subordinated Debentures), the ability of
the holders to sell their Convertible Preferred Securities (or Convertible
Junior Subordinated Debentures) or at what price holders of the Convertible
Preferred Securities (or the Convertible Junior Subordinated Debentures) will be
able to sell such securities. Future trading prices of the Convertible Preferred
Securities (and the Convertible Junior Subordinated Debentures) will depend on
many factors including, among other things, prevailing interest rates, the
Company's operating results and the market for similar securities. The Initial
Purchasers currently make a market for the Convertible Preferred Securities
offered hereby; however, the Initial Purchasers are not obligated to do so and
such market making activity is subject to the limits imposed by applicable law
and may be discontinued at any time without notice.
ANTI-TAKEOVER PROVISIONS
The Company has adopted a number of anti-takeover measures. The Company's
Revised Articles of Incorporation provide that certain transactions between the
Company and a beneficial owner of more than 10% of the Company's voting stock,
or an affiliate of such beneficial holder, require either (i) approval of a
majority of the Company's voting stock other than that held by such beneficial
holders or their affiliates, (ii) the satisfaction of certain minimum price
requirements and other procedural requirements or (iii) the approval of a
majority of the Company's directors who are not related to such beneficial
owner. The Company's Revised Articles of Incorporation and By-laws contain other
such anti-takeover measures. See "Description of Company Common Stock."
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<PAGE> 12
THE COMPANY
The Company, incorporated in Utah in 1969, operates through subsidiaries
primarily in the areas of rail transportation and trucking. The Company's rail
transportation operations principally consist of UPRR, which includes two major
acquisitions since 1995, Southern Pacific and Chicago and North Western Railway
Company and its affiliated railroads ("CNW"). The Company's trucking operations
principally consist of Overnite. On May 20, the Company announced that it
intends to sell its entire interest in Overnite through an initial public
offering of all the common stock of Overnite Corporation, a newly formed
Virginia corporation created for the purpose of indirectly holding all of the
issued and outstanding capital stock of Overnite (the "Overnite IPO").
Rail Transportation. UPRR is the largest railroad in the United States
(measured in both track miles and freight revenue), operating nearly 35,000
route miles linking Pacific Coast and Gulf Coast ports to the Midwest and
eastern U.S. gateways and providing several north/south corridors to key Mexican
gateways. UPRR serves the western two-thirds of the country and cooperates with
other carriers in the handling of freight to and from the Atlantic seaboard, the
Pacific Coast, the Southeast, the Southwest, Canada and Mexico. Export and
import traffic is moved through Gulf Coast and Pacific Coast ports and across
the Mexican and Canadian borders (primarily through interline connections).
Major categories of freight hauled by UPRR are agricultural products,
automotive, chemicals, energy (primarily coal), industrial products and
intermodal.
Beginning in 1995, the Company made significant railroad acquisitions.
- In April 1995, the Company acquired the remaining 71.6% of the
outstanding common stock of CNW's parent corporation not previously owned
by the Company for $1.2 billion.
- In September 1995, the Company acquired 25% of Southern Pacific's parent
corporation, and, in September 1996, it acquired the remaining 75% after
receipt of a decision from the STB approving the Company's acquisition of
Southern Pacific. The aggregate purchase price was $4.1 billion,
comprised of $2.5 billion in the Company's common stock and $1.6 billion
in cash.
- During 1997, UPRR and a consortium of partners were granted a 50-year
concession for the Pacific-North and Chihuahua Pacific rail lines in
Mexico and a 25% stake in the Mexico City Terminal Company at an
aggregate price of $525 million. UPRR holds a 13% ownership share in the
consortium. The consortium assumed operational control of both lines in
February 1998.
Trucking. The Company's other major line of business is truck
transportation. Overnite, a major interstate trucking company specializing in
less-than-truckload shipments, serves all 50 states and portions of Canada and
Mexico through 166 service centers located throughout the United States.
Overnite transports a variety of products, including machinery, tobacco,
textiles, plastics, electronics and paper products.
As indicated above, the Company has announced that it intends to dispose of
its ownership interest in Overnite. In connection with the Overnite IPO, the
Company recognized an after-tax loss of $261 million in the second quarter of
1998, which is accounted for as a loss from discontinued operations.
Natural Resources Divestiture. In July 1995, the Company's Board of
Directors approved a formal plan to dispose of its oil, gas and mining business
through an initial public offering (the "IPO") of 17% of the common stock of
Union Pacific Resources Group, Inc. ("Resources"), followed by a distribution of
the Company's remaining interest in Resources to the Company's stockholders on a
tax-free, pro-rata basis (the "Spin-Off"). In October 1995, Resources completed
the IPO, and, after the Company's receipt of a favorable Internal Revenue
Service ruling as to the tax-free nature of the Spin-Off, the Company completed
its divestiture of Resources in October 1996.
Skyway Divestiture. In January 1998, the Company announced its intention
to sell Skyway, a wholly-owned subsidiary engaged in contract logistics and
supply chain management, by the end of the year. In connection with the planned
sale, the Company recognized a $40 million after tax loss in the fourth quarter
of 1997. In 1997, Skyway had revenues of $152 million and an operating net loss
of $5.5 million.
The Company's executive offices are located at 1717 Main Street, Suite
5900, Dallas, Texas 75201-4605, and its telephone number is (214) 743-5600.
8
<PAGE> 13
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges on a historical basis for each of the five years ended December 31, 1997
and the three months ended March 31, 1998.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------- THREE MONTHS ENDED
1993 1994 1995 1996 1997 MARCH 31, 1998
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges............. 1.8 2.7 2.8 2.7 1.8 .4
</TABLE>
The ratio of earnings to fixed charges has been computed on a total
enterprise basis. Earnings represent income from continuing operations before
the cumulative effect of accounting changes less equity in undistributed
earnings of unconsolidated affiliates, plus income taxes and fixed charges.
Fixed charges represent interest, amortization of debt discount and expense and
the estimated interest portion of rental charges. For the three months ended
March 31, 1998, fixed charges exceeded earnings by approximately $116 million.
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<PAGE> 14
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included in
the consolidated financial statements of the Company. The Convertible Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of the Company entitled "Company-obligated mandatorily redeemable
Convertible Preferred Securities of Union Pacific Capital Trust," and
appropriate disclosures about the Convertible Preferred Securities, the
Guarantee and the Convertible Junior Subordinated Debentures will be included in
the notes to the Company's consolidated financial statements. For financial
reporting purposes, the Company will record distributions payable on the
Convertible Preferred Securities as a financing charge to earnings in the
Company's statement of consolidated income.
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<PAGE> 15
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of the
Offered Securities. Neither the Company nor the Issuer will receive any of the
proceeds from the sale of the Offered Securities.
UNION PACIFIC CAPITAL TRUST
Union Pacific Capital Trust is a statutory business trust that was formed
under Delaware law on March 17, 1998. The Trust's original declaration of trust
was amended and restated in its entirety by the Company, as sponsor of the
Trust, and the trustees of the Issuer (the "Issuer Trustees") (as so amended and
restated, the "Declaration"), on the Original Offering Date. The Company
directly or indirectly owns Common Securities in an aggregate liquidation amount
equal to 3% of the total capital of the Issuer. Payment on the Common Securities
will be made pro rata with the Convertible Preferred Securities except that upon
the occurrence and during the continuance of an event of default under the
Declaration, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Convertible Preferred
Securities. The assets of the trust consist principally of the Convertible
Junior Subordinated Debentures, and payments under the Convertible Junior
Subordinated Debentures are the sole revenue of the Issuer. The Issuer exists
for the exclusive purposes of (i) issuing the Trust Securities representing
undivided beneficial interests in the assets of the Trust, (ii) investing the
gross proceeds of the Trust Securities in the Convertible Junior Subordinated
Debentures and (iii) engaging in only those other activities necessary or
incidental thereto.
Pursuant to the Declaration, there are initially five Issuer Trustees.
Three of the Issuer Trustees (the "Administrative Trustees") are individuals who
are employees or officers of or who are affiliated with the Company. The fourth
trustee is a financial institution that is unaffiliated with the Company (the
"Property Trustee"). The fifth trustee is an entity which maintains its
principal place of business in the State of Delaware (the "Delaware Trustee").
Initially, The Bank of New York, a New York banking corporation, acts as
Property Trustee and its affiliate, The Bank of New York (Delaware), a Delaware
banking corporation, acts as Delaware Trustee until, in each case, removed or
replaced by the holder of the Common Securities. The Bank of New York also acts
as indenture trustee under the Guarantee (the "Guarantee Trustee") and under the
Indenture (the "Debenture Trustee"). See "Description of Guarantee" and
"Description of Convertible Junior Subordinated Debentures." In certain
circumstances, the holders of a majority of the Convertible Preferred Securities
will be entitled to appoint one additional trustee (a "Special Trustee"), who
need not be an officer or employee of or otherwise affiliated with the Company,
who will have the same rights, powers and privileges as the Administrative
Trustees. See "Description of Convertible Preferred Securities -- Voting Rights;
Amendment of the Declaration."
The Property Trustee holds title to the Convertible Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities and the
Property Trustee has the power to exercise all rights, powers and privileges
under the Indenture as the holder of the Convertible Junior Subordinated
Debentures. In addition, the Property Trustee maintains exclusive control of a
segregated non-interest bearing bank account (the "Property Account") to hold
all payments made in respect of the convertible Junior Subordinated Debentures
for the benefit of the holders of the Trust Securities. The Guarantee Trustee
holds the Guarantee for the benefit of the holders of the Convertible Preferred
Securities. Subject to the right of the holders of the Convertible Preferred
Securities to appoint a Special Trustee, the Company, as the direct or indirect
holder of all the Common Securities, has the right to appoint, remove or replace
any of the Issuer Trustees and to increase or decrease the number of trustees,
provided that the number of trustees shall be at least three, a majority of
which shall be Administrative Trustees. The Company pays all fees and expenses
related to the Trust and the offering of the Convertible Preferred Securities
(other than any discounts, commissions, concessions or other compensation paid
to any underwriter, broker/dealer or agent in any offering of the Convertible
Preferred Securities subsequent to the Original Offering). See "Description of
Convertible Junior Subordinated Debentures."
The rights of the holders of the Convertible Preferred Securities,
including economic rights, rights to information and voting rights, are as set
forth in the Declaration and the Delaware Business Trust Act, as
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<PAGE> 16
amended (the "Trust Act"). See "Description of Convertible Preferred
Securities." The Declaration, the Indenture and the Guarantee also incorporate
by reference the terms of the Trust Indenture Act. It is expected that, at the
time the Shelf Registration Statement (as defined herein) becomes effective, the
Declaration, the Indenture and the Guarantee will be qualified under the Trust
Indenture Act.
The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of the Company. See "The
Company."
DESCRIPTION OF CONVERTIBLE PREFERRED SECURITIES
The Convertible Preferred Securities and the Common Securities were issued
in fully registered form without interest coupons. The Convertible Preferred
Securities represent preferred undivided beneficial ownership interests in the
Trust and the holders thereof are entitled to a preference in certain
circumstances with respect to Distributions and amounts payable on redemption of
the Trust Securities or liquidation of the Trust over the Common Securities, as
well as other benefits as described in the Declaration. See "-- Subordination of
Common Securities." The Declaration will be qualified under the Trust Indenture
Act and incorporates certain provisions of the Trust Indenture Act. This summary
of certain provisions of the Convertible Preferred Securities, the Common
Securities and the Declaration does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the provisions of the
Declaration, including the definitions therein of certain terms. The form of the
Declaration is available upon request from the Issuer Trustees.
GENERAL
Payments on the Convertible Preferred Securities will be made pro rata with
payments on the Common Securities, except as described under "-- Subordination
of Common Securities." Legal title to the Convertible Junior Subordinated
Debentures is held by the Property Trustee on behalf of the Trust in trust for
the benefit of the holders of the Convertible Preferred Securities and Common
Securities. The Guarantee Agreement executed by the Company for the benefit of
the holders of the Convertible Preferred Securities provides for the Guarantee
on a subordinated basis with respect to the Convertible Preferred Securities but
does not guarantee payment of Distributions or amounts payable on redemption of
the Convertible Preferred Securities or on liquidation of the Trust when the
Trust does not have funds on hand available to make such payments. See
"Description of Guarantee."
DISTRIBUTIONS
Distributions accrue on the Convertible Preferred Securities from the date
of their original issuance at the annual rate of 6 1/4% of the stated
liquidation amount of $50 per each of the Convertible Preferred Securities, and
are payable quarterly in arrears on each January 1, April 1, July 1 and October
1 (each, a "Distribution Date"), commencing July 1, 1998, to the person in whose
name each of the Convertible Preferred Securities is registered, subject to
certain exceptions, at the close of business on the fifteenth of the month next
preceding the applicable Distribution Date. The amount of Distributions payable
for any period will be computed on the number of days elapsed in a 360-day year
consisting of twelve 30-day months. In the event that any Distribution Date is
not a Business Day, payment of the Distributions payable on such date will be
made on the next succeeding day that is a Business Day (and without any
additional Distributions or other payments in respect to any such delay) with
the same force and effect as if made on the date such payment was originally
payable. Accrued Distributions that are not paid on the applicable Distribution
Date will accrue additional Distributions on the amount thereof (to the extent
permitted by law), compounded quarterly from the relevant Distribution Date.
"Distribution" as used herein shall include quarterly distributions, additional
distributions on quarterly distributions not paid on the applicable Distribution
Date, Special Distributions and Additional Sums (as defined herein), as
applicable. See "Description of Convertible Junior Subordinated Debentures
- -- Additional Sums" and "Registration Rights." A "Business Day" shall mean any
day other than a Saturday or a Sunday, or a day on which banking institutions in
The City of New York or London are
12
<PAGE> 17
authorized or required by law or executive order to remain closed, or a day on
which the corporate trust office of the Property Trustee or the Debenture
Trustee is closed for business.
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
on the Convertible Junior Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
Deferral Period, provided that no Deferral Period may extend beyond the Stated
Maturity of the Convertible Junior Subordinated Debentures. See "Description of
Convertible Junior Subordinated Debentures -- Option to Extend Interest Payment
Date." As a consequence of any such election, quarterly Distributions on the
Convertible Preferred Securities by the Trust will be deferred during any such
Deferral Period. Deferred Distributions to which holders of the Convertible
Preferred Securities are entitled will accumulate additional Distributions
thereon, compounded quarterly from the relevant payment date for such
Distributions during any such Deferral Period, to the extent permitted by
applicable law. During any such Deferral Period, the Company may not (i) declare
or pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) other than stock dividends paid by the
Company which consist of stock of the same class as that on which the dividend
is being paid, (ii) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the Convertible Junior Subordinated
Debentures, or (iii) make any guarantee payments with respect to any guarantee
by the Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu with or junior in interest to the Convertible Junior
Subordinated Debentures (other than (a) dividends or distributions in Company
Common Stock, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, (d) purchases or
acquisitions of shares of Company Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plan
or any other contractual obligation of the Company (other than a contractual
obligation ranking pari passu with or junior to the Convertible Junior
Subordinated Debentures), (e) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock or (f) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged). A Deferral Period will
terminate upon the payment by the Company of all amounts then accrued and unpaid
on the Convertible Junior Subordinated Debentures (together with interest
thereon compounded quarterly, to the extent permitted by applicable law). Prior
to the termination of any such Deferral Period, the Company may further extend
such Deferral Period, provided that such deferral does not cause such Deferral
Period to exceed 20 consecutive quarters or to extend beyond the Stated Maturity
of the Convertible Junior Subordinated Debentures. Upon the termination of any
Deferral Period, and subject to the foregoing limitations, the Company may elect
to begin a new Deferral Period. No interest or other amounts shall be due and
payable during a Deferral Period, except at the end thereof. The Company must
give the Property Trustee, the Administrative Trustees and the Debenture Trustee
notice of its election of any such Deferral Period and shall cause the Issuer to
give such notice (which shall include notice of the deferral of Distributions on
Convertible Preferred Securities) to holders of Convertible Preferred Securities
not later than ten days prior to the related record date for Distributions on
Convertible Preferred Securities. There is no limitation on the number of times
that the Company may elect to begin a Deferral Period. See "Description of
Convertible Junior Subordinated Debentures -- Option to Extend Interest Payment
Date" and "United States Federal Income Tax Consequences -- Interest Income and
Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of interest on the Convertible Junior Subordinated Debentures.
The revenue of the Trust available for distribution to holders of the
Convertible Preferred Securities is limited to payments under the Convertible
Junior Subordinated Debentures. See "Description of Convertible Junior
Subordinated Debentures -- General." If the Company does not make interest
payments on the Convertible Junior Subordinated Debentures, the Property Trustee
will not have funds available to pay
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Distributions on the Convertible Preferred Securities. The payment of
Distributions (if and to the extent the Trust has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by the Company on a limited basis as set forth herein under
"Description of Guarantee."
CONVERSION RIGHTS
General. Convertible Preferred Securities are convertible at any time
prior to 5:00 p.m., New York City time on the Stated Maturity date (except that
Convertible Preferred Securities called for redemption by the Company will be
convertible at any time prior to 5:00 p.m., New York City time, on the Business
Day preceding any Optional Redemption Date), at the option of the holder thereof
and in the manner described below, into shares of Company Common Stock. Each of
the Convertible Preferred Securities is convertible, at the option of the
holder, into 0.7257 shares of Company Common Stock for each of the Convertible
Preferred Securities (equivalent to a conversion price (the "Initial Conversion
Price") of $68.90 per share of Company Common Stock). The conversion ratio and
the equivalent conversion price are subject to adjustment as described under
"-- Conversion Price Adjustments" below, and the conversion price and equivalent
conversion ratio in effect at any time after giving effect to all such
adjustments are hereinafter referred to as the Applicable Conversion Price and
the Applicable Conversion Ratio, respectively. The Issuer has covenanted in the
Declaration not to convert Convertible Junior Subordinated Debentures held by it
except pursuant to a notice of conversion delivered to the Property Trustee, as
Conversion Agent, by a holder of Convertible Preferred Securities. A holder of
Convertible Preferred Securities wishing to exercise its conversion right shall
deliver an irrevocable conversion notice, together, if such Convertible
Preferred Securities are in certificated form with such certificated securities,
to the Conversion Agent which shall, on behalf of such holder, exchange such
Convertible Preferred Securities for a Like Amount (as defined under
"-- Liquidation of the Trust and Distribution of Convertible Junior Subordinated
Debt") of Convertible Junior Subordinated Debentures and immediately convert
such Convertible Junior Subordinated Debentures into Company Common Stock.
Holders may obtain copies of the required form of the conversion notice from the
Conversion Agent.
Holders of Convertible Preferred Securities at the close of business on a
Distribution record date will be entitled to receive the Distribution payable on
such Convertible Preferred Securities on the corresponding Distribution Date
notwithstanding the conversion of such Convertible Preferred Securities
following such Distribution record date but prior to such Distribution Date.
Except as provided in the immediately preceding sentence, neither the Issuer nor
the Company will make, or be required to make, any payment, allowance or
adjustment for accrued and unpaid Distributions, whether or not in arrears, on
converted Convertible Preferred Securities. The Company will make no payment or
allowance for distributions on the shares of Company Common Stock issued upon
such conversion, except to the extent that such shares of Company Common Stock
are held of record on the record date for any such distributions. Each
conversion will be deemed to have been effected immediately prior to the close
of business on the day on which the related conversion notice was received by
the Issuer.
No fractional shares of Company Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid by the
Company in cash based on the then current market value of the Company Common
Stock.
Conversion Price Adjustments -- General. The Applicable Conversion Price
will be subject to adjustment in certain events including, without duplication:
(i) the payment of dividends (and other distributions) payable in Company Common
Stock on the Company Common Stock; (ii) the issuance to all holders of Company
Common Stock of rights or warrants; (iii) subdivisions and combinations of
Company Common Stock; (iv) the payment of dividends (and other distributions) to
all holders of Company Common Stock consisting of evidences of indebtedness of
the Company, securities or capital stock, cash or assets (including securities,
but excluding those rights, warrants, dividends and distributions referred to in
clauses (i) and (ii) and dividends and distributions paid exclusively in cash);
(v) the payment of dividends (and other distributions) on Company Common Stock
paid exclusively in cash, excluding (a) cash dividends that do not exceed the
per share amount of the smallest of the four immediately preceding quarterly
cash dividends (as adjusted to reflect any of the events referred to in clauses
(i) through (vi) of this sentence) and (b) cash
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<PAGE> 19
dividends if the annualized per share amount thereof does not exceed 12 1/2% of
the current market price of Company Common Stock as of the trading day
immediately preceding the date of declaration of such dividend; and (vi) payment
to holders of Company Common Stock in respect of a tender or exchange offer
(other than an odd-lot offer) by the Company or any subsidiary of the Company
for Company Common Stock at a price in excess of 110% of the current market
price of Company Common Stock as of the trading day next succeeding the last
date tenders or exchanges may be made pursuant to such tender or exchange offer.
The Company may, at its option, make such reductions in the Applicable
Conversion Price as the Company's Board of Directors deems advisable to avoid or
diminish any income tax to holders of Company Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. See "United States Federal Income Tax
Consequences -- Adjustment of Conversion Price."
No adjustment of the Applicable Conversion Price will be made upon the
issuance of any shares of Company Common Stock pursuant to any present or future
plan providing for the reinvestment of dividends or interest payable on
securities of the Company and the investment of additional optional amounts in
shares of Company Common Stock under any such plan or the issuance of any shares
of Company Common Stock or options or rights to purchase such shares pursuant to
any present or future employee, director or consultant benefit plan or program
of the Company or pursuant to any option, warrant, right, or exercisable,
exchangeable or convertible security outstanding as of the date the Convertible
Preferred Securities were first issued. There shall also be no adjustment of the
Applicable Conversion Price in case of the issuance of any Company Common Stock
(or securities convertible into or exchangeable for Company Common Stock),
except as specifically described above. If any action would require adjustment
of the Applicable Conversion Price pursuant to more than one of the
anti-dilution provisions, only one adjustment shall be made and such adjustment
shall be the amount of adjustment that has the highest absolute value to holders
of the Convertible Preferred Securities. No adjustment in the Applicable
Conversion Price will be required unless such adjustment would require an
increase or decrease of at least 1% of the Applicable Conversion Price, but any
adjustment that would otherwise be required to be made shall be carried forward
and taken into account in any subsequent adjustment.
