<PAGE>
Rule No. 424(b)(2)
Registration No. 33-55461
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 24, 1995)
2,000,000 Preferred Securities
United Capital Funding Partnership L.P.
9 5/8% Preferred Capital Securities, Series A
(Liquidation Preference $25 per Security)
Guaranteed to the extent the Partnership has
legally available funds, as described herein, by
The United Illuminating Company
--------------
The 9 5/8% Preferred Capital Securities, Series A (the "Series A Preferred
Capital Securities") offered hereby are being issued by, and represent limited
partner interests in, United Capital Funding Partnership L.P., a Delaware
special purpose limited partnership ("United Capital"). United Capital was
formed for the sole purpose of issuing its limited partner interests ("Limited
Partner Interests") and lending the proceeds thereof to The United
Illuminating Company ("UI"), which owns all of the general partner interests
in United Capital. The proceeds of the Series A Preferred Capital Securities,
together with the related capital contributions made by UI, will be loaned to
UI in return for 9 5/8% Junior Subordinated Deferrable Interest Debentures,
Series A, Due 2025 (the "Series A Debentures") issued by UI. The limited
partner interests represented by the Series A Preferred Capital Securities
will have a preference with respect to cash distributions ("dividends") and
amounts payable on liquidation over the general partner interests in United
Capital.
Holders of the Series A Preferred Capital Securities will be entitled to
receive, to the extent of funds held by United Capital and legally available
therefor, cumulative preferential dividends, at an annual rate of 9 5/8% of
the liquidation preference of $25 per security, accruing from the date of
original issue and payable monthly in arrears on the last day of each calendar
month of each year, commencing April 30, 1995. The payment of dividends and
payments on liquidation or redemption with respect to the Series A Preferred
Capital Securities, to the extent of funds held by United Capital and legally
available therefor, will be guaranteed under a Payment and Guarantee Agreement
(the "Guarantee") of UI to the extent described herein and in the accompanying
Prospectus. The Guarantee does not cover payment of amounts in respect of the
Series A Preferred Capital Securities to the extent that United Capital does
not have legally available funds for the payment thereof and cash on hand
sufficient to make such payment. Such funds and cash on hand will be limited
to payments by UI on the Series A Debentures and any other Indenture
Securities (as defined in the accompanying Prospectus) issued in connection
with the investment of the proceeds of any other offering of Limited Partner
Interests. If UI fails to make interest payments on the Series A Debentures or
any other such Indenture Securities, United Capital will have insufficient
funds to pay dividends on the Series A Preferred Capital Securities and the
Guarantee will not cover payment of such dividends. In such event, the holders
of Series A Preferred Capital Securities may enforce certain rights in respect
of the Series A Debentures. See "Description of the Guarantee" and
"Description of the Debentures and the Indenture--Enforcement of Certain
Rights by Holders of Preferred Capital Securities" in the accompanying
Prospectus.
The Guarantee and the Series A Debentures will rank subordinate in right of
payment to all Senior Indebtedness (as defined in the accompanying Prospectus)
of UI. As of December 31, 1994, UI had approximately $987 million of Senior
Indebtedness outstanding. UI has the right, from time to time, to extend
interest payment periods on the Series A Debentures for up to 60 consecutive
months, and, as a consequence, monthly dividends on the Series A Preferred
Capital Securities will be deferred by United Capital during any such extended
interest payment period. During any such extended interest payment period, UI
may not declare or pay dividends on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any shares of its capital stock. UI
currently has no intention to so extend the interest payment period. See
"Description of the Debentures and the Indenture--Option to Extend Interest
Payment Period" and "Description of the Preferred Capital Securities--Voting
Rights" in the accompanying Prospectus.
(continued on next page)
--------------
SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES A PREFERRED CAPITAL
SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH
DIVIDENDS ON THE SERIES A PREFERRED CAPITAL SECURITIES AND INTEREST ON THE
SERIES A DEBENTURES MAY BE DEFERRED.
--------------
THE SERIES A PREFERRED CAPITAL SECURITIES HAVE BEEN APPROVED FOR LISTING ON
THE NEW YORK STOCK EXCHANGE, SUBJECT TO OFFICIAL NOTICE OF ISSUANCE.
--------------
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 SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
PRICE $25 PER SECURITY AND ACCRUED DIVIDENDS, IF ANY
--------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) UNITED CAPITAL (3)(4)
---------- --------------- ---------------------
<S> <C> <C> <C>
Per Security.................. $25.00 (3) $25.00
Total......................... $50,000,000 (3) $50,000,000
</TABLE>
-------
(1) Plus accrued dividends, if any, from the date of original issue.
(2) United Capital and UI have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Underwriting."
(3) Because the proceeds of the sale of the Series A Preferred Capital
Securities will be loaned to UI, UI has agreed, in the Underwriting
Agreement, to pay the Underwriters as compensation for their services
$.7875 per security (or $1,575,000 in the aggregate); provided that such
compensation will be $.50 per security sold to certain institutions.
Therefore, to the extent that Series A Preferred Capital Securities are
sold to such institutions, the actual amount of such compensation will
be less than the aggregate amount specified in the preceding sentence.
See "Underwriting."
(4) Expenses of the offering, which are payable by UI, are estimated to be
$255,000.
--------------
The Series A Preferred Capital Securities are offered subject to prior sale,
when, as and if accepted by the Underwriters and subject to approval of
certain legal matters by Winthrop, Stimson, Putnam & Roberts, counsel for the
Underwriters. It is expected that delivery of the Series A Preferred Capital
Securities will be made on or about April 3, 1995 through the book-entry
facilities of The Depository Trust Company, against payment therefor in New
York funds.
--------------
MORGAN STANLEY & CO.
Incorporated
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
LEGG MASON WOOD WALKER
Incorporated
LEHMAN BROTHERS
PRUDENTIAL SECURITIES INCORPORATED
March 24, 1995
<PAGE>
(continued from front cover)
The Series A Preferred Capital Securities are redeemable, at the option of
United Capital and at the direction of UI, in whole or in part, from time to
time, on or after April 30, 2000, at a redemption price of $25 per security
plus accumulated and unpaid dividends and any Additional Amounts (as defined
in the accompanying Prospectus) to the date fixed for redemption (the
"Redemption Price"). The Series A Preferred Capital Securities are also
redeemable, at the option of United Capital, in whole or in part, at the
Redemption Price if at any time United Capital or UI, as a consequence of
certain events described herein, is or would be required to pay certain
additional amounts or to withhold or deduct certain amounts. In addition, upon
redemption or payment at maturity of Series A Debentures, the proceeds from
such redemption or payment will be applied to redeem Series A Preferred
Capital Securities at the Redemption Price. Under certain circumstances
following the occurrence of a Special Event (as defined in the accompanying
Prospectus), UI may cause United Capital to redeem the Series A Preferred
Capital Securities in whole at the Redemption Price or to distribute the
Series A Debentures in exchange for the Series A Preferred Capital Securities
in whole. If Series A Debentures are distributed, UI will use its best efforts
to have such Series A Debentures listed on the same exchange on which the
Series A Preferred Capital Securities are then listed. See "Certain Terms of
the Series A Preferred Capital Securities--Redemption or Exchange" and
"Certain Terms of the Series A Debentures" herein.
In the event of the liquidation of United Capital, holders of Series A
Preferred Capital Securities will be entitled to receive for each security a
liquidation preference of $25 plus accumulated and unpaid dividends and any
Additional Amounts to the date of payment, subject to certain limitations. See
"Description of the Preferred Capital Securities--Liquidation Distribution" in
the accompanying Prospectus.
-------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY UI, UNITED CAPITAL OR THE UNDERWRITERS. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF UI OR UNITED CAPITAL SINCE THE DATE HEREOF.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Certain Investment Considerations.......................................... S-3
The United Illuminating Company............................................ S-4
United Capital Funding Partnership L.P. ................................... S-5
Summary Financial Information.............................................. S-6
Use of Proceeds............................................................ S-6
Certain Terms of the Series A Preferred Capital Securities................. S-7
Certain Terms of the Series A Debentures................................... S-7
United States Income Taxation.............................................. S-8
Underwriting............................................................... S-12
<CAPTION>
PROSPECTUS
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The United Illuminating Company............................................ 3
United Capital Funding Partnership L.P. ................................... 3
Use of Proceeds............................................................ 3
UI Earnings Ratios......................................................... 4
Description of the Preferred Capital Securities............................ 4
Description of the Guarantee............................................... 15
Description of the Debentures and the Indenture............................ 18
Plan of Distribution....................................................... 27
Legal Opinions............................................................. 28
Experts.................................................................... 28
</TABLE>
S-2
<PAGE>
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of the Series A Preferred Capital Securities should
carefully review the information contained in the accompanying Prospectus,
including the documents incorporated by reference therein, and elsewhere in
this Prospectus Supplement and should particularly consider the following
matters. Capitalized terms used in this Prospectus Supplement shall have the
meanings ascribed thereto in the accompanying Prospectus unless otherwise
defined in this Prospectus Supplement.
SUBORDINATION OF UI'S OBLIGATIONS
The payment of dividends and payments on liquidation or redemption with
respect to the Series A Preferred Capital Securities, to the extent of funds
held by United Capital and legally available to make such payments, will be
guaranteed by UI under the Guarantee. The Guarantee does not cover payment of
amounts in respect of the Series A Preferred Capital Securities to the extent
that United Capital does not have legally available funds for the payment
thereof and cash on hand sufficient to make such payment.