Conversion Price Adjustments -- Merger, Consolidation or Sale of Assets of
the Company. In the event that the Company is a party to any transaction
(including, without limitation, a merger, consolidation, sale of all or
substantially all of the assets of the Company, recapitalization or
reclassification of Company Common Stock or any compulsory share exchange (each
of the foregoing being referred to as a "Company Transaction")), in each case,
as a result of which shares of Company Common Stock shall be converted into the
right to receive other securities, cash or other property, then lawful provision
shall be made as part of the terms of such Company Transaction whereby the
holder of each of the Convertible Preferred Securities then outstanding shall
have the right thereafter to convert each of the Convertible Preferred
Securities only into (i) in the case of any Company Transaction other than a
Company Transaction involving a Common Stock Fundamental Change (as defined
herein), the kind and amount of securities, cash and other property receivable
upon the consummation of such Company Transaction by a holder of that number of
shares of Company Common Stock into which each of the Convertible Preferred
Securities was convertible immediately prior to such Company Transaction, or
(ii) in the case of a Company Transaction involving a Common Stock Fundamental
Change, common stock of the kind received by holders of Company Common Stock
(but in each case after giving effect to any adjustment discussed below relating
to a Fundamental Change (as defined herein) if such Company Transaction
constitutes a Fundamental Change). The holders of Convertible Preferred
Securities will have no voting rights with respect to any Company Transaction
described in this section.
In the case of any Company Transaction involving a Fundamental Change, the
Applicable Conversion Price will be adjusted immediately after such Fundamental
Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the Applicable
Conversion Price of the Convertible Preferred Securities will thereupon
become the lower of (a) the Applicable Conversion Price immediately prior
to such Non-Stock Fundamental Change, but after giving effect to any other
prior adjustments, and (b) the result obtained by multiplying the greater
of the Relevant Price or the then
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<PAGE> 20
applicable Reference Market Price by the Optional Redemption Ratio (such
product shall hereinafter be referred to as the "Adjusted Relevant Price"
or the "Adjusted Reference Market Price," as the case may be); and
(ii) in the case of a Common Stock Fundamental Change, the Applicable
Conversion Price of the Convertible Preferred Securities immediately prior
to such Common Stock Fundamental Change, but after giving effect to any
other prior adjustments, will thereupon be adjusted by multiplying such
Applicable Conversion Price by a fraction of which the numerator will be
the Purchaser Stock Price and the denominator will be the Relevant Price;
provided, however, that in the event of a Common Stock Fundamental Change
in which (a) 100% of the value of the consideration received by a holder of
Company Common Stock is common stock of the successor, acquiror or other
third party (and cash, if any, is paid only with respect to any fractional
interests in such common stock resulting from such Common Stock Fundamental
Change) and (b) all of Company Common Stock will have been exchanged for,
converted into, or acquired for common stock (and cash with respect to
fractional interests) of the successor, acquiror or other third party, the
Applicable Conversion Price of the Convertible Preferred Securities
immediately prior to such Common Stock Fundamental Change will thereupon be
adjusted by multiplying such conversion price by a fraction of which the
numerator will be one and the denominator will be the number of shares of
common stock of the successor, acquiror, or other third party received by a
holder of one share of Company Common Stock as a result of such Common
Stock Fundamental Change.
In the absence of the adjustments to the Applicable Conversion Price after
a Fundamental Change, in the case of a Company Transaction each of the
Convertible Preferred Securities would become convertible into the securities,
cash, or other property receivable by a holder of the number of shares of
Company Common Stock into which each of the Convertible Preferred Securities was
convertible immediately prior to such Company Transaction. Thus, in the absence
of the Fundamental Change provisions, a Company Transaction could substantially
lessen or eliminate the value of the conversion privilege associated with the
Convertible Preferred Securities. For example, if the Company were acquired in a
cash merger, each of the Convertible Preferred Securities would become
convertible solely into cash and would no longer be convertible into securities
whose value would vary depending on the future prospects of the Company and
other factors.
In Non-Stock Fundamental Change transactions, the foregoing conversion
price adjustments are designed to increase the securities, cash or other
property into which each of the Convertible Preferred Securities is convertible.
In a Non-Stock Fundamental Change transaction in which the initial value
received per share of Company Common Stock (measured as described in the
definition of Adjusted Relevant Price) is lower than the then Applicable
Conversion Price of each of the Convertible Preferred Securities but greater
than or equal to the Adjusted Reference Market Price, the Applicable Conversion
Price will be adjusted as described above with the effect that each of the
Convertible Preferred Securities will be convertible into securities, cash or
other property of the same type received by the holders of Company Common Stock
in such transaction with the Applicable Conversion Price adjusted as though such
initial value had been the Adjusted Relevant Price. In a Non-Stock Fundamental
Change transaction in which the initial value received per share of Company
Common Stock (measured as described in the definition of Adjusted Relevant
Price) is lower than both the Applicable Conversion Price of each of the
Convertible Preferred Securities and the Adjusted Reference Market Price, the
Applicable Conversion Price will be adjusted as described above but calculated
as though such initial value had been the Adjusted Reference Market Price.
In Common Stock Fundamental Change transactions, the foregoing adjustments
are designed to provide in effect that (i) where Company Common Stock is
converted partly into such common stock and partly into other securities, cash
or property, each of the Convertible Preferred Securities will be convertible
solely into a number of shares of such common stock determined so that the
initial value of such shares (measured as described in the definition of
Purchaser Stock Price) equals the value of the shares of Company Common Stock
into which each of the Convertible Preferred Securities was convertible
immediately before the transaction (measured as aforesaid) and (ii) where
Company Common Stock is converted solely into such common stock, each of the
Convertible Preferred Securities will be convertible into the same number of
shares of such common stock receivable by a holder of the number of shares of
Company Common Stock into which each of the Convertible Preferred Securities was
convertible immediately before such transaction.
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<PAGE> 21
"Closing Price" of any security on any day means the last reported sale
price of such security on such day, or in case no sale takes place on such day,
the average of the closing bid and asked prices in each case on the principal
national securities exchange on which such securities are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, on the National Market System of the Nasdaq Stock Market or any
successor national automated interdealer quotation system (the "NNM") or, if
such securities are not listed or admitted to trading on any national securities
exchange or quoted on the NNM, the average of the closing bid and asked prices
of such security in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected by the Company for such purpose.
"Common Stock Fundamental Change" means any Fundamental Change in which
more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Company
Common Stock consists of common stock that for each of the ten consecutive
trading days immediately prior to and including the Entitlement Date has been
admitted for listing or admitted for listing subject to notice of issuance on a
national securities exchange or quoted on the NNM.
"Entitlement Date" means the record date for determination of the holders
of Company Common Stock entitled to receive securities, cash or other property
in connection with a Non-Stock Fundamental Change or a Common Stock Fundamental
Change or, if there is no such record date, the date upon which holders of
Company Common Stock shall have the right to receive such securities, cash or
other property.
"Fundamental Change" means the occurrence of any transaction or event in
connection with a plan pursuant to which all or substantially all of Company
Common Stock shall be exchanged for, converted into, acquired for or constitute
solely the right to receive securities, cash or other property (whether by means
of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise); provided that, in
the case of a plan involving more than one such transaction or event, for
purposes of adjustment of the Applicable Conversion Price, such Fundamental
Change shall be deemed to have occurred when substantially all of the Company
Common Stock shall be exchanged for, converted into, or acquired for or
constitute solely the right to receive securities, cash, or other property, but
the adjustment shall be based upon the highest weighted average per share
consideration that a holder of Company Common Stock could have received in such
transactions or events as a result of which more than 50% of Company Common
Stock shall have been exchanged for, converted into, or acquired for or
constitute solely the right to receive securities, cash or other property.
"Non-Stock Fundamental Change" means any Fundamental Change other than a
Common Stock Fundamental Change.
"Optional Redemption Ratio" means a fraction of which the numerator will be
$50 and the denominator will be the then current Optional Redemption Price (as
defined herein) or, prior to April 10, 2001, an amount per each of the
Convertible Preferred Securities determined by the Company in its sole
discretion, after consultation with an investment banking firm, to be the
equivalent of the hypothetical redemption price that would have been applicable
if the Convertible Preferred Securities had been redeemable during such period.
"Purchaser Stock Price" means, with respect to any Common Stock Fundamental
Change, the average of the Closing Prices for the common stock received in such
Common Stock Fundamental Change for the ten consecutive trading days prior to
and including the Entitlement Date, as adjusted in good faith by the Company to
appropriately reflect any of the events referred to in clauses (i) through (vi)
of the first paragraph under "-- Conversion Price Adjustments -- General."
"Reference Market Price" shall initially mean on the date of original
issuance of the Convertible Preferred Securities, $36.17 (which is an amount
equal to 66 2/3% of the last reported sale price for the Company Common Stock on
the New York Stock Exchange Composite Tape on March 26, 1998), and, in the event
of any adjustment to the Applicable Conversion Price, other than as a result of
a Non-Stock Fundamental Change, the Reference Market Price shall also be
adjusted so that the ratio of the Reference Market Price to the Applicable
Conversion Price after giving effect to any such adjustment shall always be the
same as the ratio of $36.17 to the Initial Conversion Price.
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<PAGE> 22
"Relevant Price" means (i) in the case of a Non-Stock Fundamental Change in
which the holder of Company Common Stock receives only cash, the amount of cash
received by the holder of one share of Company Common Stock and (ii) in the
event of any other Non-Stock Fundamental Change or any Common Stock Fundamental
Change, the average of the daily Closing Prices for Company Common Stock during
the ten consecutive trading days prior to and including the Entitlement Date, in
each case as adjusted in good faith by the Company to appropriately reflect any
of the events referred to in clauses (i) through (vi) of the first paragraph
under "-- Conversion Price Adjustments -- General."
MANDATORY REDEMPTION
Upon the repayment in full of the Convertible Junior Subordinated
Debentures at the Stated Maturity or a redemption in whole or in part of the
Convertible Junior Subordinated Debentures (other than following any
distribution of the Convertible Junior Subordinated Debentures to the holders of
the Trust Securities), the proceeds from such repayment or redemption shall be
applied by the Property Trustee to redeem, on a pro rata basis, a Like Amount of
Trust Securities, on the Redemption Date, in an amount per Trust Security equal
to the applicable Redemption Price, which Redemption Price will be equal to (i)
the liquidation amount of each of the Convertible Preferred Securities plus any
accrued and unpaid Distributions thereon (A) in the case of the repayment of the
Convertible Junior Subordinated Debentures at Stated Maturity (the "Stated
Maturity Price"), or (B) in the case of the redemption of the Convertible Junior
Subordinated Debentures in certain limited circumstances upon the occurrence of
a Tax Event or (ii) in the case of an Optional Redemption (as defined herein) on
or after April 10, 2001, the Optional Redemption Price.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Convertible Junior Subordinated Debentures such
amounts as shall be required so that the Distributions payable by the Trust in
respect of the Trust Securities shall not be reduced as a result of any such
additional taxes, duties or other governmental charges. See "Description of
Convertible Junior Subordinated Debentures -- Additional Sums."
REDEMPTION PROCEDURES
Trust Securities shall be redeemed, if at all, at the applicable Redemption
Price with the proceeds from the contemporaneous repayment or redemption of the
Convertible Junior Subordinated Debentures. Redemptions of the Trust Securities
shall be made and the applicable Redemption Price shall be payable on each
Redemption Date only to the extent that the Trust has funds on hand available
for the payment of such Redemption Price. See also "-- Subordination of Common
Securities." As used herein, "Redemption Price" shall mean the "Stated Maturity
Price," the "Optional Redemption Price" and the "Tax Event Redemption Price" (as
defined herein), as applicable.
If the Trust gives a notice of redemption in respect of the Convertible
Preferred Securities, then, by 12:00 noon, New York City time, on the date fixed
for redemption (the "Redemption Date"), to the extent funds are available, with
respect to the Convertible Preferred Securities held in global form, the
Property Trustee will deposit irrevocably with The Depository Trust Company
("DTC") funds sufficient to pay the applicable Redemption Price and will give
DTC irrevocable instructions and authority to pay the applicable Redemption
Price to the holders of the Convertible Preferred Securities. See "-- Form,
Book-Entry Procedures and Transfer." With respect to the Convertible Preferred
Securities held in certificated form, the Property Trustee, to the extent funds
are available, will irrevocably deposit with the paying agent for the
Convertible Preferred Securities funds sufficient to pay the applicable
Redemption Price and will give such paying agent irrevocable instructions and
authority to pay the Redemption Price to the holders thereof upon surrender of
their certificates evidencing the Convertible Preferred Securities. See
"-- Payment and Paying Agency." Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date shall be payable to the holders of
the Convertible Preferred Securities on the relevant record dates for the
related Distribution Dates. If notice of redemption shall have been given and
funds deposited as required, then upon the date of such deposit, all rights of
the holders of the Convertible Preferred Securities will cease, except the right
of the holders of the Convertible Preferred Securities to receive the applicable
Redemption Price, but without interest on such Redemption Price, and the
Convertible Preferred Securities will cease to be
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<PAGE> 23
outstanding. In the event that any Redemption Date is not a Business Day, then
payment of the applicable Redemption Price payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the applicable Redemption
Price is improperly withheld or refused and not paid either by the Trust or by
the Company pursuant to the Guarantee as described under "Description of
Guarantee," Distributions on Convertible Preferred Securities will continue to
accrue from the Redemption Date originally established by the Trust to the date
such Redemption Price is actually paid, in which case the actual payment date
will be the date fixed for redemption for purposes of calculating the Redemption
Price.
Subject to applicable law (including, without limitation, United States
Federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Convertible Preferred Securities by
tender, in the open market or by private agreement.
If the Company desires to consummate an Optional Redemption it must send a
notice to each holder of Trust Securities at its registered address in
accordance with the notice procedures set forth under "Description of
Convertible Junior Subordinated Debentures -- Redemption -- Optional
Redemption." Notice of a Tax Event Redemption will be mailed at least 20 days
but not more than 60 days before the Redemption Date to each holder of
Convertible Preferred Securities. Notice of repayment at Stated Maturity is not
required.
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION
If a Tax Event shall occur and be continuing, the Company shall cause the
Issuer Trustees to liquidate the Issuer and cause Convertible Junior
Subordinated Debentures to be distributed to the holders of the Convertible
Preferred Securities in liquidation of the Issuer within 90 days following the
occurrence of such Tax Event; provided, however, that such liquidation and
distribution shall be conditioned on (i) the Issuer Trustees' receipt of an
opinion of nationally recognized independent tax counsel (reasonably acceptable
to the Issuer Trustees) experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on published revenue rulings of the Internal
Revenue Service, to the effect that the holders of the Convertible Preferred
Securities will not recognize any income, gain or loss for United States Federal
income tax purposes as a result of such liquidation and distribution of
Convertible Junior Subordinated Debentures, and (ii) the Company being unable to
avoid such Tax Event within such 90-day period by taking some ministerial action
or pursuing some other reasonable measure that, in the sole judgment of the
Company, will have no adverse effect on the Issuer, the Company or the holders
of the Convertible Preferred Securities and will involve no material cost.
Furthermore, if (i) the Company has received an opinion (a "Redemption Tax
Opinion") of nationally recognized independent tax counsel (reasonably
acceptable to the Issuer Trustees) experienced in such matters that, as a result
of a Tax Event, there is more than an insubstantial risk that the Company would
be precluded from deducting the interest on the Convertible Junior Subordinated
Debentures for United States Federal income tax purposes, even after the
Convertible Junior Subordinated Debentures were distributed to the holders of
the Convertible Preferred Securities upon liquidation of the Issuer as described
above, or (ii) the Issuer Trustees shall have been informed by such tax counsel
that it cannot deliver a No Recognition Opinion, the Company shall have the
right, upon not less than 20 nor more than 60 days' notice and within 90 days
following the occurrence and continuation of the Tax Event, to redeem the
Convertible Junior Subordinated Debentures, in whole, but not in part, for cash,
for the principal amount thereof plus accrued and unpaid interest thereon and,
following such redemption, all the Convertible Preferred Securities will be
redeemed by the Issuer at the aggregate liquidation amount thereof plus accrued
and unpaid Distributions thereon; provided, however, that, if at the time there
is available to the Company or the Issuer the opportunity to eliminate, within
such 90-day period, the Tax Event by taking some ministerial action or pursuing
some other reasonable measure that, in the sole judgment of the Company, will
have no adverse effect on the Issuer, the Company or the holders of the
Convertible Preferred Securities and will involve no material cost, the Issuer
or the Company will pursue such measure in lieu of redemption. See "-- Mandatory
Redemption." In lieu of the foregoing options, the Company will also have the
option of causing the Convertible Preferred Securities to remain outstanding and
pay Additional Sums on the Convertible Junior
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Subordinated Debentures. See "Description of Convertible Junior Subordinated
Debentures -- Additional Sums."
"Tax Event" means the receipt by the Property Trustee of an opinion of a
nationally recognized independent tax counsel to the Company (reasonably
acceptable to the Issuer Trustees) experienced in such matters (a "Dissolution
Tax Opinion") to the effect that, as a result of (i) any amendment to or change
(including any announced prospective change (which shall not include a proposed
change), provided that a Tax Event shall not occur more than 90 days before the
effective date of any such prospective change) in the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (ii) any judicial decision or official
administrative pronouncement, ruling, regulatory procedure, notice or
announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (iii) any amendment to
or change in the administrative position or interpretation of any Administrative
Action or judicial decision that differs from the theretofore generally accepted
position, in each case, by any legislative body, court, governmental agency or
regulatory body, irrespective of the manner in which such amendment or change is
made known, which amendment or change is effective or such Administrative Action
or decision is announced, in each case, on or after the date of original
issuance of the Convertible Junior Subordinated Debentures or the issue date of
the Convertible Preferred Securities issued by the Trust, there is more than an
insubstantial risk that (a) if the Convertible Junior Subordinated Debentures
are held by the Property Trustee, (I) the Trust is, or will be within 90 days of
the date of such opinion, subject to United States Federal income tax with
respect to interest accrued or received on the Convertible Junior Subordinated
Debentures or subject to more than a de minimis amount of other taxes, duties or
other governmental charges as determined by such counsel, or (II) any portion of
interest payable by the Company to the Trust on the Convertible Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion
will not be, deductible by the Company in whole or in part for United States
Federal income tax purposes or (b) with respect to Convertible Junior
Subordinated Debentures which are no longer held by the Property Trustee, any
portion of interest payable by the Company on the Convertible Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion
will not be, deductible by the Company in whole or in part for United States
Federal income tax purposes.
If an Investment Company Event shall occur and be continuing, the Company
shall cause the Issuer Trustees to liquidate the Issuer and cause the
Convertible Junior Subordinated Debentures to be distributed to the holders of
the Convertible Preferred Securities in liquidation of the Issuer within 90 days
following the occurrence of such Investment Company Event.
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that the Issuer is or will
be considered an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
1940 Act Law becomes effective on or after the date of this Prospectus.
The distribution by the Company of the Convertible Junior Subordinated
Debentures will effectively result in the cancelation of the Convertible
Preferred Securities. See "-- Liquidation of the Trust and Distribution of
Convertible Junior Subordinated Debentures."
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES
The Company, as the holder of the outstanding Common Securities, has the
right at any time (including, without limitation, upon the occurrence of a Tax
Event or Investment Company Act Event) to terminate the Trust and cause a Like
Amount of the Convertible Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities upon liquidation of the Trust, provided that
the Issuer Trustees shall have received a No Recognition Opinion prior to the
liquidation of the Trust; and, provided further that, following such
distribution of the Convertible Junior Subordinated Debentures, the Company
agrees to use its best efforts to maintain a rating of such Convertible Junior
Subordinated Debentures by any nationally recognized rating agency for so long
as any such Convertible Junior Subordinated Debentures are outstanding.
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The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the distribution of a Like Amount of the Convertible Junior Subordinated
Debentures to the holders of the Trust Securities if the Company, as Depositor,
has given written direction to the Property Trustee to terminate the Trust
(which direction is optional and, except as described above, wholly within the
discretion of the Company, as Depositor); (iii) redemption of all the Trust
Securities as described under "-- Mandatory Redemption" above; (iv) expiration
of the term of the Trust; and (v) the entry of an order for the dissolution of
the Trust by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii), (iv) or
(v) above, the Trust shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, to the holders of such Trust Securities a Like Amount of the Convertible
Junior Subordinated Debentures, unless such distribution would not be practical,
in which event such holders will be entitled to receive out of the assets of the
Trust available for distribution to holders, after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, an amount equal to, in
the case of holders of Convertible Preferred Securities, the aggregate
liquidation amount thereof plus accrued and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by the Trust on the Convertible
Preferred Securities shall be paid on a pro rata basis. The Company, as holder
of the Common Securities, will be entitled to receive distributions upon any
such liquidation pro rata with the holders of the Convertible Preferred
Securities, except that if a Debenture Event of Default (or an event that, with
notice or passage of time, would become such a Debenture Event of Default) or an
Event of Default under the Declaration has occurred and is continuing, the
Convertible Preferred Securities shall have a priority over the Common
Securities with respect to any such distributions. See "-- Subordination of
Common Securities."
"Like Amount" means (i) with respect to a redemption of Convertible
Preferred Securities, Convertible Preferred Securities having an aggregate
liquidation amount equal to that portion of the principal amount of Convertible
Junior Subordinated Debentures to be contemporaneously redeemed in accordance
with the Indenture, allocated to the Common Securities and to the Convertible
Preferred Securities based upon the relative liquidation amounts of such classes
and the proceeds of which will be used to pay the applicable Redemption Price of
the Convertible Preferred Securities and (ii) with respect to a distribution of
Convertible Junior Subordinated Debentures to holders of Convertible Preferred
Securities in connection with a dissolution or liquidation of the Trust,
Convertible Junior Subordinated Debentures having a principal amount equal to
the aggregate liquidation amount of the Trust Securities of the holder to whom
such Convertible Junior Subordinated Debentures are distributed.
If the Company does not redeem the Convertible Junior Subordinated
Debentures prior to maturity and the Trust is not liquidated and the Convertible
Junior Subordinated Debentures are not distributed to holders of the Trust
Securities, the Convertible Preferred Securities will remain outstanding until
the repayment of the Convertible Junior Subordinated Debentures at the Stated
Maturity and the distribution of the Liquidation Distribution to the holders of
the Convertible Preferred Securities.
On and after the liquidation date fixed for any distribution of Convertible
Junior Subordinated Debentures to holders of the Trust Securities, (i) the
Convertible Preferred Securities will no longer be deemed to be outstanding,
(ii) DTC or its nominee, as the record holder of the Convertible Preferred
Securities, will receive a registered global certificate or certificates
representing the Convertible Junior Subordinated Debentures to be delivered upon
such distribution with respect to Convertible Preferred Securities held by DTC
or its nominee and (iii) any certificates representing Convertible Preferred
Securities not held by DTC or its nominee will be deemed to represent
Convertible Junior Subordinated Debentures having a principal amount equal to
the liquidation amount of such Convertible Preferred Securities and bearing
accrued and unpaid interest in an amount equal to the accumulated and unpaid
Distributions on such Convertible Preferred Securities until such certificates
are presented to the Administrative Trustees or their agent for cancelation,
whereupon the Company will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Convertible Junior Subordinated
Debentures.
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There can be no assurance as to the market prices for the Convertible
Preferred Securities or the Convertible Junior Subordinated Debentures that may
be distributed in exchange for the Trust Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Convertible Preferred
Securities, or the Convertible Junior Subordinated Debentures that a holder may
receive on dissolution and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Convertible Preferred
Securities.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Convertible
Preferred Securities and Common Securities, as applicable, shall be made pro
rata to the holders of Convertible Preferred Securities and Common Securities
based on the liquidation amount of the Trust Securities, provided that, if on
any Distribution Date or Redemption Date any Debenture Event of Default (or an
event that, with notice or passage of time, would become such an Event of
Default) or an Event of Default under the Declaration shall have occurred and be
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of such Common Securities, shall be
made unless payment in full in cash of all accrued and unpaid Distributions on
all of the outstanding Convertible Preferred Securities for all Distribution
periods terminating on or prior thereto, or, in the case of payment of the
applicable Redemption Price, the full amount of such Redemption Price on all of
the outstanding Convertible Preferred Securities, shall have been made or
provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on, or the
applicable Redemption Price of, the Convertible Preferred Securities then due
and payable.
In the case of any Event of Default under the Declaration resulting from a
Debenture Event of Default, the Company as holder of the Common Securities will
be deemed to have waived any right to act with respect to any such Event of
Default under the Declaration until the effect of all such Events of Default
have been cured, waived or otherwise eliminated. Until all such Events of
Default under the Declaration have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
such Convertible Preferred Securities and not on behalf of the Company as holder
of the Common Securities, and only the holders of the Convertible Preferred
Securities will have the right to direct the Property Trustee to act on their
behalf.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under the
Declaration (an "Event of Default") (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description
of Convertible Junior Subordinated Debentures -- Debenture Events of
Default"); or
(ii) default by the Issuer in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of
30 days (subject to the deferral of any due date in the case of a Deferral
Period); or
(iii) default by the Issuer in the payment of any Redemption Price of
any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Issuer Trustees in the Declaration
(other than a covenant or warranty, a default in the performance of which
or the breach of which is addressed in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Issuer Trustees by the holders of at least 25% in aggregate
liquidation amount of the outstanding Convertible Preferred Securities, a
written notice specifying such default or
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breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" under the Declaration; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within three Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Convertible Preferred
Securities, the Administrative Trustees and the Company, as Depositor, unless
such Event of Default shall have been cured or waived. The Company, as
Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under the Declaration.
If a Debenture Event of Default (or an event that with notice or the
passage of time, would become such an Event of Default) or an Event of Default
under the Declaration has occurred and is continuing, the Convertible Preferred
Securities shall have a preference over the Common Securities as described
above. See "-- Liquidation of the Trust and Distribution of Convertible Junior
Subordinated Debentures" and "-- Subordination of Common Securities."
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in liquidation amount of the outstanding Convertible
Preferred Securities. In no event do the holders of the Convertible Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities. No resignation or removal of the
Delaware Trustee or the Property Trustee and no appointment of a successor
trustee shall be effective until the acceptance of appointment by the successor
trustee in accordance with the provisions of the Declaration.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust's property
may at the time be located, the Company, as the holder of the Common Securities,
and the Administrative Trustees have the power to appoint one or more persons
either to act as a co-trustee, jointly with the Property Trustee, of all or any
part of such Trust's property, or to act as separate trustee of any such
property, in either case with such powers as may be provided in the instrument
of appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Declaration. In case a Debenture Event of Default has occurred
and is continuing, the Property Trustee alone shall have power to make such
appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any person resulting from any merger,
conversion or consolidation to which such Issuer Trustee shall be a party, or
any person succeeding to all or substantially all the corporate trust business
of such Issuer Trustee, shall be the successor of such Issuer Trustee under the
Declaration, provided such person shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below or as otherwise set forth in the Declaration. The Trust may, at
the request of the Company, as
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Depositor, with the consent of the Administrative Trustees but without the
consent of the holders of the Convertible Preferred Securities, the Property
Trustee or the Delaware Trustee, merge with or into, consolidate, amalgamate or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, a trust organized as such under the laws of any
State; provided, however, that (i) such successor entity either (a) expressly
assumes all of the obligations of the Trust with respect to the Convertible
Preferred Securities or (b) substitutes for the Convertible Preferred Securities
other securities having substantially the same terms as the Convertible
Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Convertible Preferred Securities rank in
priority with respect to distributions and payments upon liquidation, redemption
and otherwise, (ii) the Company expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee as the
holder of the Convertible Junior Subordinated Debentures, (iii) the Successor
Securities are listed or traded, or any Successor Securities will be listed or
traded upon notification of issuance, on any national securities exchange,
national automated quotation system or other organization on which the
Convertible Preferred Securities are then listed or traded, if any, (iv) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not cause the Convertible Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Convertible Preferred Securities (including
any Successor Securities) in any material respect, (vi) such successor entity
has a purpose identical and limited to that of the Trust, (vii) prior to such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
the Company has received an opinion from independent counsel to the Trust
experienced in such matters to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Convertible
Preferred Securities (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such successor
entity will be required to register as an investment company under the 1940 Act,
(viii) the Company or any permitted successor or assignee owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee and (ix) such merger, consolidation, amalgamation, replacement
or lease is not a taxable event for holders of the Convertible Preferred
Securities. Notwithstanding the foregoing, the Trust shall not, except with the
consent of holders of 100% in aggregate liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it, if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Trust or the
successor entity to be classified as an association taxable as a corporation (or
to substantially increase the likelihood that the Trust or the successor entity
would be classified as other than a grantor trust) for United States Federal
income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE DECLARATION
Except as provided below and under "Description of Guarantee -- Amendments
and Assignment" and as otherwise required by law and the Declaration, the
holders of the Convertible Preferred Securities have no voting rights.
In addition to the rights of the holders of Convertible Preferred
Securities with respect to the enforcement of payment to the Issuer of principal
of or interest on the Convertible Junior Subordinated Debentures as provided
under "Description of Convertible Junior Subordinated Debentures -- Debenture
Events of Default," if (i) a Debenture Event of Default occurs and is continuing
or (ii) the Company defaults under the Guarantee with respect to the Convertible
Preferred Securities (each an "Appointment Event"), then the holders of the
Convertible Preferred Securities, acting as a single class, will be entitled by
the majority vote of such holders to appoint a Special Trustee. Any holder of
Convertible Preferred Securities (other than the Company or any of its
affiliates) shall be entitled to nominate any person to be appointed as Special
Trustee. Not later than 30 days after such right to appoint a Special Trustee
arises, the Issuer Trustees shall convene a meeting of the holders of
Convertible Preferred Securities for the purpose of appointing a
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<PAGE> 29
Special Trustee. If the Issuer Trustee fails to convene such meeting within such
30-day period, the holders of not less than 10% of the aggregate stated
liquidation amount of the outstanding Convertible Preferred Securities will be
entitled to convene such meeting. The provisions of the Declaration relating to
the convening and conduct of the meetings of the holders will apply with respect
to any such meeting. Any Special Trustee so appointed shall cease to be a
Special Trustee if the Appointment Event pursuant to which the Special Trustee
was appointed and all other Appointment Events cease to be continuing.
Notwithstanding the appointment of any such Special Trustee, the Company shall
retain all rights under the Indenture, including the right to defer payments of
interest by extending the interest payment period as provided under "Description
of Convertible Junior Subordinated Debentures -- Option to Extend Interest
Payment Date." If such an extension occurs, there will be no Debenture Event of
Default and, consequently, no Event of Default for failure to make any scheduled
interest payment during the Deferral Period on the date originally scheduled.
The Declaration may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provision in the Declaration that may be inconsistent with any
other provision, or to make any other provisions with respect to ministerial
matters or questions arising under the Declaration, which shall not be
inconsistent with the other provisions of the Declaration, or (ii) to modify,
eliminate or add to any provisions of the Declaration to such extent as shall be
necessary to ensure that the Trust will not be taxable as a corporation or will
be classified for United States Federal income tax purposes as a grantor trust
at all times that any Trust Securities are outstanding or to ensure that the
Trust will not be required to register as an "investment company" under the 1940
Act; provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of any holder of Trust
Securities, and any amendments of the Declaration shall become effective when
notice thereof is given to the holders of the Trust Securities. The Declaration
may be amended by the Issuer Trustees and the Company with (i) the consent of
holders representing not less than a majority (based upon liquidation amounts)
of the outstanding Convertible Preferred Securities, and (ii) receipt by the
Issuer Trustees of an opinion of counsel to the effect that such amendment or
the exercise of any power granted to the Issuer Trustees in accordance with such
amendment will not affect the Trust's status as a grantor trust for United
States Federal income tax purposes or the Trust's exemption from status as an
"investment company" under the 1940 Act. In addition, without the consent of
each holder of Trust Securities, the Declaration may not be amended to (i)
change the amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to be made in
respect of the Trust Securities as of a specified date or (ii) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
So long as any Convertible Junior Subordinated Debentures are held by the
Trust, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Convertible Junior Subordinated Debentures, (ii) waive any past default that
is waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Convertible Junior Subordinated
Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Convertible Junior
Subordinated Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the holders of a majority in aggregate
liquidation amount of all outstanding Convertible Preferred Securities;
provided, however, that where a consent under the Indenture would require the
consent of each holder of Convertible Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior consent of each holder of the Convertible Preferred Securities. The Issuer
Trustees shall not revoke any action previously authorized or approved by a vote
of the holders of the Convertible Preferred Securities except by subsequent vote
of such holders. The Property Trustee shall notify each holder of Convertible
Preferred Securities of any notice of default with respect to the Convertible
Junior Subordinated Debentures. In addition to obtaining the foregoing approvals
of such holders of the Convertible Preferred Securities, prior to taking any of
the foregoing actions, the Issuer Trustees shall obtain an opinion of counsel
experienced in such matters to the effect that such action will not affect the
Trust's status as a grantor trust for United States Federal income tax purposes
on account of such action.
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Any required approval of holders of Convertible Preferred Securities may be
given at a meeting of such holders convened for such purpose or pursuant to
written consent. The Property Trustee will cause a notice of any meeting at
which holders of Convertible Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be given to each holder of record of Convertible Preferred Securities in the
manner set forth in the Declaration.
No vote or consent of the holders of Convertible Preferred Securities will
be required for the Trust to redeem and cancel the Convertible Preferred
Securities in accordance with the Declaration.
Notwithstanding that holders of the Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Convertible Preferred Securities that are owned by the Company, the
Issuer Trustees or any affiliate of the Company or any Issuer Trustees, shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
EXPENSES AND TAXES
In the Indenture, the Company, as borrower, has agreed to pay all debts and
other obligations (other than with respect to payments of Distributions, amounts
payable upon redemption and the liquidation amount of the Trust Securities) and
all costs and expenses of the Trust (including costs and expenses relating to
the organization of the Trust, the fees and expenses of the Issuer Trustees and
the costs and expenses relating to the operation of the Trust), and to pay any
and all taxes and all costs and expenses with respect to the foregoing (other
than United States withholding taxes) to which the Trust might become subject.
The foregoing obligations of the Company under the Indenture are for the benefit
of, and shall be enforceable by, any person to whom any such debts, obligations,
costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor
has received notice thereof. Any such Creditor may enforce such obligations of
the Company directly against the Company, and the Company has irrevocably waived
any right or remedy to require that any such Creditor take any action against
the Trust or any other person before proceeding against the Company. The Company
has also agreed in the Indenture to execute such additional agreement(s) as may
be necessary or desirable to give full effect to the foregoing.
FORM, BOOK-ENTRY PROCEDURES AND TRANSFER
Convertible Preferred Securities originally sold to qualified institutional
buyers (as defined in Rule 144A under the Securities Act) were issued in the
form of one or more fully registered global Convertible Preferred Securities
certificates (the "Global Convertible Preferred Securities"). The Global
Convertible Preferred Securities were deposited with the Property Trustee, as
custodian for DTC and registered in the name of Cede & Co., as nominee of DTC.
Except as set forth below, the Global Convertible Preferred Securities may be
transferred, in whole and not in part, only to DTC or another nominee of the
DTC. Investors may hold their beneficial interests in the Global Convertible
Preferred Securities directly through DTC if they have an account with DTC or
indirectly through organizations which have accounts with DTC.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of institutions that have accounts with DTC ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (which may include the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to DTC's
book-entry system is also available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, whether directly or indirectly.
Upon the issuance of the Global Convertible Preferred Securities, DTC
credited, on its book-entry registration and transfer system, the principal
amount of the Convertible Preferred Securities represented by such Global
Convertible Preferred Securities to the accounts of participants designated by
the Initial
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<PAGE> 31
Purchasers of such Convertible Preferred Securities. Ownership of beneficial
interests in the Global Convertible Preferred Securities is limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Convertible Preferred Securities are shown
on, and the transfer of those ownership interests will be effected only through,
records maintained by DTC (with respect to participants' interests) and such
participants (with respect to the owners of beneficial interests in the Global
Convertible Preferred Securities other than participants). The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and laws may impair
the ability to transfer or pledge beneficial interests in the Global Convertible
Preferred Securities.
So long as DTC or its nominee is the registered holder and owner of the
Global Convertible Preferred Securities, DTC or such nominee, as the case may
be, will be considered the sole legal owner and holder of the related
Convertible Preferred Securities for all purposes of the Declaration, the
Guarantee and the Indenture. Except as set forth below, owners of beneficial
interests in the Global Convertible Preferred Securities will not be entitled to
have the Convertible Preferred Securities represented by the Global Convertible
Preferred Securities registered in their names, will not receive or be entitled
to receive physical delivery of certificated Convertible Preferred Securities in
definitive form and will not be considered to be the owners or holders of any
Convertible Preferred Securities under the Declaration, the Guarantee or the
Indenture. The Company understands that under existing industry practice, in the
event an owner of a beneficial interest in the Global Convertible Preferred
Securities desires to take any action that DTC, as the holder of the Global
Convertible Preferred Securities, is entitled to take, DTC would authorize the
participants to take such action, and that the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Payment of amounts with respect to the Convertible Preferred Securities
represented by the Global Convertible Preferred Securities registered in the
name of and held by DTC or its nominee will be made to DTC or its nominee, as
the case may be, as the registered owner and holder of the Global Convertible
Preferred Securities.
The Company expects that DTC or its nominee, upon receipt of payment of
amounts with respect to the Global Convertible Preferred Securities, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global
Convertible Preferred Securities as shown on the records of DTC or its nominee.
The Company also expects that payments by participants to owners of beneficial
interests in the Global Convertible Preferred Securities held through such
participants will be governed by standing instructions and customary practices
and will be the responsibility of such participants. None of the Company, the
Issuer or the Initial Purchasers will have any responsibility or liability for
any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the Global Convertible Preferred Securities or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for any other aspect of the relationship
between DTC and its participants or the relationship between such participants
and the owners of beneficial interests in the Global Convertible Preferred
Securities owning through such participants.
Unless and to the extent they are exchanged in whole or in part for
certificated Convertible Preferred Securities in definitive form, the Global
Convertible Preferred Securities may not be transferred except as a whole by DTC
to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Convertible Preferred Securities among
participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. None of
the Company, the Issuer or the Initial Purchasers will have any responsibility
for the performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
None of the Company, the Issuer or the Initial Purchasers shall be liable
for any delay by DTC or any participant or indirect participant in identifying
the beneficial owners of the Convertible Preferred Securities,
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<PAGE> 32
and the Company, the Issuer and the Initial Purchasers may conclusively rely on,
and shall be protected in relying on, instructions from DTC for all purposes
(including with respect to the registration and delivery, and their respective
principal amounts, of the Convertible Preferred Securities to be issued).
The information in this Prospectus concerning DTC and DTC's book-entry
system has been obtained from such sources that the Company believes to be
reliable. None of the Company, the Issuer or the Initial Purchasers will have
any responsibility for the performance by DTC or its participants of their
respective obligations as described hereunder or under the rules and procedures
governing their respective operations.
Certificated Convertible Preferred Securities
Convertible Preferred Securities initially sold to (i) institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) or (ii) to a non-U.S. person pursuant to Regulation S were
issued in fully registered, certificated form ("Restricted Certificated
Convertible Preferred Securities"). Upon the transfer of any such Restricted
Certificated Convertible Preferred Securities, such Restricted Certificated
Convertible Preferred Securities will, unless the Global Convertible Preferred
Securities have previously been exchanged for Certificated Convertible Preferred
Securities (as defined below), be exchanged for an interest in the Global
Convertible Preferred Securities representing the number of Convertible
Preferred Securities being transferred. Any such transfers will generally
require the delivery by the transferee of a transfer certificate in the form set
forth in the Declaration.
The Convertible Preferred Securities represented by the Global Convertible
Preferred Securities are exchangeable for certificated Convertible Preferred
Securities in definitive form of like tenor as such Convertible Preferred
Securities ("Certificated Convertible Preferred Securities") in denominations of
U.S. $1,000 and integral multiples thereof if (i) DTC notifies the Company or
the Issuer that it is unwilling or unable to continue as depositary for the
Global Convertible Preferred Securities or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act, (ii) the Company or the
Issuer in its discretion at any time determines not to have all of the
Convertible Preferred Securities evidenced by the Global Convertible Preferred
Securities or (iii) a default entitling the holders of the Convertible Preferred
Securities to accelerate the maturity thereof has occurred and is continuing.
Any of the Convertible Preferred Securities that is exchangeable pursuant to the
preceding sentence is exchangeable for Certificated Convertible Preferred
Securities issuable in authorized denominations and registered in such names as
DTC shall direct. Subject to the foregoing, the Global Convertible Preferred
Securities are not exchangeable, except for Global Convertible Preferred
Securities of the same aggregate denomination to be registered in the name of
DTC or its nominee.
PAYMENT AND PAYING AGENCY
Payments in respect of the Global Convertible Preferred Securities shall be
made to DTC, which shall credit the relevant accounts at DTC on the applicable
Distribution Dates, or, in respect of the Convertible Preferred Securities that
are not held by DTC, such payments shall be made by check mailed to the address
of the holder entitled thereto as such address shall appear on the register. The
paying agent (the "Paying Agent") shall initially be the Property Trustee and
any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Company. The Paying Agent shall be permitted to
resign as Paying Agent upon 30 days' written notice to the Property Trustee, the
Administrative Trustees and the Company. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees shall appoint a
successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Company) to act as Paying Agent.
The Property Trustee has informed the Trust that so long as it serves as
paying agent for the Convertible Preferred Securities, it anticipates that
information regarding Distributions on the Convertible Preferred Securities,
including payment date, record date and redemption information, will be made
available through The Bank of New York.
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<PAGE> 33
REGISTRAR, CONVERSION AGENT, PAYING AGENT AND TRANSFER AGENT
The Property Trustee acts as registrar and conversion agent for the
Convertible Preferred Securities.
The Property Trustee acts as initial paying agent and transfer agent for
Restricted Certificated Convertible Preferred Securities and Certificated
Convertible Preferred Securities and may designate additional or substitute
paying agents and transfer agents at any time. Registration of transfers of
Restricted Certificated Convertible Preferred Securities and Certificated
Convertible Preferred Securities will be effected without charge by or on behalf
of the Trust, but upon payment (with the giving of such indemnity as the
Administrative Trustees, the Property Trustee or the Company may require) in
respect of any tax or other government charges that may be imposed in relation
thereto. The Trust will not be required to register the transfer of or exchange
Restricted Certificated Convertible Preferred Securities and Certificated
Convertible Preferred Securities during the period beginning at the opening of
business 15 days before any selection of Restricted Certificated Convertible
Preferred Securities and Certificated Convertible Preferred Securities to be
redeemed and ending at the close of business on the day of that selection or
register the transfer of or exchange any Restricted Certificated Convertible
Preferred Securities and Certificated Convertible Preferred Securities, or
portion thereof, called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Declaration and, during the existence of an Event of Default,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Declaration at the request of any holder of Trust
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no Event of Default has
occurred and is continuing and the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
Declaration or is unsure of the application of any provision of the Declaration,
and the matter is not one on which holders of the Convertible Preferred
Securities or the Common Securities are entitled under the Declaration to vote,
then the Property Trustee shall take such action as is directed by the Company
and, if not so directed, shall take such action as it deems advisable and in the
best interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the 1940
Act or classified as an association taxable as a corporation for United States
Federal income tax purposes (or in a way that would substantially increase the
risk that the Trust would be classified as other than a grantor trust for United
States Federal income tax purposes), and so that the Convertible Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States Federal income tax purposes. In this connection, the Company and
the Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of the Trust or the Declaration,
that the Company and the Administrative Trustees determine in their discretion
to be necessary or desirable for such purposes, as long as such action does not
materially adversely affect the interests of the holders of the Trust
Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
The Convertible Junior Subordinated Debentures were issued under a
Convertible Junior Subordinated Indenture (the "Indenture"), between the Company
and The Bank of New York, as trustee (the "Debenture
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<PAGE> 34
Trustee"). The Indenture will be qualified under the Trust Indenture Act and
incorporates certain provisions of the Trust Indenture Act. This summary of
certain terms and provisions of the Convertible Junior Subordinated Debentures
and the Indenture does not purport to be complete, and where reference is made
to particular provisions of the Indenture, such provisions, including the
definitions of certain terms, some of which are not otherwise defined herein,
are qualified in their entirety by reference to all of the provisions of the
Indenture and those terms made a part of the Indenture by incorporation of the
Trust Indenture Act.
GENERAL
Concurrently with the issuance of the Trust Securities, the Trust invested
the proceeds thereof in Convertible Junior Subordinated Debentures issued by the
Company. Interest accrues on the Convertible Junior Subordinated Debentures from
the date of their original issuance at the annual rate of 6 1/4% of the
principal amount thereof and is payable quarterly in arrears on January 1, April
1, July 1 and October 1 (each, an "Interest Payment Date"), commencing July 1,
1998, to the person in whose name each Convertible Junior Subordinated Debenture
is registered, subject to certain exceptions, at the close of business on the
fifteenth of the month next preceding the applicable Interest Payment Date. It
is anticipated that, until the liquidation of the Trust, each Convertible Junior
Subordinated Debenture will be registered in the name of the Trust and held by
the Property Trustee for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of the
number of days elapsed in a 360-day year consisting of twelve 30-day months. In
the event that any Interest Payment Date is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay), with the same force and effect as if made on the applicable
Interest Payment Date. Accrued interest that is not paid on the applicable
Interest Payment Date will bear additional interest on the amount thereof (to
the extent permitted by law), compounded quarterly from the relevant Interest
Payment Date. The term "interest" as used herein shall include quarterly
interest payments, interest on quarterly interest payments not paid on the
applicable Interest Payment Date, Special Interest and Additional Sums, as
applicable. See "-- Additional Sums" and "Registration Rights."
Unless previously redeemed or repurchased in accordance with the Indenture,
the Convertible Junior Subordinated Debentures will mature on April 1, 2028 (the
"Stated Maturity"). See "-- Redemption -- Repayment at Maturity; Redemption of
Convertible Preferred Securities."
The Convertible Junior Subordinated Debentures are unsecured and rank
junior and are subordinate in right of payment to all Senior Debt. Because the
Company is principally a holding company, the right of the Company to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Convertible Preferred Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of such subsidiary,
except to the extent that the Company may itself be recognized as a creditor of
such subsidiary. Accordingly, the Convertible Junior Subordinated Debentures are
subordinated to all Senior Debt and effectively subordinated to all existing and
future liabilities of the Company's subsidiaries, and holders of Convertible
Junior Subordinated Debentures should look only to the assets of the Company for
payments on the Convertible Junior Subordinated Debentures. The Indenture does
not limit the incurrence or issuance of other secured or unsecured debt of the
Company, including Senior Debt, whether under the Indenture or any existing or
other indenture that the Company may enter into in the future or otherwise. See
"Risk Factors -- Ranking of Obligations Under the Guarantee and the Convertible
Junior Subordinated Debentures" and "-- Subordination."
OPTION TO EXTEND INTEREST PAYMENT DATE
As long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
on the Convertible Junior Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
Deferral Period, provided, that no Deferral Period may extend beyond the Stated
Maturity of the Convertible Junior Subordinated Debentures. At the end of a
Deferral Period, the Company must pay all interest then accrued
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<PAGE> 35
and unpaid on the Convertible Junior Subordinated Debentures (together with
interest accrued thereon compounded quarterly from the relevant Interest Payment
Date, to the extent permitted by applicable law). During a Deferral Period and
for so long as the Convertible Junior Subordinated Debentures remain
outstanding, interest will continue to accrue and holders of Convertible Junior
Subordinated Debentures (and holders of the Convertible Preferred Securities)
will be required to accrue interest income (in the form of OID) for United
States Federal income tax purposes. See "United States Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
During any Deferral Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) other than stock dividends paid by the
Company which consist of stock of the same class as that on which the dividend
is being paid and (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company that
rank pari passu with or junior in interest to the Convertible Junior
Subordinated Debentures or (iii) make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu with or junior in interest to the Convertible
Junior Subordinated Debentures (other than (a) dividends or distributions in
Company Common Stock, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, (d) purchases or
acquisitions of shares of Company Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plan
or any other contractual obligation of the Company (other than a contractual
obligation ranking pari passu with or junior to the Convertible Junior
Subordinated Debentures), (e) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock or (f) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged). A Deferral Period will
terminate upon the payment by the Company of all interest then accrued and
unpaid on the Convertible Junior Subordinated Debentures (together with interest
accrued thereon, compounded quarterly, to the extent permitted by applicable
law). Prior to the termination of any Deferral Period, the Company may further
extend such Deferral Period, provided, however, that such deferral does not
cause such Deferral Period to exceed 20 consecutive quarters or to extend beyond
the Stated Maturity of the Convertible Junior Subordinated Debentures. Upon the
termination of any Deferral Period, and subject to the foregoing limitations,
the Company may elect to begin a new Deferral Period. No interest shall be due
and payable during a Deferral Period, except at the end thereof. The Company
must give the Property Trustee, the Administrative Trustees and the Debenture
Trustee notice of its election of any Deferral Period at least ten days prior to
the record date for the Distributions on the Convertible Preferred Securities
that would have been payable except for the election to begin or extend such
Deferral Period. The Debenture Trustee shall give notice of the Company's
election to begin or extend a new Deferral Period to the holders of the
Convertible Preferred Securities. There is no limitation on the number of times
that the Company may elect to begin a Deferral Period.
REDEMPTION
Repayment at Maturity; Redemption of Convertible Junior Subordinated
Debentures
The Convertible Junior Subordinated Debentures must be repaid at Stated
Maturity, unless earlier redeemed. The circumstances in which the Company may
redeem the Convertible Junior Subordinated Debentures prior to Stated Maturity
are described below. Upon the repayment in full at maturity or redemption, in
whole or in part, of the Convertible Junior Subordinated Debentures (other than
following the distribution of the Convertible Junior Subordinated Debentures to
the holders of the Trust Securities), the proceeds from such repayment or
redemption shall concurrently be applied to redeem, at the applicable Redemption
Price, a Like Amount of Trust Securities, upon the terms and conditions
described herein. See "Description of Convertible Preferred
Securities -- Mandatory Redemption."
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Optional Redemption
The Company has the right to redeem (an "Optional Redemption") the
Convertible Junior Subordinated Debentures, in whole or in part, at any time or
from time to time after April 10, 2001, upon not less than 30 nor more than 60
days' notice, at a redemption price (the "Optional Redemption Price") equal to
$51.56 per $50 principal amount of the Convertible Junior Subordinated
Debentures to be redeemed plus any accrued and unpaid interest, including
Additional Sums, if any, to the date of redemption, if redeemed on or before
April 1, 2002, and at the following redemption prices per $50 principal amount
of Convertible Junior Subordinated Debentures, if redeemed during the 12-month
period ending April 1:
<TABLE>
<CAPTION>
PRICE PER
YEAR $50 PRINCIPAL AMOUNT
---- --------------------
<S> <C>
2003.............................................. $51.04
2004.............................................. $50.52
</TABLE>
and thereafter at $50 per $50 principal amount of Convertible Junior
Subordinated Debentures plus, in each case, accrued and unpaid interest,
including Additional Sums, if any, to the redemption date.
In the event of any redemption in part, the Company shall not be required
(i) to issue, register the transfer of or exchange any Convertible Junior
Subordinated Debenture during a period beginning at the opening of business 15
days before any selection for redemption of Convertible Junior Subordinated
Debentures and ending at the close of business on the earliest date on which the
relevant notice of redemption is deemed to have been given to all holders of
Convertible Junior Subordinated Debentures to be so redeemed and (ii) to
register the transfer of or exchange any Convertible Junior Subordinated
Debentures so selected for redemption, in whole or in part, except the
unredeemed portion of any Convertible Junior Subordinated Debenture being
redeemed in part.
Tax Event Redemption
The Company may also, under certain limited circumstances within 90 days of
the occurrence and continuation of a Tax Event, redeem (a "Tax Event
Redemption") the Convertible Junior Subordinated Debentures in whole, but not in
part, at the aggregate principal amount thereof plus accrued and unpaid interest
thereon to the date of redemption (the "Tax Event Redemption Price"). See
"Description of Convertible Preferred Securities -- Tax Event or Investment
Company Event Redemption or Distribution."
If the Company is permitted to consummate a Tax Event Redemption and it
desires to do so, it must mail notice to holders of Convertible Preferred
Securities at least 20 days but not more than 60 days before the Redemption
Date.
ADDITIONAL SUMS
If (i) the Property Trustee is the sole holder of all Convertible Junior
Subordinated Debentures and (ii) the Trust is required to pay any additional
taxes, duties, assessments or other governmental charges as a result of a Tax
Event or otherwise ("Additional Sums"), the Company will pay as additional
amounts on the Convertible Junior Subordinated Debentures such amounts as shall
be required so that the Distributions payable by the Trust in respect of the
Trust Securities shall not be reduced as a result of any such Additional Sums.
RESTRICTIONS ON CERTAIN PAYMENTS
If (i) there shall have occurred a Debenture Event of Default, (ii) the
Company shall be in default with respect to its payment of any obligations under
the Guarantee or (iii) the Company shall have given notice of its election of a
Deferral Period as provided in the Indenture and shall not have rescinded such
notice, or such Deferral Period shall be continuing, the Company will not (a)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock (which includes common and preferred stock) other than stock dividends
paid by the Company which consist of stock of the same class as that on which
the dividend is being paid, (b) make any payment of
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principal, interest or premium, if any, on or repay or repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Convertible Junior Subordinated Debentures or (c) make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks pari passu with or junior
in interest to the Convertible Junior Subordinated Debentures (in each case
other than (A) dividends or distributions in Company Common Stock, (B) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (C)
payments under the Guarantee, (D) purchases or acquisitions of shares of Company
Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plan or any other contractual obligation
of the Company (other than a contractual obligation ranking pari passu with or
junior in interest to the Convertible Junior Subordinated Debentures), (E) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock or (F) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged).
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of Convertible Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies (provided that any such
action does not materially adversely affect the interest of the holders of
Convertible Junior Subordinated Debentures or the holders of the Convertible
Preferred Securities so long as they remain outstanding) and maintaining the
qualification of the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting the Company and the Debenture Trustee, with the
consent of the holders of not less than a majority in principal amount of
Convertible Junior Subordinated Debentures, to modify the Indenture in a manner
affecting the rights of the holders of Convertible Junior Subordinated
Debentures; provided, however, that no such modification may, without the
consent of the holder of each outstanding Convertible Junior Subordinated
Debenture so affected, change the Stated Maturity, or reduce the principal
amount of the Convertible Junior Subordinated Debentures, or reduce the rate or
extend the time of payment of interest thereon or reduce the percentage of
principal amount of Convertible Junior Subordinated Debentures the consent of
whose holders is required to amend, waive or supplement the Indenture, or have
certain other effects as set forth in the Indenture.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Convertible Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default":
(i) failure for 30 days to pay any interest on the Convertible Junior
Subordinated Debentures when due (subject to the deferral of any due date
in the case of a Deferral Period); or
(ii) failure to pay any principal or premium, if any, on the
Convertible Junior Subordinated Debentures when due, whether at maturity,
upon redemption, by declaration of acceleration or otherwise; or
(iii) failure to observe or perform certain other covenants contained
in the Indenture for 90 days after written notice to the Company from the
Debenture Trustee or the holders of at least 25% in aggregate outstanding
principal amount of the Convertible Junior Subordinated Debentures; or
(iv) failure by the Company to issue and deliver shares of Company
Common Stock upon an election by a holder of Convertible Preferred
Securities to convert such Convertible Preferred Securities; or
(v) certain events in bankruptcy, insolvency or reorganization of the
Company; or
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(vi) the voluntary or involuntary dissolution, winding-up or
termination of the Trust, except in connection with the distribution of the
Convertible Junior Subordinated Debentures to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration.
The holders of a majority in aggregate outstanding principal amount of the
Convertible Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Convertible Junior Subordinated
Debentures may declare the principal due and payable immediately upon a
Debenture Event of Default and, should the Debenture Trustee or such holders of
Convertible Junior Subordinated Debentures fail to make such declaration, the
holders of at least 25% in aggregate liquidation amount of the Convertible
Preferred Securities shall have such right. The holders of a majority in
aggregate outstanding principal amount of the Convertible Junior Subordinated
Debentures may annul such declaration and waive the default if the default
(other than the non-payment of the principal of the Convertible Junior
Subordinated Debentures which has become due solely by such acceleration) has
been cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Debenture Trustee. Should the holders of Convertible Junior Subordinated
Debentures fail to annul such declaration and waive such default, the holders of
a majority in aggregate liquidation amount of the Convertible Preferred
Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
Convertible Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Convertible Junior Subordinated Debentures, waive any
past default, except a default in the payment of principal of (or premium, if
any) or interest (unless such default has been cured and a sum sufficient to pay
all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee) or a default in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Convertible
Junior Subordinated Debenture. Should the holders of such Convertible Junior
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate liquidation amount of the Convertible
Preferred Securities shall have such right. The Company is required to file
annually with the Debenture Trustee a certificate as to whether or not the
Company is in compliance with all the conditions and covenants applicable to it
under the Indenture.
In case a Debenture Event of Default shall occur and be continuing, the
Property Trustee will have the right to declare the principal of and the
interest on the Convertible Junior Subordinated Debentures, and any other
amounts payable under the Indenture, to be forthwith due and payable and to
enforce its other rights as a creditor with respect to the Convertible Junior
Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CONVERTIBLE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or principal
on the Convertible Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, a holder of Convertible Preferred Securities may
institute a Direct Action. The Company may not amend the Indenture to remove the
foregoing right to bring a Direct Action without the prior written consent of
the holders of all of the Convertible Preferred Securities. If the right to
bring a Direct Action is removed following the effectiveness of the Shelf
Registration Statement in respect of the Convertible Junior Subordinated
Debentures, the Trust may become subject to the reporting obligations under the
Exchange Act. Notwithstanding any payments made to a holder of Convertible
Preferred Securities by the Company in connection with a Direct Action, the
Company shall remain obligated to pay the principal of and interest on the
Convertible Junior Subordinated Debentures, and the Company shall be subrogated
to the rights of the holders of such Convertible Preferred Securities with
respect to payments on the Convertible Preferred Securities to the extent of any
payments made by the Company to such holder in any Direct Action.
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The holders of the Convertible Preferred Securities will not be able to
exercise directly any remedies, other than those set forth in the preceding
paragraph, available to the holders of the Convertible Junior Subordinated
Debentures unless there shall have been an Event of Default under the
Declaration. See "Description of Convertible Preferred Securities -- Events of
Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
with or into any other person or convey, transfer or lease its properties and
assets substantially as an entirety to any person, and no person shall
consolidate with or merge with or into the Company or convey, transfer or lease
its properties and assets substantially as an entirety to the Company, unless
(i) in case the Company consolidates with or merges with or into another person
or conveys or transfers its properties and assets substantially as an entirety
to any person, the successor person is organized under the laws of the United
States or any State of the United States or the District of Columbia, and such
successor person expressly assumes the Company's obligations on the Convertible
Junior Subordinated Debentures issued under the Indenture and shall have
provided for conversion rights in accordance with Article XIII of the Indenture;
(ii) immediately after giving effect thereto, no Debenture Event of Default, and
no event which, after notice or lapse of time or both, would become a Debenture
Event of Default, shall have occurred and be continuing; (iii) if at the time
any Convertible Preferred Securities are outstanding, such transaction is
permitted under the Declaration and the Guarantee and does not give rise to any
breach or violation of the Declaration or the Guarantee; and (iv) certain other
conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Convertible Junior Subordinated Debentures protection in the event of a highly
leveraged or other transaction involving the Company that may adversely affect
holders of the Convertible Junior Subordinated Debentures.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any
Convertible Junior Subordinated Debentures issued thereunder shall be
subordinate and junior in right of payment to all Senior Debt to the extent
provided in the Indenture. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any bankruptcy,
insolvency, debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding of the Company, the holders of Senior Debt
will first be entitled to receive payment in full of principal of, and premium
and interest, if any, on, such Senior Debt before the holders of Convertible
Junior Subordinated Debentures, or the Property Trustee on behalf of the
holders, will be entitled to receive or retain any payment or distribution in
respect thereof.
In the event of the acceleration of the maturity of the Convertible Junior
Subordinated Debentures, the holders of all Senior Debt outstanding at the time
of such acceleration will first be entitled to receive payment in full of all
amounts due thereon (including any amounts due upon acceleration) before the
holders of the Convertible Junior Subordinated Debentures will be entitled to
receive or retain any payment in respect of the principal of, and premium and
interest, if any, on, the Convertible Junior Subordinated Debentures.
In the event that the Company shall default in the payment of any principal
of, or premium or interest, if any, on, any Senior Debt when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, and such default continues beyond the
period of grace, if any, specified in the instrument evidencing such Senior
Debt, then, unless and until such default shall have been cured or waived or
shall have ceased to exist or all Senior Debt shall have been paid, no direct or
indirect payment (in cash, property, securities, by set-off or otherwise) shall
be made or agreed to be made for principal of, and premium and interest, if any,
on, the Convertible Junior Subordinated Debentures, or in respect of any
redemption, repayment, retirement, purchase or other acquisition of any of the
Convertible Junior Subordinated Debentures.
"Senior Debt" means (i) the principal of, and premium and interest, if any,
on, all indebtedness of the Company for money borrowed, whether outstanding on
the date of execution of the Indenture or thereafter
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created, assumed or incurred, (ii) all obligations to make payment pursuant to
the terms of financial instruments, such as (a) securities contracts and foreign
currency exchange contracts, (b) derivative instruments, such as swap agreements
(including interest rate and foreign exchange rate swap agreements), cap
agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange agreements, options, commodity futures contracts and commodity
options contracts, and (c) similar financial instruments; except, in the case of
both (i) and (ii) above, such indebtedness and obligations that are expressly
stated to rank junior in right of payment to, or pari passu in right of payment
with, the Convertible Junior Subordinated Debentures, (iii) indebtedness or
obligations of others of the kind described in both (i) and (ii) above for the
payment of which the Company is responsible or liable as guarantor or otherwise
and (iv) any deferrals, renewals or extensions of any such Senior Debt;
provided, however, that Senior Debt shall not be deemed to include (a) any Debt
of the Company which, when incurred and without respect to any election under
Section 1111(b) of the United States Bankruptcy Code of 1978, was without
recourse to the Company, (b) trade accounts payable and accrued liabilities
arising in the ordinary course of business, (c) any Debt of the Company to any
of its subsidiaries, (d) Debt to any employee of the Company and (e) Debt which
by its terms is subordinated to trade accounts payable or accrued liabilities
arising in the ordinary course of business to the extent that payments made to
the holders of such Debt by the holders of the Convertible Junior Subordinated
Debentures as a result of the subordination provisions of the Indenture would be
greater than such payments otherwise would have been as a result of any
obligation of such holders of such Debt to pay amounts over to the obligees on
such trade accounts payable or accrued liabilities arising in the ordinary
course of business as a result of subordination provisions to which such Debt is
subject.
"Debt" means (i) the principal of, and premium and interest, if any, on,
indebtedness for money borrowed, (ii) purchase money and similar obligations,
(iii) obligations under capital leases, (iv) guarantees, assumptions or purchase
commitments relating to, or other transactions as a result of which the Company
is responsible for the payment of such indebtedness of others, (v) renewals,
extensions and refunding of any such indebtedness, (vi) interest or obligations
in respect of any such indebtedness accruing after the commencement of any
insolvency or bankruptcy proceedings and (vii) obligations associated with
derivative products such as interest rate and currency exchange contracts,
foreign exchange contracts, commodity contracts and similar arrangements.
The Indenture places no limitation on the amount of Senior Debt that may be
incurred by the Company. The Company expects from time to time to incur
additional indebtedness constituting Senior Debt. At February 28, 1998, the
aggregate outstanding Senior Debt of the Company was approximately $7.0 billion.
The Indenture also places no limitation on the Debt of the Company's
subsidiaries, which is effectively senior in right of payment to the Convertible
Junior Subordinated Debentures. As of February 28, 1998, the Company's
subsidiaries had Debt and other liabilities of approximately $7.7 billion.
REGISTRATION AND TRANSFER
Unless and until distributed to holders of the Trust Securities, the
Convertible Junior Subordinated Debentures will be registered in the name of and
held by the Property Trustee. Should the Convertible Junior Subordinated
Debentures be distributed to holders of the Trust Securities, (i) beneficial
interests in the Convertible Junior Subordinated Debentures issued to holders of
beneficial interests in Global Convertible Preferred Securities will be shown
on, and transfers thereof will be effected only through, records maintained by
participants in DTC and (ii) Convertible Junior Subordinated Debentures issued
to holders of Restricted Certificated Convertible Preferred Securities will be
in fully registered, certificated form.
A global security shall be exchangeable for Convertible Junior Subordinated
Debentures in certificated form registered in the names of persons other than
Cede & Co. only if (i) DTC notifies the Company that it is unwilling or unable
to continue as a depositary for such global security and no successor depositary
shall have been appointed, or if at any time DTC ceases to be a "clearing
agency" registered under the Exchange Act, at a time when DTC is required to be
so registered to act as such depositary, (ii) the Company in its sole discretion
determines that such global security shall be so exchangeable, or (iii) there
shall have occurred and be continuing a Debenture Event of Default. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for certificates registered in such names as DTC shall direct. It
is
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expected that such instructions will be based upon directions received by DTC
from its participants with respect to ownership of beneficial interests in such
global security.
Payments on Convertible Junior Subordinated Debentures held in global form
will be made to DTC, as the depositary for the Convertible Junior Subordinated
Debentures. In the case of Convertible Junior Subordinated Debentures issued in
certificated form, principal and interest will be payable, the transfer of the
Convertible Junior Subordinated Debentures will be registrable, and Convertible
Junior Subordinated Debentures will be exchangeable for Convertible Junior
Subordinated Debentures of other denominations of a like aggregate principal
amount, at the corporate office of the Debenture Trustee in New York, New York,
or at the offices of any paying agent or transfer agent appointed by the
Company, provided that payment of interest may be made at the option of the
Company by check mailed to the address of the persons entitled thereto or by
wire transfer.
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Description of Convertible Preferred Securities -- Form,
Book-Entry Procedures and Transfer." If the Convertible Junior Subordinated
Debentures are distributed to the holders of the Trust Securities upon the
termination of the Trust, the form, book-entry and transfer procedures with
respect to the Convertible Preferred Securities as described under "Description
of Convertible Preferred Securities -- Form, Book-Entry Procedures and
Transfer," shall apply to the Convertible Junior Subordinated Debentures mutatis
mutandis.
PAYMENT AND PAYING AGENTS
Payment of the principal of, and premium and interest, if any, on, the
Convertible Junior Subordinated Debentures will be made at the office or agency
of the Company maintained for that purpose in New York, New York, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that, at the
option of the Company, payment of interest may be made (except in the case of
Convertible Junior Subordinated Debentures that are held in global form) by
check mailed to each registered holder or by wire transfer. Payment of any
interest on any Convertible Junior Subordinated Debenture will be made to the
person in whose name such Convertible Junior Subordinated Debenture is
registered at the close of business on the record date for such interest, except
in the case of defaulted interest.
GOVERNING LAW
The Indenture and the Convertible Junior Subordinated Debentures are
governed by and will be construed in accordance with the laws of the State of
New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee has and is subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Convertible Junior Subordinated Debentures, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF GUARANTEE
The Guarantee was executed and delivered by the Company concurrently with
the issuance by the Trust of the Convertible Preferred Securities for the
benefit of the holders from time to time of such Convertible Preferred
Securities. The Bank of New York acts as trustee (the "Guarantee Trustee") under
the Guarantee Agreement. The Guarantee Agreement will be qualified under the
Trust Indenture Act. This summary of certain provisions of the Guarantee does
not purport to be complete and is subject to, and qualified in its
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entirety by reference to, all of the provisions of the Guarantee, including the
definitions therein of certain terms, and the Trust Indenture Act. The Guarantee
Trustee holds the Guarantee for the benefit of the holders of the Convertible
Preferred Securities.
GENERAL
Pursuant to the Guarantee, the Company irrevocably agrees to pay in full on
a subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined herein) to the holders of the Convertible Preferred Securities, as and
when due, regardless of any defense, right of set-off or counterclaim that the
Trust may have or assert other than the defense of payment. The following
payments with respect to the Convertible Preferred Securities, to the extent not
paid by or on behalf of the Trust (the "Guarantee Payments"), are subject to the
Guarantee: (i) any accrued and unpaid Distributions required to be paid on the
Convertible Preferred Securities, to the extent that the Trust has funds on hand
available therefor at such time, (ii) the applicable Redemption Price with
respect to Convertible Preferred Securities called for redemption, to the extent
that the Trust has funds on hand available therefor at such time, and (iii) upon
a voluntary or involuntary dissolution, winding up or liquidation of the Trust
(other than in connection with the distribution of Convertible Junior
Subordinated Debentures to the holders of the Convertible Preferred Securities
or the redemption of all of the Convertible Preferred Securities) the lesser of
(a) the Liquidation Distribution, to the extent the Trust has funds available
therefor and (b) the amount of assets of the Trust remaining available for
distribution to holders of the Convertible Preferred Securities upon liquidation
of the Trust after satisfaction of liabilities to creditors of the Trust as
required by applicable law. The Company's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by the Company to the
holders of the Convertible Preferred Securities or by causing the Trust to pay
such amounts to such holders.
The Guarantee is an irrevocable guarantee on a subordinated basis of the
Trust's obligations under the Convertible Preferred Securities, although it
applies only to the extent that the Trust has funds sufficient to make such
payments, and is not a guarantee of collection. If the Company does not make
interest payments on the Convertible Junior Subordinated Debentures held by the
Trust, the Trust will not be able to pay Distributions on the Convertible
Preferred Securities and will not have funds legally available therefor.
The Guarantee ranks subordinate and junior in right of payment to all
Senior Debt. See "-- Status of the Guarantee." Because the Company is
principally a holding company, the right of the Company to participate in any
distribution of assets of any subsidiary, upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of the holders of Convertible
Preferred Securities to benefit indirectly from any such distribution), is
subject to the prior claims of creditors of such subsidiary, except to the
extent the Company may itself be recognized as a creditor of that subsidiary.
Accordingly, the Company's obligations under the Guarantee are effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and claimants should look only to the assets of the Company for
payments thereunder. The Guarantee does not limit the incurrence or issuance of
other secured or unsecured debt of the Company, including Senior Debt, whether
under any indenture that the Company may enter into in the future or otherwise.
Taken together, the Company's obligations under the Guarantee, the
Declaration, the Convertible Junior Subordinated Debentures and the Indenture,
including the Company's obligation to pay the costs, expenses and other
liabilities of the Trust (other than the Trust's obligations to the holders of
the Trust Securities under the Trust Securities), provide, in the aggregate, a
full, irrevocable and unconditional guarantee of all of the Trust's obligations
under the Convertible Preferred Securities. No single document standing alone or
operating in conjunction with fewer than all the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Convertible Preferred Securities. See
"Relationship Among the Convertible Preferred Securities, the Convertible Junior
Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee constitutes an unsecured obligation of the Company and ranks
subordinate and junior in right of payment to all Senior Debt in the same manner
as Convertible Junior Subordinated Debentures.
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The Guarantee constitutes a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against any other person or entity). The Guarantee is held
for the benefit of the holders of the Convertible Preferred Securities. The
Guarantee will not be discharged except by payment of the Guarantee Payments in
full to the extent not paid by the Trust or upon distribution to the holders of
the Convertible Preferred Securities of the Convertible Junior Subordinated
Debentures. The Guarantee does not place a limitation on the amount of
additional Senior Debt that may be incurred by the Company. The Company expects
from time to time to incur additional indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Convertible Preferred Securities (in which case no
vote will be required), the Guarantee may not be amended without the prior
approval of the holders of not less than a majority of the aggregate liquidation
amount of the outstanding Convertible Preferred Securities. The manner of
obtaining any such approval will be as set forth under "Description of
Convertible Preferred Securities -- Voting Rights; Amendment of the
Declaration." All guarantees and agreements contained in the Guarantee shall
bind the successors, assigns, receivers, trustees and representatives of the
Company and shall inure to the benefit of the holders of the Convertible
Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder; provided,
however, that except with respect to a default in payment of any Guarantee
Payment, the Company shall have received notice of default and shall not have
cured such default within 60 days after receipt of such notice. The holders of
not less than a majority in aggregate liquidation amount of the Convertible
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
Any holder of the Convertible Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the Guarantee Trustee is under no obligation
to exercise any of the powers vested in it by the Guarantee at the request of
any holder of the Convertible Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Convertible Preferred Securities,
upon full payment of the amounts payable upon liquidation of the Trust or upon
distribution of Convertible Junior Subordinated Debentures to the holders of the
Convertible Preferred Securities. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of the
Convertible Preferred Securities must restore payment of any sums paid under the
Convertible Preferred Securities or the Guarantee.
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GOVERNING LAW
The Guarantee is governed by and will be construed in accordance with the
laws of the State of New York.
RELATIONSHIP AMONG THE CONVERTIBLE PREFERRED SECURITIES,
THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Convertible
Preferred Securities (to the extent the Trust has funds available for the
payment of such Distributions) are irrevocably guaranteed by the Company as and
to the extent set forth under "Description of Guarantee." Taken together, the
Company's obligations under the Convertible Junior Subordinated Debentures, the
Indenture, the Declaration and the Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and other
amounts due on the Convertible Preferred Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the Trust's obligations under the Trust Securities. If and to the extent that
the Company does not make payments on the Convertible Junior Subordinated
Debentures, the Trust will not pay Distributions or other amounts due on the
Convertible Preferred Securities. The Guarantee does not cover payment of
Distributions when the Trust does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of Convertible Preferred
Securities is to institute a Direct Action. The obligations of the Company under
the Guarantee are subordinate and junior in right of payment to all Senior Debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Convertible Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Convertible Preferred
Securities, primarily because (i) the aggregate principal amount or applicable
Redemption Price of the Convertible Junior Subordinated Debentures will be equal
to the sum of the aggregate liquidation amount or applicable Redemption Price,
as applicable, of the Trust Securities; (ii) the interest rate payable on the
Convertible Junior Subordinated Debentures and interest and other payment dates
on the Convertible Junior Subordinated Debentures will match the Distribution
rate and Distribution and other payment dates for the Convertible Preferred
Securities; (iii) the Company shall pay for all costs, expenses and liabilities
of the Trust except the Trust's obligations to holders of Trust Securities under
such Trust Securities; and (iv) the Declaration further provides that the Trust
will not engage in any activity that is not consistent with the limited purposes
thereof.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, any payment under the Guarantee used to satisfy
the related payment of indebtedness under the Indenture.
ENFORCEMENT RIGHTS OF HOLDERS OF CONVERTIBLE PREFERRED SECURITIES
A holder of any of the Convertible Preferred Securities may institute a
legal proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Debt would not constitute a
default or Event of Default under the Declaration. However, in the event of
payment defaults under, or acceleration of, Senior Debt, the subordination
provisions of the Indenture provide that no payments may be made in respect of
the Convertible Junior Subordinated Debentures until such Senior Debt has been
paid in full or any payment default
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thereunder has been cured or waived. Failure to make required payments on
Convertible Junior Subordinated Debentures would constitute an Event of Default
under the Declaration.
LIMITED PURPOSE OF THE TRUST
The Convertible Preferred Securities evidence a beneficial interest in the
Trust, and the Trust exists for the sole purpose of issuing the Convertible
Preferred Securities and Common Securities and investing the proceeds of the
Trust Securities in Convertible Junior Subordinated Debentures.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
the Trust involving the liquidation of the Convertible Junior Subordinated
Debentures, after satisfaction of the liabilities of creditors of the Trust as
required by applicable law, the holders of the Trust Securities will be entitled
to receive, out of assets held by the Trust, the Liquidation Distribution in
cash. See "Description of Convertible Preferred Securities -- Liquidation of the
Trust and Distribution of Convertible Junior Subordinated Debentures." Upon any
voluntary or involuntary liquidation or bankruptcy of the Company, the Property
Trustee, as holder of the Convertible Junior Subordinated Debentures, would be a
subordinated creditor of the Company, subordinated in right of payment to all
Senior Debt as set forth in the Indenture, but entitled to receive payment in
full of principal and interest, before any stockholders of the Company receive
payments or distributions. Since the Company is the guarantor under the
Guarantee and has agreed to pay for all costs, expenses and liabilities of the
Trust (other than the Trust's obligations to the holders of its Trust
Securities), the positions of a holder of Convertible Preferred Securities and a
holder of Convertible Junior Subordinated Debentures relative to other creditors
and to stockholders of the Company in the event of liquidation or bankruptcy of
the Company are expected to be substantially the same.
DESCRIPTION OF COMPANY COMMON STOCK
The Company is presently authorized to issue 500,000,000 shares of Common
Stock, par value $2.50 per share ("Company Common Stock"), and 20,000,000 shares
of preferred stock, without par value. At February 28, 1998 an aggregate of
247,292,769 shares of Company Common Stock were outstanding. No shares of
preferred stock are currently outstanding, and no shares are reserved for
issuance.
DIVIDEND RIGHTS AND PRIORITY
Subject to the rights of holders of any preferred stock which may be issued
in the future, the holders of Company Common Stock are entitled to receive, to
the extent permitted by law, dividends thereon if and when declared by the Board
of Directors. The Company may not pay dividends on Company Common Stock (other
than dividends payable in Company Common Stock) unless all dividends accrued on
outstanding preferred stock have been paid or declared and set apart for
payment.
VOTING RIGHTS
Holders of Company Common Stock are entitled to one vote for each share
held. Holders do not have cumulative voting rights.
CERTAIN TRANSACTIONS
The Company's Revised Articles of Incorporation provide that certain
transactions between the Company and a beneficial owner of more than 10% of the
Company's voting stock, or an affiliate of such a beneficial holder, must either
(1) be approved by a majority of the Company's voting stock other than that held
by such beneficial owner, (2) satisfy certain minimum price and procedural
criteria, or (3) be approved by a majority of the Company's directors who are
not related to such beneficial owner. The transactions covered by these
provisions include mergers, consolidations, sales or disposition of assets,
adoption of a plan or liquidation or dissolution, or other transactions
increasing the proportionate share of such 10% beneficial owner.
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LIQUIDATION RIGHTS
Any preferred stock would be senior to the Company Common Stock as to
distributions upon liquidation, dissolution or winding up. After distribution in
full of the preferential amounts to be distributed to holders of preferred
stock, holders of Company Common Stock will be entitled to receive all remaining
assets of the Company available for distribution to stockholders in the event of
voluntary or involuntary liquidation.
PREFERRED STOCK
The Board of Directors of the Company is authorized to issue preferred
stock in one or more series, from time to time, with such designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations and restrictions thereof, as may be provided in
resolutions adopted by the Board of Directors. Each share of preferred stock is
entitled to one vote, and except as described below, holders of preferred stock
vote together with holders of Company Common Stock as one class. In the event
that dividends on the preferred stock are in arrears in an amount equal to six
quarterly dividends, the holders of the preferred stock, voting separately as a
class are entitled to elect two directors of the Company. Holders of preferred
stock are entitled to vote separately as a class on certain transactions
affecting the rights and preferences of the preferred stock.
OTHER MATTERS
The Company Common Stock is not redeemable, has no preemptive or conversion
rights and is not liable for further assessments or calls. All shares of Company
Common Stock issuable upon conversion of the Convertible Preferred Securities
will be fully paid and nonassessable.
Harris Trust and Savings Bank is the Transfer Agent and Registrar for the
Company Common Stock.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special tax
counsel to the Company and the Issuer ("Special Tax Counsel"), the following is
a summary of certain material United States Federal income tax consequences of
the purchase, ownership, conversion and disposition of Convertible Preferred
Securities. Unless otherwise stated, this summary assumes that the Convertible
Preferred Securities are held as capital assets by holders who purchase the
Convertible Preferred Securities upon original issuance. It does not describe
the special tax considerations applicable to special classes of holders such as
banks, thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors,
or persons who will hold the Convertible Preferred Securities as a position in a
"straddle", as part of a "synthetic security" or "hedge", as part of a
"conversion transaction" or other integrated investment or as other than a
capital asset. This summary also does not address the tax consequences to
persons who have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of
Convertible Preferred Securities. Further, it does not include any description
of any alternative minimum tax consequences or the tax laws of any state or
local government or of any foreign government that may be applicable to the
Convertible Preferred Securities. This summary is based on the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury regulations thereunder (the
"Treasury Regulations") and administrative and judicial interpretations thereof,
as of the date hereof, all of which are subject to change, possibly on a
retroactive basis.
CLASSIFICATION OF THE TRUST AS A GRANTOR TRUST
In connection with the Original Offering of the Convertible Preferred
Securities, Special Tax Counsel rendered its opinion, under then current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, that the Trust will be classified for United States
Federal income tax purposes as a grantor trust and not as a partnership, an
association taxable as a corporation, or a publicly traded partnership taxable
as a
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corporation. Accordingly, for United States Federal income tax purposes, each
holder of Convertible Preferred Securities generally will be considered the
owner of an undivided interest in the Convertible Junior Subordinated
Debentures, and each holder will be required to include in its gross income all
income, gain or loss with respect to its allocable share of those Convertible
Junior Subordinated Debentures.
CLASSIFICATION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES AS INDEBTEDNESS
In connection with the Original Offering of the Convertible Junior
Subordinated Debentures, Special Tax Counsel rendered its opinion, generally to
the effect that under then current law and assuming full compliance with the
terms of the Indenture (and certain other documents), and based on certain facts
and assumptions contained in such opinion, that the Convertible Junior
Subordinated Debentures to be held by the Trust will be classified for United
States Federal income tax purposes as indebtedness of the Company. By acceptance
of Convertible Preferred Securities, each holder covenants to treat the
Convertible Junior Subordinated Debentures as indebtedness and the Convertible
Preferred Securities as evidence of indirect beneficial ownership interest in
the Convertible Junior Subordinated Debentures. No assurance can be given,
however, that such position will not be challenged by the Internal Revenue
Service ("IRS") or, if challenged, that such a challenge will not be successful.
The remainder of this discussion assumes, unless specifically indicated
otherwise, that the Convertible Junior Subordinated Debentures will be
classified as indebtedness of the Company for United States Federal income tax
purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Unless the OID rules apply to the Convertible Junior Subordinated
Debentures, as discussed below, stated interest on the Convertible Preferred
Securities will generally be taxable to a holder as ordinary income when paid or
accrued in accordance with that holder's method of accounting for United States
Federal income tax purposes. While the existence of an issuer's option to defer
the payment of interest on debt instruments generally results in the application
of the OID rules, debt instruments like the Convertible Junior Subordinated
Debentures are not considered issued with OID if there is only a "remote"
likelihood of the Company exercising its option of deferral.
The Company believes, and this discussion assumes, that, as of the date of
this Prospectus, the likelihood of deferring payments of interest under the
terms of the Convertible Junior Subordinated Debentures is "remote" within the
meaning of the applicable Treasury Regulations. This belief is based in part on
the fact that exercising that option would prevent the Company from declaring
dividends on its stock and would prevent the Company from making any payments
with respect to debt securities that rank pari passu with or junior to the
Convertible Junior Subordinated Debentures. Therefore, although the matter is
not free from doubt, the Company believes that the Convertible Junior
Subordinated Debentures should not be treated as subject to the OID rules at the
time of their original issuance by reason of the Company's deferral option.
No rulings or other interpretations have been issued by the IRS which have
addressed the meaning of the term "remote" as used in the applicable Treasury
regulations, and it is possible that the IRS could take a position contrary to
the interpretations herein.
If the likelihood of the Company exercising the option to defer any payment
of interest were determined not to be "remote" or if the Company were to
exercise its option to defer payments of interest, the Convertible Junior
Subordinated Debentures would be treated as subject to the OID rules at the time
of their original issuance or at the time of such exercise, as the case may be,
for the entire remaining term of the Convertible Junior Subordinated Debentures.
Under these rules, OID would accrue on an economic accrual basis and would be
includible in income on the accrual method, including during any interest
deferral period, regardless of the holder's method of accounting for United
States Federal income tax purposes. Consequently, holders of the Convertible
Preferred Securities would be required to include OID in gross income even
though the Company would not make any actual distributions during the extension
period. Actual distributions of interest on the Convertible Junior Subordinated
Debentures generally would not be separately taxable. A holder that disposes of
its Convertible Preferred Securities prior to the record date for payment of
distributions on the Convertible Junior Subordinated Debentures will be subject
to tax on OID accrued through the date of
43
<PAGE> 48
disposition (and not previously included in income), but will not receive cash
from the Trust with respect to such OID.
Because the income underlying the Convertible Preferred Securities would
not be characterized as dividends for United States Federal income tax purposes,
corporate holders of the Convertible Preferred Securities will not be entitled
to a dividends-received deduction for any income recognized with respect to the
Convertible Preferred Securities.
RECEIPT OF CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION
OF THE TRUST
Under certain circumstances, as described under the caption "Description of
Convertible Preferred Securities -- Tax Event or Investment Company Event
Redemption or Distribution," Convertible Junior Subordinated Debentures may be
distributed to holders in exchange for the Convertible Preferred Securities and
in liquidation of the Trust. Under current law, such a distribution to holders,
for United States Federal income tax purposes, would be a nontaxable event to
each holder, and each holder would receive an aggregate tax basis in the
Convertible Junior Subordinated Debentures equal to such holder's aggregate tax
basis in its Convertible Preferred Securities. A holder's holding period in the
Convertible Junior Subordinated Debentures so received in liquidation of the
Trust would include the period during which the Convertible Preferred Securities
were held by such holder.
Under certain circumstances described herein (see "Description of
Convertible Preferred Securities"), the Convertible Junior Subordinated
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Convertible Preferred Securities.
Under current law, such a redemption would, for United States Federal income tax
purposes, constitute a taxable disposition of the redeemed Convertible Preferred
Securities, and a holder would recognize gain or loss as if it sold such
redeemed Convertible Preferred Securities for cash. See "-- Sale of Convertible
Preferred Securities."
SALE OF CONVERTIBLE PREFERRED SECURITIES
A holder who sells Convertible Preferred Securities will be considered to
have disposed of all or part of its pro rata share of the Convertible Junior
Subordinated Debentures and will recognize gain or loss equal to the difference
between the amount realized on the sale of the Convertible Preferred Securities
and the holder's adjusted tax basis in such Convertible Preferred Securities. A
holder's adjusted tax basis in the Convertible Preferred Securities generally
will be its initial purchase price decreased by principal payments received on
the Convertible Preferred Securities. If the OID rules apply to the Convertible
Junior Subordinated Debentures, a holder's adjusted tax basis is increased by
OID previously includible in income and decreased by distributions or other
payments received on the Convertible Junior Subordinated Debentures since and
including the day that the Convertible Junior Subordinated Debentures became
subject to the OID rules. Any such gain or loss generally will be a capital gain
or loss (except to the extent of any accrued interest with respect to such
holder's pro rata share of the Convertible Junior Subordinated Debentures
required to be included in income as ordinary income). In the case of a
noncorporate holder, the maximum marginal United States Federal income tax rate
applicable to such gain will be lower than the maximum marginal United States
Federal income tax rate applicable to ordinary income if such holder's holding
period for such Convertible Preferred Securities exceeds one year and will be
further reduced if such Convertible Preferred Securities are held for more than
18 months.
If the Convertible Junior Subordinated Debentures are subject to the OID
rules, a holder who disposes of its Convertible Preferred Securities between
record dates for payments of distributions thereon will be required to include
OID on the Convertible Junior Subordinated Debentures through the date of
disposition in income as ordinary income, and to add such amount to its adjusted
tax basis. To the extent the amount recognized on the sale is less than the
holder's adjusted tax basis (which basis will include all accrued but unpaid
OID), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States Federal income tax purposes.
44
<PAGE> 49
CONVERSION OF CONVERTIBLE PREFERRED SECURITIES INTO COMPANY COMMON STOCK
A holder of Convertible Preferred Securities will not recognize income,
gain or loss upon the conversion, through the Property Trustee, as Conversion
Agent, of Convertible Junior Subordinated Debentures into Company Common Stock
(although the holder will be required to continue to accrue any OID through the
date of conversion). The holder will recognize gain upon the receipt of cash in
lieu of a fractional share of Company Common Stock. Such gain will be equal to
the amount of cash received less the holder's tax basis in such fractional
share.
A holder's tax basis in the Company Common Stock received upon conversion
will generally be equal to the holder's tax basis in the Convertible Preferred
Securities delivered to the Property Trustee, as Conversion Agent, for exchange
less the basis allocated to any fractional share for which cash is received, and
a holder's holding period in the Company Common Stock received upon conversion
will generally begin on the date following the date on which the holder acquired
the Convertible Preferred Securities delivered to the Property Trustee, as
Conversion Agent, for exchange.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Convertible Preferred Securities as having received a constructive
distribution from the Company if the Applicable Conversion Ratio of the
Convertible Junior Subordinated Debentures were adjusted and both (i) as a
result of such adjustment, the proportionate interest (measured by the amount of
Company Common Stock into which the Convertible Junior Subordinated Debentures
are convertible) of the holders of the Convertible Preferred Securities in the
assets or earnings and profits of Company were increased, and (ii) the
adjustment was not made pursuant to a bona fide, reasonable antidilution
formula. An adjustment in the conversion ratio would not be considered made
pursuant to such a formula if the adjustment was made to compensate for certain
taxable distributions with respect to the Company Common Stock. Thus, under
certain circumstances, a reduction in the conversion price for the holders may
result in deemed dividend income to holders to the extent of the current or
accumulated earnings and profits of the Company. Holders of the Convertible
Preferred Securities would be required to include their allocable share of such
deemed dividend income in gross income but would not receive any cash related
thereto.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a "United
States person" as defined in section 7701(a)(30) of the Code (generally, as to
the United States, a foreign corporation, a non-resident alien individual, a
foreign partnership, or a foreign estate or trust).
Interest
Under current United States Federal income tax law, distributions on the
Convertible Preferred Securities to a United States Alien Holder will not be
subject to withholding of United States Federal income tax if (a) the beneficial
owner of the Convertible Preferred Securities does not actually or
constructively (including by virtue of its interest in the underlying
Convertible Junior Subordinated Debentures) own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote,
(b) the beneficial owner of Convertible Preferred Securities is not a controlled
foreign corporation that is related to the Company through stock ownership, and
(c) either (A) the beneficial owner of Convertible Preferred Securities
certifies to the Trust or its agent, under penalties of perjury, that it is not
a United States person and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds Convertible Preferred Securities in such capacity,
certifies to the Trust or its agent, under penalties of perjury, that such
statement has been received from the beneficial owner by it or by a Financial
Institution between it and the beneficial owner and furnishes the Trust or its
agent with a copy thereof. Recently finalized Treasury Regulations would modify
the certification requirements set forth in (A) and (B) with respect to payments
of interest made after December 31, 1998.
45
<PAGE> 50
Dividends
If it is determined that the Convertible Junior Subordinated Debentures are
not classified as an indebtedness of the Company for United States Federal
income tax purposes, or if the Convertible Preferred Securities are converted
into Company Common Stock, any dividend paid by the Company with respect to the
Convertible Preferred Securities, or the Company Common Stock into which they
were converted, as the case may be, will generally be subject to withholding of
United States Federal income tax at the rate of 30% (unless reduced by an
applicable income tax treaty), unless the dividend is effectively connected with
the conduct of a trade or business in the United States by the United States
Alien Holder, in which case the dividend will be subject to the United States
Federal income tax on net income that applies to United States persons generally
(and with respect to corporate shareholders and under certain circumstances, the
branch profit tax). If a United States Alien Holder is treated as receiving a
deemed dividend as a result of the adjustment of the conversion price of the
Convertible Preferred Securities as described above, such deemed dividend will
generally be subject to the same rules. Under current regulations, dividends
paid to an address in a foreign country are presumed to be paid to a resident of
that country for the purpose of determining the applicable income tax treaty
rate, but regulations issued pursuant to certain income tax treaties may require
certain certification and proof of residence to be furnished. Recently finalized
Treasury regulations contain certain certification requirements with respect to
payments of dividends made after December 31, 1998.
Conversion
A United States Alien Holder will be subject to the same rules described
above under "-- Conversion of Convertible Preferred Securities Into Company
Common Stock" on the conversion of the Convertible Preferred Securities into
Company Common Stock.
Sale of Convertible Preferred Securities or Company Common Stock
A United States Alien Holder will not be subject to tax on any gain (except
for gain attributable to accrued and unpaid interest, which would be treated as
interest subject to the rules described above) recognized upon the sale or other
disposition of the Convertible Preferred Securities (or the Company Common Stock
to which it was converted, or upon receipt of cash in lieu of fractional shares
upon conversion of the Convertible Preferred Securities into Company Common
Stock) unless (i) the United States Alien Holder is an individual who is present
in the United States for 183 days or more in the taxable year of disposition,
and certain other conditions apply, (ii) the gain is effectively connected with
the conduct by the United States Alien Holder of a trade or business in the
United States, or (iii) the Company is, or during the preceding five years has
been, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code and either (a) if the Convertible Preferred
Securities are considered to be "regularly traded interests", the United States
Alien Holder beneficially owns (actually or constructively), or during the
preceding five years has beneficially owned (actually or constructively), more
than five percent of the Convertible Preferred Securities, or (b) if the
Convertible Preferred Securities are not considered to be regularly traded
interests, the United States Alien Holder beneficially owned (actually or
constructively), on the date it acquired any Convertible Preferred Securities,
Convertible Preferred Securities having a fair market value greater than the
fair market value of five percent of the Company Common Stock. A United States
Alien Holder will not be subject to tax on any gain recognized upon the sale or
other disposition of the Company Common Stock unless such United States Alien
Holder is described in sub-sections (i) or (ii) above, or if the Company is, or
during the preceding five years has been, a "United States real property holding
corporation" within the meaning of section 897(c)(2) of the Code and the United
States Alien Holder beneficially owns (actually or constructively), or during
the preceding five years has beneficially owned (actually or constructively),
more than five percent of the Company Common Stock.
It is not clear whether the Company is, or has been during the preceding
five years a "United States real property holding corporation" and accordingly,
United States Alien Holders should consult their own tax advisors regarding the
investment in the Convertible Preferred Securities.
46
<PAGE> 51
INFORMATION REPORTING AND BACKUP WITHHOLDING
Annual tax information reporting requirements generally will apply to
interest paid or accrued, distributions made with respect to the Company Stock
and sale or redemption proceeds received on the Convertible Preferred Securities
or the Company Common Stock to which it converts, and such amounts may be
subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification requirements. Any withheld amounts will be allowed as a
credit against the holder's United States Federal income tax, provided the
holder provides the required information to the Internal Revenue Service.
On October 7, 1997, the United States Treasury Department issued final
Treasury regulations governing information reporting and the certification
procedures regarding withholding and backup withholding on certain amounts paid
to United States Alien Holders after December 31, 1998. Such regulations, among
other things, may change the certification procedures relating to the receipt by
intermediaries of payments on behalf of a beneficial owner of Convertible
Preferred Securities. However, compliance with the certification procedures
described in the preceding Section would generally continue the exemption (from
information reporting requirements and the backup withholding tax) for United
States Alien Holders who are exempt recipients.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
THE CONVERTIBLE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES FEDERAL OR OTHER TAX LAWS.
CERTAIN ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans and certain
other retirement plans and arrangements, including individual retirement
accounts and annuities, that are subject to ERISA and the Code (all of which are
hereinafter referred to as "ERISA Plans") and on persons who are fiduciaries
with respect to such ERISA Plans. In accordance with ERISA's general fiduciary
standards, before investing in Convertible Preferred Securities, an ERISA Plan
fiduciary should determine whether such an investment is permitted under the
governing ERISA Plan instruments and is appropriate for the ERISA Plan in view
of its overall investment policy and the composition and diversification of its
portfolio. Other provisions of ERISA and the Code prohibit certain transactions
involving the assets of an ERISA Plan and persons who have certain specified
relationships to the ERISA Plan ("parties in interest" within the meaning of
ERISA or "disqualified persons" within the meaning of the Code). Accordingly,
any ERISA Plan with respect to which the Company or any of its affiliates would
be considered a party in interest or a disqualified person should not purchase
Convertible Preferred Securities.
In addition, under United States Department of Labor Regulation Section
2510.3-101 (the "Regulation"), if immediately after any acquisition of
Convertible Preferred Securities, 25 percent or more of the value of the
Convertible Preferred Securities is held by ERISA Plans, employee benefit plans
not subject to ERISA (for example, governmental plans) and entities whose
underlying assets include plan assets by reason of a plan's investment in the
entity, then the assets of the Issuer (including the Convertible Junior
Subordinated Debentures) would be treated as assets of ERISA Plans holding
Convertible Preferred Securities, unless another exemption or exception applied.
In such event, the persons providing services with respect to the assets of the
Trust may be subject to the fiduciary responsibility provisions of Title I of
ERISA and the prohibited transaction provisions of ERISA and Section 4975 of the
Code with respect to transactions involving such assets. In order to avoid
certain prohibited transactions that might otherwise arise in connection with
the Trust assets, each investing ERISA Plan, by its purchase of Convertible
Preferred Securities, will be deemed to have directed the Trustee to purchase
the Convertible Junior Subordinated Debentures and to have
47
<PAGE> 52
approved all of the documents relating to the Trust assets. Moreover, the
holders of Convertible Preferred Securities will have the right to direct the
Property Trustee as to the exercise of remedies in connection with any Event of
Default.
ANY ERISA PLAN PROPOSING TO PURCHASE CONVERTIBLE PREFERRED SECURITIES
SHOULD CONSULT WITH ITS COUNSEL REGARDING THE APPLICATION OF ERISA, THE CODE AND
THE REGULATION WITH RESPECT TO INVESTMENT IN CONVERTIBLE PREFERRED SECURITIES.
REGISTRATION RIGHTS
In connection with the Original Offering, the Company and the Trust entered
into a registration agreement with the Initial Purchasers (the "Registration
Agreement") for the benefit of the holders of the Convertible Preferred
Securities wherein the Company and the Trust agreed, at the Company's sole
expense, to (i) file as soon as practicable, but in no event more than 30 days
after the Original Offering Date a shelf registration (the "Shelf Registration
Statement") covering resales of the Convertible Preferred Securities, the
Guarantee, the Convertible Junior Subordinated Debentures and the related
Company Common Stock issuable upon conversion thereof (the "Registerable
Securities"), (ii) use their best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act within 120 days
after the Original Offering Date and (iii) use their best efforts to keep
effective the Shelf Registration Statement for two years or such other period as
required under Rule 144(k) of the Securities Act or any successor rule thereto
or, if earlier, such time as all of the applicable Registerable Securities have
been sold thereunder. The Company will provide to each holder for whom such
Shelf Registration Statement was filed copies of this Prospectus, notify each
such holder when the Shelf Registration Statement for the Registerable
Securities has become effective and take certain other actions as are required
to permit unrestricted resales of the Registerable Securities. A holder that
sells Registerable Securities pursuant to the Shelf Registration Statement
generally will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration
Agreement that are applicable to such a holder (including certain
indemnification rights and obligations).
If (i) within 120 days of the Original Offering Date the Shelf Registration
Statement has not been declared effective by the Commission, or (ii) in the
event that a Shelf Registration Statement is declared effective by the
Commission, the Company or the Trust fails to keep such Shelf Registration
Statement continuously effective and usable (subject to certain exceptions) for
the period required by the Registration Agreement (each such event referred to
in clauses (i) and (ii) a "Registration Default"), then additional interest
("Special Interest") will accrue on the Convertible Junior Subordinated
Debentures (including in respect of amounts accruing during any Deferral
Period), and corresponding additional distributions (the "Special
Distributions") will accrue on the Trust Securities, in each case from and
including the day following such Registration Default to but excluding the day
on which such Registration Default has been cured or has been deemed to have
been cured. Special Interest and Special Distributions will be paid in cash
quarterly in arrears on each Interest Payment Date commencing with the first
Interest Payment Date following the applicable Registration Default and will
accrue at a rate such that the interest rate or distribution rate, as the case
may, will be increased 0.50% per annum of the principal amount or liquidation
amount, as applicable. Following the cure of a Registration Default, Special
Interest and Special Distributions will cease to accrue with respect to such
Registration Default.
Each Registerable Security contains a legend to the effect that the holder
thereof, by its acceptance thereof, will be deemed to have agreed to be bound by
the provisions of the Registration Agreement.
The Registration Agreement is governed by, and will be construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration Agreement does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Registration Agreement, a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
48
<PAGE> 53
SELLING HOLDERS
The Convertible Preferred Securities were originally issued by the Trust
and sold by Credit Suisse First Boston Corporation, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Smith Barney Inc. and Schroder & Co. Inc. (the
"Initial Purchasers") in a transaction exempt from the registration requirements
of the Securities Act, to persons reasonably believed by such Initial Purchasers
to be "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act), to a limited number of institutional "accredited investors" (as
defined in Rule 501(a) (1), (2), (3) or (7) under the Securities Act) and
outside the United States to non-U.S. persons in offshore transactions in
reliance on Regulation S under the Securities Act. The Selling Holders may from
time to time offer and sell pursuant to this Prospectus any or all of the
Convertible Preferred Securities, any Convertible Junior Subordinated Debentures
and Company Common Stock issued upon conversion of the Convertible Preferred
Securities.
The following table sets forth information with respect to the Selling
Holders of the Convertible Preferred Securities and the respective number of
Convertible Preferred Securities beneficially owned by each Selling Holder that
may be offered pursuant to this Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- -----------
<S> <C>
Credit Suisse First Boston Corporation...................... 2,822,418
Fidelity Securities Fund: Fidelity Growth & Income
Portfolio(1).............................................. 1,377,000
Argent Classic Convertible Arbitrage Fund (Bermuda) L.P..... 1,335,000
Hartford Capital Appreciation Fund, Inc.(2)................. 1,230,000
Lipper Convertibles, L.P.................................... 1,069,700
The Income Fund of America, Inc............................. 976,200
Fidelity Devonshire Trust: Fidelity Equity-Income Fund(1)... 817,600
J.P. Morgan & Co. Incorporated.............................. 752,133
Equity Portfolio............................................ 700,000
Equity Income Portfolio..................................... 541,000
Aim Charter Fund............................................ 500,000
Premium Total Return Portfolio.............................. 472,000
Alliance Growth and Income Fund, Inc........................ 444,000
Argent Classic Convertible Arbitrage Fund L.P............... 390,000
Variable Insurance Products Fund: Equity-Income
Portfolio(1).............................................. 384,500
Oppenheimer Main Street Funds Inc. for the Oppenheimer Main
Street Income & Growth Fund............................... 350,300
Commerzbank AG.............................................. 350,000
Salomon Brothers Fund(3).................................... 350,000
The TCW Group, Inc.......................................... 346,800
SBC Warburg Dillon Read Inc................................. 343,500
The Northwestern Mutual Life Insurance Company(4)........... 340,000
General Motors Investment Management Corp.(3)............... 300,000
Paloma Securities LLC....................................... 300,000
The Cincinnati Insurance Company............................ 300,000
Allstate Life Insurance Company............................. 286,500
Fidelity Capital Trust: Fidelity Value Fund(1).............. 268,000
Fundamental Investors, Inc.................................. 260,000
Oppenheimer Bond Fund Series -- Oppenheimer Convertible
Securities Fund........................................... 250,000
Hartford Capital Appreciation Fund(2)....................... 246,000
Prudential Equity Income Fund............................... 243,900
</TABLE>
49
<PAGE> 54
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- -----------
<S> <C>
Prudential Series Fund, Inc. -- Equity Income Portfolio..... 243,900
Grantham, Mayo, Van Otterloo & Co., LLC..................... 240,000
Highbridge International, LLC............................... 230,000
MainStay Convertible Fund................................... 230,000
Chilton International (BVI) Ltd............................. 214,266
The Hudson River Trust -- Alliance Growth and Income
Portfolio................................................. 206,000
Transamerica Life Insurance & Annuity Co.................... 200,000
Fidelity Puritan Trust: Fidelity Balanced Fund(1)........... 200,000
Fidelity Puritan Trust: Fidelity Puritan Fund(1)............ 190,600
Putnam Convertible Income-Growth Trust...................... 186,373
Chilton Investment Partners, L.P............................ 183,869
T. Rowe Price Associates, Inc............................... 178,100
Allstate Insurance Company.................................. 176,000
Vanguard Equity Income Fund................................. 168,300
Fiduciary Trust Company International....................... 151,000
Chase Vista Growth & Income Fund............................ 150,000
GLG Market Neutral Fund..................................... 150,000
Fidelity Financial Trust: Fidelity Equity-Income II
Fund(1)................................................... 139,400
Oppenheimer Equity Income Fund.............................. 131,400
BT Holdings (New York ) Inc................................. 130,500
Davis New York Venture Fund, Inc............................ 125,000
Salomon Brothers Investors Fund(3).......................... 125,000
MFS Series Trust V -- MFS Total Return Fund................. 117,500
Bond Fund of America, Inc................................... 111,100
Fidelity Management Trust Company on behalf of accounts
managed by it(5).......................................... 111,000
Allmerica Select Growth & Income Fund....................... 105,200
Paloma Strategic Fund, L.P.................................. 100,000
President & Fellows of Harvard College...................... 100,000
The Cincinnati Life Insurance Company....................... 100,000
Baker, Fentress & Company................................... 93,100
JP Morgan Securities Inc.................................... 92,133
MainStay Value Fund......................................... 90,000
Pacific Horizon Capital Income Fund......................... 90,000
Teachers Insurance and Annuity Association of America....... 90,000
Oppenheimer Total Return Fund, Inc.......................... 87,600
Shriners Hospitals For Children............................. 87,000
The Chase Manhattan Bank NA Trustee for IBM Retirement Plan
dated 12/18/45............................................ 85,800
Aim V.I. Growth & Income Fund............................... 80,000
Excelsior Value & Restructuring Fund........................ 80,000
Chrysler Insurance Company.................................. 75,000
Continental Casualty Company................................ 71,000
Evergreen Income & Growth Fund.............................. 70,000
Equity Income Fund.......................................... 67,200
The EB Convertible Securities Fund.......................... 66,900
Bear, Stearns & Co. Inc..................................... 61,000
American Home Assurance Company............................. 60,000
</TABLE>
50
<PAGE> 55
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- -----------
<S> <C>
American Investors Life Insurance Company, Inc.(3).......... 60,000
AAM/Zazove Institutional Income Fund, L.P................... 58,200
Guardian Life Insurance Company of America.................. 57,000
MFS Series Trust I -- MFS Managed Sectors Fund.............. 56,400
Bank One Trust Company, N.A................................. 54,600
The Charitable Securities Fund.............................. 53,506
Personal Trust Income Equity Fund........................... 53,000
United National Insurance Company........................... 52,000
Bankers Trust Trustee for Chrysler Corporation Emp. #1
Pension Plan dated 4/1/89................................. 50,300
CIBC Oppenheimer Corp....................................... 50,000
Employers Reinsurance Corp. (3)............................. 50,000
GLG Global Convertible Fund................................. 50,000
Michigan Mutual Insurance Company........................... 50,000
Stagecoach Diversified Equity Income Fund................... 47,700
MFS/Sunlife Series Trust -- Managed Sector Series........... 45,700
Employers' Reinsurance Corporation.......................... 43,745
The Common Fund............................................. 42,600
Lehman Brothers, Inc........................................ 40,700
IDS Bond Fund, Inc.......................................... 40,000
The Victory Convertible Securities Fund..................... 40,000
Motors Insurance Corp.(3)................................... 40,000
Presidential Life Insurance Company......................... 40,000
Public Employees Retirement Association of Colorado......... 40,000
Sound Shore Partners L.P.................................... 40,000
Tennessee Consolidated Retirement System.................... 40,000
Chilton QP Investment Partners, L.P......................... 38,040
Davis Growth and Income Fund................................ 38,000
American Balanced Fund, Inc................................. 30,000
Associated Electric & Gas Services Limited.................. 30,000
HSB Group, Inc.............................................. 30,000
MainStay Institutional Value Equity Fund.................... 30,000
Pillar Equity Income Fund................................... 30,000
Selected American Shares, Inc............................... 30,000
Smith Barney Convertible Fund............................... 30,000
TQA Vantage Fund, Ltd....................................... 30,000
Public Service Mutual Insurance Company..................... 27,000
State Street Bank Custodian for GE Pension Trust............ 26,500
Millers Mutual Fire Insurance Company of Texas.............. 26,000
The Potlatch-First Trust Co. of St. Paul.................... 25,200
United Teacher Associates Insurance Company................. 25,000
Life Special Income Fund.................................... 24,000
Delaware Group Dividend and Income Fund, Inc................ 23,900
Lone Star Life Insurance Company............................ 23,700
Chilton Opportunity Trust, L.P.............................. 23,100
Ozark National Life Insurance Company....................... 21,200
NAC Reinsurance Company(2).................................. 21,000
</TABLE>
51
<PAGE> 56
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- -----------
<S> <C>
CAPITAL INVEST die Kapitalanlagegesellschaft der Bank
Austria AG................................................ 20,000
EquiTrust Investment Management Services, Inc............... 20,000
Evergreen American Retirement Fund.......................... 20,000
General Motors Employee Domestic Group Benefit Trust........ 20,000
Merrill Lynch, Pierce, Fenner and Smith Incorporated........ 20,000
Northern Life Insurance Company............................. 20,000
Oppenheimer Variable Account Funds for the Oppenheimer
Growth & Income Fund...................................... 20,000
Transatlantic Reinsurance Company........................... 20,000
Federated Equity Funds, on behalf of its Federated Capital
Appreciation Fund......................................... 18,800
SunAmerican Series Trust Davis Value Fund................... 18,200
Frontier Insurance Company.................................. 18,000
Guarantee Trust Life Insurance Company...................... 16,500
Zazove Hedged Convertible Fund, L.P......................... 16,000
Managed Sectors Variable Account............................ 15,700
American Republic Insurance Company......................... 15,500
Mutual Protective Insurance Company......................... 15,200
New Hampshire State Retirement System....................... 15,131
American Tobacco Company.................................... 15,000
Salomon Brothers Total Return Fund(3)....................... 15,000
The Key Trust Convertible Securities Fund................... 14,994
Value Line Convertible Fund, Inc............................ 14,500
Children's Memorial Hospital................................ 14,200
TransGuard Insurance Company of America, Inc. .............. 13,500
NationsBanc Montgomery Securities LLC....................... 13,100
Zazove Convertible Fund, L.P................................ 13,000
Promutual................................................... 12,661
Global Series Fund II -- Prudential Incomevertible Fund I... 12,200
Delaware Group Global Dividend and Income Fund, Inc......... 12,000
Medico Life Insurance Company............................... 12,000
Regence Blue Cross/Blue Shield of Washington(3)............. 11,600
Syracuse University......................................... 11,200
The Health Foundation of Greater Cincinnati (f/k/a The
ChoiceCare Foundation).................................... 10,900
Evergreen Variable Annuity Foundation Fund.................. 10,000
Pacific Life Insurance Company.............................. 10,000
ReliaStar Life Insurance Company............................ 10,000
Sheet Metal Workers Pension Plan of Southern California,
Arizona & Nevada.......................................... 10,000
Medmarc Insurance Company................................... 9,900
Putnam Convertible Opportunities and Income Trust........... 9,636
The Parker Society Convertible Fund......................... 9,200
BCS Life Insurance Company.................................. 9,000
World Insurance Company..................................... 9,000
Rhone-Poulenc Rorer Inc. Pension Plan....................... 8,889
Atlas Assets, Inc. for the Atlas Balanced Fund.............. 8,800
Amwest Surety Insurance Company............................. 8,500
Century National Insurance Company.......................... 8,000
</TABLE>
52
<PAGE> 57
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- -----------
<S> <C>
Connecticut Humane Society -- Community Fund................ 8,000
Putnam Balanced Retirement Fund............................. 7,814
Convertible Securities Fund................................. 7,800
Magee Rehab Hospital........................................ 7,700
Catholic Mutual Relief Society of America................... 7,600
Catholic Relief Insurance Company of America................ 7,500
Indiana Lumbermans Mutual Insurance Company................. 7,500
The University of Southern Florida Foundation............... 7,500
Secura Insurance, A Mutual Company.......................... 7,500
National Chiropractic Mutual Insurance Company.............. 7,400
American Community Mutual Insurance Company................. 7,000
Guaranty Income Life Insurance Company...................... 7,000
Old Guard Insurance Company................................. 7,000
Reassurance Company of Hannover............................. 7,000
Regence Blue Cross/Blue Shield of Oregon(3)................. 6,800
Midwestern National Life Insurance Company of Ohio.......... 6,500
Orrington Investments Limited Partnership................... 6,000
Phico Insurance Company..................................... 5,700
The GenCorp Foundation...................................... 5,650
Fox Family Portfolio Partnership c/o Forest Investment
Management LLC............................................ 5,600
Pacific Innovation Trust Capital Income Fund................ 5,500
The Value Line Income Fund, Inc............................. 5,500
Washington International Insurance Company.................. 5,500
Farmers Home Mutual Insurance Company....................... 5,000
Fortune Brands, Inc......................................... 5,000
Physicians Mutual Insurance Company......................... 5,000
Transamerica Premier Value Fund............................. 5,000
University of Kentucky...................................... 4,600
Catholic Mutual Relief Society Retirement Plan and Trust.... 4,500
Federated Rural Electric Insurance Corporation.............. 4,500
Forest Performance Fund LP.................................. 4,500
Millers Casualty Insurance Company of Texas................. 4,500
Pennsylvania Academy of the Fine Arts....................... 4,500
Stevens Institute of Technology............................. 4,500
Integrity Mutual Insurance Company.......................... 4,400
Midwest Security Life Insurance Company..................... 4,400
Paramount Insurance Company................................. 4,300
Union Bank of California, Trustee of Fujitsu Business
Communications Systems Non-Union Employees Pension Plan... 4,300
Davis Venture Value Series New England Zenith Fund.......... 4,300
Pitney Bowes, Inc........................................... 4,200
Shell Pension Trust......................................... 4,200
Standard Mutual Insurance Company........................... 4,200
Regence Blue Cross/Blue Shield of Idaho(3).................. 4,100
California State Teachers Retirement System................. 4,000
Donaldson, Lufkin & Jenrette Securities Corp................ 4,000
</TABLE>
53
<PAGE> 58
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- -----------
<S> <C>
Fort Dearborn Life Insurance Company........................ 4,000
Orrington International Fund Ltd............................ 4,000
Franklin & Marshall College................................. 3,900
Parker-Hannifin Corporation................................. 3,750
Radcliffe College........................................... 3,700
Research Corporation Foundation Fund #2..................... 3,700
Chesapeake Utilities Corporation............................ 3,600
Illinois State Bar Association Mutual Insurance Company..... 3,300
Middle Cities Risk Management Trust......................... 3,200
The Field Foundation of Illinois............................ 3,150
Concord Life Insurance Company.............................. 3,000
Delaware Group Premium Fund, Inc. Convertible Securities
Series.................................................... 3,000
Grain Dealers Mutual Insurance Company...................... 3,000
Guardian Master Pension Trust............................... 3,000
Merrill Lynch Life Insurance Company........................ 3,000
Nationwide Balanced Fund(3)................................. 3,000
Old Guard Fire Insurance Company............................ 3,000
The Dexter Corporation(2)................................... 3,000
Wisconsin Lawyers Mutual Insurance Company.................. 3,000
Wisconsin Mutual Insurance Company.......................... 3,000
University of Rochester..................................... 2,963
Museum of Fine Arts, Boston................................. 2,960
Boston College Endowment Fund............................... 2,715
Western Home Insurance Company.............................. 2,700
Spokane Employees Retirement System......................... 2,600
Condor Insurance Company.................................... 2,500
Regence Blue Cross/Blue Shield of Utah(3)................... 2,500
Forest Greyhound c/o Forest Investment Management LLC....... 2,300
Forest Global Convertible Fund B-1.......................... 2,300
New York Advisors Sicav -- Davis Value Fund................. 2,300
IRB Equity Fund(3).......................................... 2,200
Texas Builders Insurance Company............................ 2,100
Maxwell H. Gluck Foundation................................. 2,000
Strategic Restructuring Fund................................ 2,000
Westward Life Insurance Company............................. 2,000
Gopher State Mutual Insurance Company....................... 1,900
Illinois Health Care Insurance Company...................... 1,800
Midamerica Life Insurance Company........................... 1,800
CareAmerica Life Insurance Company.......................... 1,700
Commonwealth Dealers Life Insurance Company................. 1,700
CSA Fraternal Life Insurance Company........................ 1,700
Service Lloyds Insurance Company............................ 1,600
Columbus McKinnon Corp. Yale Master Account................. 1,500
Police & Fireman's Insurance Association.................... 1,500
Service Life & Casualty Insurance Company................... 1,500
University of Virginia...................................... 1,500
</TABLE>
54
<PAGE> 59
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- -----------
<S> <C>
Forest Alternative Strategies Fund II L.P. B-3.............. 1,400
Forest Global Convertible Fund B-2.......................... 1,400
Lebanon Mutual Insurance Company............................ 1,400
Pioneer Insurance Company................................... 1,300
American Public Entity Excess Pool.......................... 1,200
Columbus McKinnon Corp. MRB Plan............................ 1,200
Gilbert Trust Corporation Endowment Fund.................... 1,200
Illinois Founders Insurance Company......................... 1,200
Lakeside Capital L.L.C...................................... 1,200
Union Bank of California, Trustee of Fujitsu Business
Communications Systems Union Employees Pension Plan....... 1,200
Central and South West System Pension Plan.................. 1,100
Delaware Group Equity Funds V, Inc. Retirement Income Fund
Series.................................................... 1,100
American Pioneer Life Insurance Company of New York......... 1,000
American Progressive Life & Health Insurance Company of New
York...................................................... 1,000
Chicago Mutual Insurance Company............................ 1,000
First Patriot Insurance Company............................. 1,000
Forest Global Convertible Fund B-3.......................... 1,000
Forest Global Convertible Fund B-5.......................... 1,000
Holy Family Society......................................... 1,000
McMahan Securities Company, L.P............................. 1,000
Baltimore Gas and Electric Company.......................... 900
Baltimore Life Insurance Company............................ 900
Style Select Series, Value Portfolio........................ 900
Putnam Funds Trust -- Putnam High Yield Total Return Fund... 880
Associated Physicians Insurance Company..................... 800
Kanawha Insurance Company................................... 800
Warner-Lambert & Parke Davis Retirement Plan................ 800
Financial American Life Insurance Company................... 700
Goodville Mutual Casualty Company........................... 700
Fox Family Foundation DTD 10/10/87 c/o Forest Investment
Management LLC............................................ 500
Hampshire Fund L.P.......................................... 500
JNL Balanced Fund(3)........................................ 500
Occidental Petroleum Corporation............................ 500
Salomon Brothers Variable Investors Fund(3)................. 500
Salomon Brothers Variable Total Return Fund(3).............. 500
South Ferry #2 LP........................................... 500
New Castle Mutual Insurance Company......................... 400
Workland ET AL PSP.......................................... 400
Gilbert Trust Corporation Scholarship Fund.................. 300
The Religious Trust of Sisters of St. Joseph................ 300
Anthracite Mutual Fire Insurance Company.................... 200
First Delaware Insurance Company............................ 200
The Mount Sinai Health Care Foundation...................... 200
Via Metropolitan Transit.................................... 200
</TABLE>
55
<PAGE> 60
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- -----------
<S> <C>
St. Thomas Episcopal Church................................. 100
Style Select Large Cap Value Fund........................... 100
Trinity College Rathbone Irrevocable Annuity Trust.......... 100
Volvo Cars of North America................................. 100
Trinity College Rathbone Revocable Trust.................... 50
United Way of Capital Area for the Restricted Endowment
Fund...................................................... 50
Any Other Holder of Convertible Preferred Securities or
Future Transferee from any such Holder.................... 2,796,124
TOTAL....................................................... 30,000,000
</TABLE>
- ---------------
(1) The entity is either an investment company or a portfolio of an investment
company registered under Section 8 of the Investment Company Act of 1940, as
amended, or a private investment account advised by Fidelity Management &
Research Company ("FMR Co."). FMR Co. is a Massachusetts corporation and an
investment advisor registered under Section 203 of the Investment Advisers
Act of 1940, as amended, and provides investment advisory services to each
of such Fidelity entities identified above, and to other registered
investment companies and to certain other funds which are generally offered
to a limited group of investors. FMR Co. is a wholly-owned subsidiary of FMR
Corp ("FMR"), a Massachusetts corporation.
(2) Wellington Management, LLP acts as investment advisor to Hartford Capital
Appreciation Fund, Inc., Hartford Capital Appreciation Fund, NAC Reinsurance
Corporation and The Dexter Corporation. Wellington Management, LLP disclaims
beneficial ownership of Convertible Preferred Securities owned by such
entities.
(3) Salomon Brothers Asset Management Inc. may also be deemed beneficial owner
of these Convertible Preferred Securities.
(4) Includes 10,000 Convertible Preferred Securities held in the Northwestern
Mutual Life Insurance Company Group Annuity Separate Account.
(5) Convertible Preferred Securities indicated as owned by such entity are owned
directly by various private investment accounts, primarily employee benefit
plans for which Fidelity Management Trust Company ("FMTC") serves as trustee
or managing agent. FMTC is a wholly-owned subsidiary of FMR and a bank as
defined in Section 3(a)(6) of the Securities Exchange Act of 1934, as
amended.
None of the Selling Holders has, or within the past three years has had,
any position, office or other material relationship with the Trust or the
Company or any of their predecessors or affiliates, except that Credit Suisse
First Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated
acted as Initial Purchasers in the Original Offering and Credit Suisse First
Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated or
their respective affiliates have provided, and may continue to provide
investment banking or financial advisory services to the Company. Because the
Selling Holders may, pursuant to this Prospectus, offer all or some portion of
the Convertible Preferred Securities, the Convertible Junior Subordinated
Debentures or the Common Stock issuable upon conversion of the Convertible
Preferred Securities, no estimate can be given as to the amount of the
Convertible Preferred Securities, the Convertible Junior Subordinated Debentures
or the Common Stock issuable upon conversion of the Convertible Preferred
Securities that will be held by the Selling Holders upon termination of any such
sales. In addition, the Selling Holders identified above may have sold,
transferred or otherwise disposed of all or a portion of their Convertible
Preferred Securities since the date on which they provided the information
regarding their Convertible Preferred Securities pursuant to transactions exempt
from the registration requirements of the Securities Act.
56
<PAGE> 61
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to time
offer the Offered Securities to or through underwriters, broker/dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
Offered Securities for whom they may act as agents. The Selling Holders and any
underwriters, broker/dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of such securities by them and any
discounts, commissions, concessions or other compensation received by any such
underwriter, broker/dealer or agent may be deemed to be underwriting discounts
and commissions under the Securities Act.
The Offered Securities may be sold by the Selling Holders from time to
time, in one or more transactions at fixed prices, at prevailing market prices
at the time of sale, at varying prices determined at the time of sale or at
negotiated prices. Such prices will be determined by the Selling Holders. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market, (iii) otherwise than on
such exchanges or in the over-the-counter market or (iv) through the writing of
options. At the time a particular offering of the Offered Securities is made, if
required, a Prospectus Supplement will be distributed which will set forth the
names of the Selling Holders, the aggregate amount and type of Offered
Securities being offered, and, to the extent required, the terms of the
offering, including the name or names of any underwriters, broker/dealers or
agents, any discounts, commissions and other terms constituting compensation
from the Selling Holders and any discounts, commissions or concessions allowed
or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they have
been registered or qualified for sale in such jurisdictions or any exemption
from registration or qualification is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Offered Securities may be limited in its
ability to engage in market activities with respect to such securities. In
addition and without limiting the foregoing, each Selling Holder will be subject
to applicable provisions of the Exchange Act and the rules and regulations
thereunder, which provisions may limit the timing of purchases and sales of any
of the Offered Securities by the Selling Holders. All of the foregoing may
affect the marketability of the Offered Securities.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Offered Securities will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts and selling commissions, if any. The Selling
Holders will be indemnified by the Company and the Trust, jointly and severally,
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith. The
Company and the Trust will be indemnified by the Selling Holders severally
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith.
Pursuant to the Registration Rights Agreement, the Company is required to
use its best efforts to keep the Registration Statement continuously effective
for a period of two years from its effective date or such shorter period that
will terminate upon the earlier of the date on which the Offered Securities
shall have been sold pursuant to the Registration Statement or the date on which
the Offered Securities are permitted to be freely sold or distributed to the
public pursuant to any exemption from the registration requirements of the
Securities Act (including in reliance on Rule 144(k) but excluding in reliance
on Rule 144A under the Securities Act). Notwithstanding the foregoing
obligations, the Company may, under certain circumstances, postpone or suspend
the filing or the effectiveness of the Registration Statement (or any amendments
or supplements thereto) or the sale of Offered Securities pursuant thereto.
57
<PAGE> 62
LEGAL MATTERS
The validity of the Convertible Preferred Securities, the Convertible
Junior Subordinated Debentures and the Guarantee will be passed upon for the
Company and the Issuer by Skadden, Arps, Slate, Meagher & Flom LLP. The validity
of the Company Common Stock issuable upon conversion of the Convertible
Preferred Securities will be passed upon by Parsons Behle & Latimer, special
Utah counsel to the Company.
In connection with the offering, certain matters relating to United States
Federal income tax considerations will be passed upon for the Company by
Skadden, Arps, Slate, Meagher & Flom LLP, as special tax counsel to the Company
and the Issuer.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
as of December 31, 1997 and 1996 and for each of the years in the three-year
period ended December 31, 1997, incorporated in this Prospectus by reference
from Company's Annual Report on Form 10-K for the year ended December 31, 1997,
have been audited by Deloitte & Touche LLP, independent auditors.
58
<PAGE> 63
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE ISSUER OR ANY INITIAL PURCHASER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THE ISSUER SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. i
Incorporation of Certain Documents by
Reference........................... ii
Risk Factors.......................... 1
The Company........................... 8
Ratio of Earnings to Fixed Charges.... 9
Accounting Treatment.................. 10
Use of Proceeds....................... 11
Union Pacific Capital Trust........... 11
Description of Convertible Preferred
Securities.......................... 12
Description of Convertible Junior
Subordinated Debentures............. 29
Description of Guarantee.............. 37
Relationship Among the Convertible
Preferred Securities, the
Convertible Junior Subordinated
Debentures and the Guarantee........ 40
Description of Company Common Stock... 41
United States Federal Income Tax
Consequences........................ 42
Certain ERISA Considerations.......... 47
Registration Rights................... 48
Selling Holders....................... 49
Plan of Distribution.................. 57
Legal Matters......................... 58
Experts............................... 58
</TABLE>
------------------------------------------------------
------------------------------------------------------
UNION PACIFIC
CAPITAL TRUST
6 1/4% Convertible Preferred Securities
30,000,000
Convertible Preferred
Securities
guaranteed to the extent set
forth herein by, and
convertible into Common Stock of,
Union Pacific Corporation logo
PROSPECTUS
------------------------------------------------------
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses to be paid by the Company in
connection with the distribution of the securities being registered hereunder,
other than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration fee........................................ $465,731.25
Printing, shipping and engraving expenses................... 48,000.00
Legal fees and expenses..................................... 37,400.00
Accounting fees and expenses................................ 10,000.00
Exchange Agent fees and expenses............................ 5,000.00
Information Agent fees and expenses......................... 6,300.00
-----------
Total............................................. $572,431.25
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
THE COMPANY
The Company is a Utah corporation. Section 16-10a-901 et. seq. of the
Revised Business Corporation Act of Utah grants to a corporation the power to
indemnify a person made a party to a lawsuit or other proceeding because such
person is or was a director or officer. A corporation is further empowered to
purchase insurance on behalf of any person who is or was a director or officer
against any liability asserted against him or her and incurred by him or her in
such capacity or arising out of his or her status as a director or officer. The
Company's By-Laws provide for mandatory indemnification of its directors,
officers and employees in certain circumstances. The Company maintains insurance
on behalf of directors and officers against liability asserted against them
arising out of their status as such.
The Company's Revised Articles of Incorporation eliminate in certain
circumstances the personal liability of directors of the Company for monetary
damages for a breach of their fiduciary duty as directors. This provision does
not eliminate the liability of a director for (i) the amount of a financial
benefit received by a director to which he is not entitled, (ii) an intentional
infliction of harm on the corporation or the shareholders, (iii) a violation of
Section 16-10a-842 of the Revised Business Corporation Act of Utah (relating to
the liability of directors for unlawful distributions) or (iv) an intentional
violation of criminal law.
THE TRUST
The Declaration of Trust (the "Declaration") provides that no Trustee,
affiliate of any Trustee, or any officers, directors, shareholders, members,
partners, employees, representatives or agents of any Trustee, or any employee
or agent of the Trust or its affiliates (each an "Indemnified Person") shall be
liable, responsible or accountable in damages or otherwise to any officer,
director, shareholder, partner, member, representative or agent of the Trust,
any affiliate of the Trust or any holder of Trust Securities for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith on behalf of the Trust and in a manner
such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by the Declaration or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's gross negligence (or, in
the case of the Property Trustee, negligence) or willful misconduct with respect
to such act or omissions. The Declaration also provides that to the fullest
extent permitted by applicable law, the Company shall indemnify and hold
harmless each Indemnified Person from and against any loss, damage or claim
incurred by such Indemnified Person by reason of any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of the Trust and
in a manner such Indemnified Person reasonably
II-1
<PAGE> 65
believed to be within the scope of authority conferred on such Indemnified
Person by the Declaration, except that no Indemnified Person shall be entitled
to be indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of gross negligence (or, in the case of the
Property Trustee, negligence) or willful misconduct with respect to such acts or
omissions. The directors and officers of the Company and the Regular Trustees
are covered by insurance policies indemnifying them against certain liabilities,
including certain liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"), which might be incurred by them in such
capacities and against which they cannot be indemnified by the Company or the
Trust. The Selling Holders will be indemnified by the Company and the Trust,
jointly and severally, against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith. The Company and the Trust will be indemnified by the
Selling Holders severally against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith.
ITEM 16. EXHIBITS
A list of exhibits included as part of the Registration Statement is set
forth below:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.1 Revised Articles of Incorporation of Union Pacific
Corporation, as amended through April 25, 1996 (incorporated
by reference to Exhibit 3 to Union Pacific Corporation's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1996).
4.2 By-Laws of Union Pacific Corporation as amended effective as
of April 30, 1998 (incorporated by reference to Exhibit 3 to
Union Pacific Corporation's quarterly report on Form 10-Q
for the quarter ended March 31, 1998).
4.3 Certificate of Trust of Union Pacific Capital Trust.*
4.4 Amended and Restated Declaration of Trust of Union Pacific
Capital Trust, dated as of April 1, 1998, among Union
Pacific Corporation, as Sponsor, The Bank of New York, as
Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee, and Gary M. Stuart, L. White Matthews, III
and Joseph E. O'Connor, Jr., as Regular Trustees.*
4.5 Indenture for the Convertible Junior Subordinated Debentures
due 2028, dated as of April 1, 1998, among Union Pacific
Corporation, as Issuer, and The Bank of New York, as
Indenture Trustee.*
4.6 Form of Union Pacific Corporation Stock Certificate
(incorporated by reference to Exhibit 4.6 to Union Pacific
Corporation's quarterly report on Form 10-Q for the quarter
ended March 31, 1998).
4.7 Form of Union Pacific Capital Trust 6 1/4% Convertible
Preferred Securities (included in Exhibit 4.4).*
4.8 Form of Union Pacific Corporation Convertible Junior
Subordinated Debentures due 2028 (included in Exhibit 4.5).*
4.9 Preferred Securities Guarantee, dated as of April 1, 1998,
between Union Pacific Corporation, as Guarantor, and The
Bank of New York, as Guarantee Trustee.*
4.10 Common Securities Guarantee, dated as of April 1, 1998, by
Union Pacific Corporation, as Guarantor.*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the legality of the Convertible Preferred Securities, the
Convertible Junior Subordinated Debentures and Preferred
Securities Guarantee being registered hereby.
5.2 Opinion of Parsons Behle & Latimer as to the legality of the
Common Stock of Union Pacific Corporation being registered
hereby.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain tax matters.
10.1 Registration Rights Agreement, dated April 1, 1998, by and
among Union Pacific Capital Trust, Union Pacific
Corporation, Credit Suisse First Boston Corporation, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Smith Barney
Inc. and Schroder & Co. Inc.*
12.1 Statement of Ratio of Earnings to Fixed Charges of Union
Pacific Corporation (incorporated by reference to Exhibit 12
to Union Pacific Corporation's quarterly report on Form 10-Q
for the quarter ended March 31, 1998, Exhibit 12 to Union
Pacific Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, and Exhibit 12 to Union
Pacific Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996).
</TABLE>
II-2
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
23.1 Consent of Deloitte & Touche LLP, independent auditors.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in the opinions filed as Exhibits 5.1 and 8.1).
23.3 Consent of Parsons Behle & Latimer (included in the opinion
filed as Exhibit 5.2).
24.1 Powers of Attorney.*
25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as
Indenture Trustee under the Convertible Junior Subordinated
Debentures Indenture due 2028.*
25.2 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as
Property Trustee under the Amended and Restated Declaration
of Trust.*
25.3 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as
Preferred Guarantee Trustee under the Preferred Securities
Guarantee.*
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933, as amended (the "Securities Act"), (ii) to reflect in the
Prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement, and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrants hereby undertake that for the purposes of
determining any liability under the Securities Act, each filing of the
Registrants' annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 67
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
UNION PACIFIC CORPORATION HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF DALLAS, STATE OF TEXAS, ON JULY 24, 1998.
UNION PACIFIC CORPORATION,
By: /s/ JOSEPH E. O'CONNOR, JR.
------------------------------------
Joseph E. O'Connor, Jr.
Vice President and Controller
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
---------- -------- ----
<S> <C> <C>
/s/ RICHARD K. DAVIDSON Chairman, President, Chief July 24, 1998
- --------------------------------------------------- Executive Officer and Director
Richard K. Davidson (Principal Executive Officer)
/s/ GARY M. STUART Executive Vice President -- Finance July 24, 1998
- --------------------------------------------------- (Principal Financial Officer)
Gary M. Stuart
/s/ JOSEPH E. O'CONNOR, JR. Vice President and Controller July 24, 1998
- --------------------------------------------------- (Principal Accounting Officer)
Joseph E. O'Connor, Jr.
* Director July 24, 1998
- ---------------------------------------------------
Philip F. Anschutz
* Director July 24, 1998
- ---------------------------------------------------
Robert P. Bauman
* Director July 24, 1998
- ---------------------------------------------------
Richard B. Cheney
* Director July 24, 1998
- ---------------------------------------------------
E. Virgil Conway
* Director July 24, 1998
- ---------------------------------------------------
Spencer F. Eccles
* Director July 24, 1998
- ---------------------------------------------------
Elbridge T. Gerry, Jr.
* Director July 24, 1998
- ---------------------------------------------------
William H. Gray, III
</TABLE>
II-4
<PAGE> 68
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
---------- -------- ----
<S> <C> <C>
* Director July 24, 1998
- ---------------------------------------------------
Judith Richards Hope
* Director July 24, 1998
- ---------------------------------------------------
Richard J. Mahoney
* Director July 24, 1998
- ---------------------------------------------------
John R. Meyer
* Director July 24, 1998
- ---------------------------------------------------
Thomas A. Reynolds, Jr.
* Director July 24, 1998
- ---------------------------------------------------
Richard D. Simmons
*By: /s/ THOMAS E. WHITAKER
---------------------------------------------
Thomas E. Whitaker
As Attorney-in-Fact
</TABLE>
II-5
<PAGE> 69
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
UNION PACIFIC CAPITAL TRUST HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF DALLAS, STATE OF TEXAS, ON JULY 24, 1998.
UNION PACIFIC CAPITAL TRUST,
By: /s/ GARY M. STUART
------------------------------------
Gary M. Stuart, Trustee
Pursuant to the requirement of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
---------- -------- ----
<S> <C> <C>
/s/ GARY M. STUART Trustee July 24, 1998
- ---------------------------------------------------
Gary M. Stuart
/s/ JOSEPH E. O'CONNOR, JR. Trustee July 24, 1998
- ---------------------------------------------------
Joseph E. O'Connor, Jr.
</TABLE>
II-6
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<C> <S> <C>
4.1 Revised Articles of Incorporation of Union Pacific
Corporation, as amended through April 25, 1996 (incorporated
by reference to Exhibit 3 to the Union Pacific Corporation's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1996). .................................................
4.2 By-Laws of Union Pacific Corporation as amended effective as
of April 30, 1998 (incorporated by reference to Exhibit 3 to
Union Pacific Corporation's quarterly report on Form 10-Q
for the quarter ended March 31, 1998). .....................
4.3 Certificate of Trust of Union Pacific Capital Trust.* ......
4.4 Amended and Restated Declaration of Trust of Union Pacific
Capital Trust, dated as of April 1, 1998, among Union
Pacific Corporation, as Sponsor, The Bank of New York, as
Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee, and Gary M. Stuart, L. White Matthews, III
and Joseph E. O'Connor, Jr., as Regular Trustees.* .........
4.5 Indenture for the Convertible Junior Subordinated Debentures
due 2028, dated as of April 1, 1998, among Union Pacific
Corporation, as Issuer, and The Bank of New York, as
Indenture Trustee.* ........................................
4.6 Form of Union Pacific Corporation Stock Certificate
(incorporated by reference to Exhibit 4.6 to Union Pacific
Corporation's quarterly report on Form 10-Q for the quarter
ended March 31, 1998). .....................................
4.7 Form of Union Pacific Capital Trust 6 1/4% Convertible
Preferred Securities (included in Exhibit 4.4). ............
4.8 Form of Union Pacific Corporation Convertible Junior
Subordinated Debentures due 2028 (included in Exhibit
4.5). ......................................................
4.9 Preferred Securities Guarantee, dated as of April 1, 1998,
between Union Pacific Corporation, as Guarantor, and The
Bank of New York, as Guarantee Trustee.* ...................
4.10 Common Securities Guarantee, dated as of April 1, 1998, by
Union Pacific Corporation, as Guarantor.* ..................
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the legality of the Convertible Preferred Securities, the
Convertible Junior Subordinated Debentures and Preferred
Securities Guarantee being registered hereby. ..............
5.2 Opinion of Parsons Behle & Latimer as to the legality of the
Common Stock of Union Pacific Corporation being registered
hereby. ....................................................
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain tax matters. .......................................
10.1 Registration Rights Agreement, dated April 1, 1998, by and
among Union Pacific Capital Trust, Union Pacific
Corporation, Credit Suisse First Boston Corporation, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Smith Barney,
Inc. and Schroder & Co. Inc.* ..............................
12.1 Statement of Ratio of Earnings to Fixed Charges of Union
Pacific Corporation (incorporated by reference to Exhibit 12
to Union Pacific Corporation's quarterly report on Form 10-Q
for the quarter ended March 31, 1998, Exhibit 12 to Union
Pacific Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997), and Exhibit 12 to
Union Pacific Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996. ...................
23.1 Consent of Deloitte & Touche LLP, independent auditors. ....
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in the opinions filed as Exhibits 5.1 and 8.1)....
23.3 Consent of Parsons Behle & Latimer (included in the opinion
filed as Exhibit 5.2). .....................................
24.1 Powers of Attorney.* .......................................
25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as
Indenture Trustee under the Convertible Junior Subordinated
Debentures Indenture due 2028.* ............................
25.2 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as
Property Trustee under the Amended and Restated Declaration
of Trust.* .................................................
25.3 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as
Preferred Guarantee Trustee under the Preferred Securities
Guarantee.* ................................................
</TABLE>
- ---------------
* Previously filed.
II-7
<PAGE> 1
EXHIBIT 5.1
July 24, 1998
Union Pacific Corporation
1717 Main Street, Suite 5900
Dallas, Texas 75201-4605
Union Pacific Capital Trust
1717 Main Street, Suite 5900
Dallas, Texas 75201-4605
Re: Union Pacific Corporation
Union Pacific Capital Trust
Registration Statement on Form S-3
Ladies and Gentleman:
We have acted as special counsel to Union Pacific Corporation, a Utah
corporation (the "Company"), and Union Pacific Capital Trust, a statutory
business trust created under the laws of the State of Delaware (the "Trust"), in
connection with the preparation of a Registration Statement on Form S-3, as
filed by the Company and the Trust with the Securities and Exchange Commission
(the "Commission") on May 1, 1998 and Amendment No. 1 thereto filed with the
Commission on the date hereof (such registration statement, as so amended, being
hereinafter referred to as the "Registration Statement"), relating to the
registration under the Securities Act of 1933, as amended (the "Act"), of (i)
30,000,000 6 1/4% Convertible Preferred Securi ties (liquidation amount $50 per
Trust Convertible Preferred Security) (the "Convert ible Preferred Securities")
representing undivided preferred beneficial ownership interests in the assets of
the Trust; (ii) Convertible Junior Subordinated Debentures due 2028 (the
"Convertible Junior Subordinated Debentures") of the Company, which may be
distributed under certain circumstances to the holders of the Convert-
<PAGE> 2
Union Pacific Corporation
Union Pacific Capital Trust
July 24, 1998
Page 2
ible Preferred Securities; (iii) the shares of common stock, par value $2.50 per
share (the "Common Stock"), of the Company, issuable upon conversion of the
Convertible Preferred Securities and the Convertible Junior Subordinated
Debentures; and (iv) the Preferred Securities Guarantee of the Company (as
defined below).
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Act.
The Convertible Preferred Securities were issued pursuant to the
Amended and Restated Declaration of Trust (the "Declaration"), dated as of April
1, 1998, among the Company, as sponsor, The Bank of New York, as property
trustee (the "Property Trustee"), The Bank of New York (Delaware), as Delaware
trustee (the "Delaware Trustee"), and L. White Mathews, III, Gary M. Stuart, and
Joseph E. O'Connor, Jr. as trustees (together with the Property Trustee and the
Delaware Trustee, the "Regular Trustees"). Capitalized terms used but not
otherwise defined herein have the meanings ascribed to them in the Registration
Statement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the certificate of
trust (the "Certificate of Trust") filed by the Delaware Trustee and the Regular
Trustees with the Secretary of State of the State of Delaware on March 17, 1998;
(ii) the Declaration (including the designations of the terms of the
Convertible Preferred Securities annexed thereto); (iii) a specimen of the
Convertible Preferred Securities; (iv) the preferred securities guarantee
agreement, dated as of April 1, 1998 (the "Preferred Securities Guarantee"),
between the Company and The Bank of New York, as trustee; (v) a specimen of the
Convertible Junior Subordinated Debentures, which were issued pursuant to an
indenture dated as of April 1, 1998 (the "Indenture"), between the Company and
The Bank of New York, as trustee; (vi) the Indenture; (vii) certain resolutions
of the Board of Directors of the Company relating to the issuance of the
Convertible Junior Subordinated Debentures and the shares of Common Stock
issuable upon conversion thereof; and (viii) the Registration Statement. We
have also examined originals or copies, certified or otherwise identified to our
satisfaction, of such other documents, certificates and records as we have
deemed necessary or appropriate as a basis for the opinions set forth herein.
<PAGE> 3
Union Pacific Corporation
Union Pacific Capital Trust
July 24, 1998
Page 3
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. In making our examination of
documents executed by parties other than the Trust (including the Company), we
have assumed that such parties had the power, corporate or other, to enter into
and perform all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and execution and
delivery by such parties of such documents and, except as set forth in
paragraphs 2 and 3 below, that such documents constitute valid and binding
obligations of such parties. We have also assumed that the performance by the
Company of its obligations under the Indenture and the Preferred Securities
Guarantee do not and will not violate or constitute a default under (i) any
agreement or instrument to which the Company or its properties are subject, (ii)
any law, rule, or regulation to which the Company is subject, (iii) any judicial
or regulatory order or decree of any governmental authority or (iv) any consent,
approval, license, authorization or validation of, or filing, recording or
registration with any governmental authority. As to any facts material to the
opinions expressed herein which were not independently established or verified,
we have relied upon oral or written statements and representations of officers,
trustees and other representatives of the Company, the Trust and others.
Members of our firm are admitted to the Bar in the States of New York
and Delaware, and we do not express any opinion with respect to the laws of any
other jurisdiction.
Based on and subject to the foregoing and to the other limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:
1. The Convertible Preferred Securities have been duly
authorized and validly issued by the Trust and, subject to the
limitations set forth in the last sentence of this paragraph, are fully
paid and non-assessable undivided beneficial interests in the assets of
the Trust and under the Delaware Trust Act (Del. Code Ann., tit. 12,
Section 3810 et seq.) and the terms of the Declaration, the holders of
Convertible Preferred Securities, in such capacity, will be
<PAGE> 4
Union Pacific Corporation
Union Pacific Capital Trust
July 24, 1998
Page 4
entitled to the same limitation of personal liability as that extended
to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware. We bring to your
attention, however, that the holders of the Convertible Preferred
Securities may be obligated, pursuant to the Declaration, to provide
(i) indemnity and/or security in connection with, and pay taxes or
governmental charges arising from, transfers of Convertible Preferred
Securities and the issuance of replacement Convertible Preferred
Securities and (ii) security and indemnity in connection with requests
of or directions to the Property Trustee to exercise its rights and
powers under such Declaration.
2. The Preferred Securities Guarantee is a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforcement
thereof may be limited by (i) bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium, or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
3. The Convertible Junior Subordinated Debentures are valid
and binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
terms, except to the extent that enforcement thereof may be limited by
(i) bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) and
except to the extent that the waiver of stay or extension laws
contained in Section 5.15 of the Indenture may be unenforceable.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm
<PAGE> 5
Union Pacific Corporation
Union Pacific Capital Trust
July 24, 1998
Page 5
under the caption "Legal Matters" in the Registration Statement. In giving this
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE> 1
EXHIBIT 5.2
July 24, 1998
Union Pacific Corporation
1717 Main Street, Suite 5900
Dallas, Texas 75201-4605
Union Pacific Capital Trust
1717 Main Street, Suite 5900
Dallas, Texas 75201-4605
RE: UNION PACIFIC CORPORATION
UNION PACIFIC CAPITAL TRUST
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentleman:
We have acted as special Utah corporate counsel to Union Pacific
Corporation, a Utah corporation (the "Company"), in connection with a
Registration Statement on Form S-3 filed by the Company and Union Pacific
Capital Trust, a statutory business trust formed under the laws of the State of
Delaware (the "Trust"), with the Securities and Exchange Commission (the
"Commission") on May 1, 1998 and Amendment No. 1 thereto filed with the
Commission on July 24, 1998 (such registration statement, as so amended, being
hereinafter referred to as the "Registration Statement"), relating to the
registration under the Securities Act of 1933, as amended (the "Act"), of (i)
30,000,000 6 1/4% Convertible Preferred Securities (liquidation amount $50 per
Convertible Preferred Security) (the "Convertible Preferred Securities")
representing undivided preferred beneficial ownership interests in the assets of
the Trust; (ii) Convertible Junior Subordinated Debentures due 2028 (the
"Convertible Junior Subordinated Debentures") of the Company, which may be
distributed under certain circumstances to the holders of the Convertible
Preferred Securities; (iii) the shares of common stock, par value $2.50 per
share (the "Common Stock"), of the Company, issuable upon conversion of the
Convertible Preferred Securities and the Convertible Junior Subordinated
Debentures; and (iv) the Preferred Securities Guarantee of the Company.
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Act.
<PAGE> 2
Union Pacific Corporation
Union Pacific Capital Trust
July 24, 1998
Page Two
The Convertible Preferred Securities were issued pursuant to the
Amended and Restated Declaration of Trust, dated as of April 1, 1998, among the
Company, as sponsor, The Bank of New York, as property trustee, the Bank of New
York (Delaware), as Delaware trustee, and L. White Mathews, III, Gary M. Stuart,
and Joseph E. O'Connor, Jr. as trustees.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement; (ii) a specimen certificate representing the Common Stock; (iii) the
Articles of Incorporation of the Company, as presently in effect; (iv) the
Bylaws of the Company, as presently in effect; and (v) certain resolutions of
the Board of Directors of the Company relating to the issuance of the
Convertible Preferred Securities and the shares of Common Stock issuable upon
conversion thereof and related matters. We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such records
of the Company and such agreements, certificates of public officials,
certificates of officers or other representatives of the Company and others, and
such other documents, certificates and records as we have deemed necessary or
appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
completeness and authenticity of the originals of such latter documents. In
making our examination of documents executed or to be executed by parties other
than the Company, we have assumed (i) that each such party has satisfied those
legal requirements that are applicable to it to the extent necessary to make
such documents enforceable against it, including without limitation due
authorization by all requisite action, corporate or other, and due execution and
delivery of such documents, and (ii) the validity and binding effect thereof. As
to any facts material to the opinions expressed herein which we have not
independently established or verified, we have relied, without investigation or
independent verification, upon statements and representations of officers and
other representatives of the Company and others.
Members of our firm are admitted to the bar in the State of Utah, and
we do not express any opinion as to the laws of any other jurisdiction. We
express no opinion as to, and assume compliance with, any applicable federal or
state securities laws.
Based upon and subject to the foregoing, we are of the opinion that the
shares of Common Stock issuable upon conversion of the Convertible Preferred
Securities and the
<PAGE> 3
Union Pacific Corporation
Union Pacific Capital Trust
July 24, 1998
Page Three
Convertible Junior Subordinated Debentures have been duly authorized and
reserved for issuance upon conversion and, when certificates representing the
Common Stock in the form of the specimen certificates examined by us have been
manually signed by an authorized officer of the transfer agent and registrar for
the Common Stock and are issued upon conversion of the Convertible Preferred
Securities and the Convertible Junior Subordinated Debentures, such shares of
Common Stock will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission.
Very truly yours,
Parsons Behle & Latimer
<PAGE> 1
EXHIBIT 8.1
July 24, 1998
Union Pacific Capital Trust
c/o Union Pacific Corporation
1717 Main Street
Suite 5900
Dallas, Texas 75201-4605
Union Pacific Corporation
1717 Main Street
Suite 5900
Dallas, Texas 75201-4605
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as a special tax counsel for Union Pacific Corporation, a
Utah corporation (the "Company"), and Union Pacific Capital Trust, a statutory
business trust organized under the Business Trust Act of the State of Delaware
(Del. Code Ann., tit. 12, section 3810) (the "Trust"), in connection with the
preparation of a Registration Statement on Form S-3 of the Company and the
Trust filed by the Company and the Trust with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), on July 24, 1998 (the "Registration Statement"), relating to
the registration under the Securities Act (i) by the Trust of 30,000,000 6 1/4%
Convertible Preferred Securities (liquidation amount $50 per Trust Convertible
Preferred Security) (the "Convertible
<PAGE> 2
Union Pacific Capital Trust
Union Pacific Corporation
July 24, 1998
Page 2
Preferred Securities") representing undivided preferred beneficial ownership
interest in the assets of the Trust; (ii) by the Company of Convertible Junior
Subordinated Debentures due 2028 (the "Convertible Junior Subordinated
Debentures") of the Company, which may be distributed under certain
circumstances to the holders of the Convertible Preferred Securities; (iii) by
the Company of shares of common stock, par value $2.50 per share (the "Common
Stock"), of the Company, issuable upon conversion of the Convertible Preferred
Securities and the Convertible Junior Subordinated Debentures; and (iv) by the
Company of the Guarantee Agreement dated as of April 1, 1998 (the "Preferred
Securities Guarantee"), among the Company, the Trust and The Bank of New York,
as trustee.
We hereby confirm that, although the discussion set forth in the above
captioned registration statement under the heading "UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES" does not purport to discuss all possible United States
federal income tax consequences of the purchase, ownership and disposition of
the Convertible Preferred Securities, in our opinion such discussion
constitutes, in all material respects, a fair and accurate summary of the
United States federal income tax consequences of the purchase, ownership and
disposition of the Convertible Preferred Securities, based upon current law.
There can be no assurances that any of the opinions expressed herein will be
accepted by the Internal Revenue Service, or if challenged, by a court.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 8.1 to the Registration Statement. We also consent to the use of our
name under the heading "Legal Matters" in the Registration Statement. In giving
this consent we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act or the rules
and regulations of the Commission promulgated thereunder. This opinion is
expressed as of the date hereof unless otherwise expressly stated and we
disclaim any undertaking to advise you of any subsequent changes of the facts
stated or assumed herein or any subsequent changes in applicable law.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 1 to Registration
Statement No. 333-51617 of Union Pacific Corporation on Form S-3 of our report
dated January 22, 1998, appearing in and incorporated by reference in the
Annual Report on Form 10-K of Union Pacific Corporation for the year ended
December 31, 1997 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
Dallas, Texas
July 24, 1998