UI's obligations under the Guarantee and the Series A Debentures will be
subordinate in right of payment to all Senior Indebtedness of UI. As of
December 31, 1994, UI had approximately $987 million of Senior Indebtedness
outstanding (exclusive of certain guarantees and other contingent obligations,
but inclusive of capitalized lease obligations and current installments and
short-term notes payable). For a description of the terms of the Guarantee and
this subordination, see "Description of the Guarantee--Status of Guarantee" and
"Description of the Debentures and the Indenture--Subordination," respectively,
in the accompanying Prospectus. There are no provisions in the Series A
Preferred Capital Securities, the Guarantee, the Partnership Agreement (as
defined herein) or the Indenture (as defined in the accompanying Prospectus)
that limit UI's ability to incur additional indebtedness, including
indebtedness that ranks senior to the Guarantee and the Series A Debentures.
The Indenture does not contain any cross-defaults to any other indebtedness of
UI and, therefore, a default with respect to, or the acceleration of, any such
indebtedness will not constitute an "Event of Default" with respect to the
Series A Debentures. See "Description of the Indenture and the Debentures--
Subordination" and "--Events of Default; Remedies" in the accompanying
Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
UI has the right under the Indenture, from time to time, to extend interest
payment periods on the Series A Debentures for up to 60 consecutive months,
and, as a consequence, monthly dividends on the Series A Preferred Capital
Securities will be deferred by United Capital during any such extended interest
payment period. During any such extended interest payment period, UI may not
declare or pay dividends on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any shares of its capital stock. UI currently has no
intention to so extend any such interest payment period, and it believes that
such an extension of an interest payment period is unlikely. See "Description
of the Debentures and the Indenture--Option to Extend Interest Payment Period"
and "Description of the Preferred Capital Securities--Voting Rights" in the
accompanying Prospectus.
TAX CONSEQUENCES OF EXTENDED INTEREST PAYMENT PERIOD
Should an extended interest payment period occur, United Capital will
continue to accrue income for United States Federal income tax purposes that
will be allocated but not distributed to record holders of Series A Preferred
Capital Securities. As a result, such holders will include such interest in
gross income for Federal income tax purposes in advance of the receipt of cash,
and will not receive the cash related to such income if such holders dispose of
the Series A Preferred Capital Securities prior to the record date for payment
of dividends. A holder's tax basis in the Series A Preferred Capital Securities
will be increased by the amount of any interest that is included in such
holder's income without receipt of cash, and will be decreased when and if such
cash is subsequently received by such Series A Preferred Capital Securities
holder from United Capital. See "United States Income Taxation--Potential
Extension of Interest Payment Period" herein.
S-3
<PAGE>
SPECIAL EVENT REDEMPTION OR EXCHANGE
Upon the occurrence and continuation of a Special Event (as defined in the
accompanying Prospectus, which term, as so defined, relates to a change in law
or regulation or official interpretation thereof), UI, as general partner of
United Capital (the "General Partner"), will elect to cause United Capital (i)
to redeem the Series A Preferred Capital Securities in whole (and not in part)
or (ii) to distribute Series A Debentures in exchange for Series A Preferred
Capital Securities. A condition to any such exchange will be receipt by United
Capital of an opinion of counsel that such exchange will be treated as a non-
taxable exchange to the holders of the Preferred Capital Securities. In the
case of a Special Event that is a Tax Event (as defined in the accompanying
Prospectus), the General Partner may also elect to cause the Series A
Preferred Capital Securities to remain outstanding. See "Certain Terms of the
Series A Preferred Capital Securities--Redemption or Exchange" herein and
"Description of the Preferred Capital Securities--Special Event Redemption or
Exchange" in the accompanying Prospectus.
In April 1994, the Internal Revenue Service (the "IRS") issued certain
notices generally addressing the characteristics that distinguish debt from
equity for various purposes under the Federal income tax laws. In these
notices, the IRS indicated that transactions involving securities that, like
the Series A Preferred Capital Securities, have both debt and equity
characteristics would be reviewed with scrutiny to determine how they would be
treated for tax purposes. UI believes that interest on the Series A Debentures
will be deductible under the tests referred to in these notices. If, as a
result of a change in law or a pronouncement or decision interpreting or
applying any applicable law, United Capital receives an opinion of counsel to
the effect that interest on the Series A Debentures would not be deductible,
United Capital would have the option (i) to redeem the Series A Preferred
Capital Securities, (ii) to distribute the Series A Debentures in exchange
therefor or (iii) to cause the Series A Preferred Capital Securities to remain
outstanding, in each case as described under "Description of the Preferred
Capital Securities--Special Event Redemption or Exchange" in the accompanying
Prospectus.
THE UNITED ILLUMINATING COMPANY
UI is an operating electric public utility company, incorporated under the
laws of the State of Connecticut in 1899. It is engaged principally in the
production, purchase, transmission, distribution and sale of electricity for
residential, commercial and industrial purposes in a service area of about 335
square miles in the southwestern part of the State of Connecticut. The
population of this area is approximately 711,000, or 22% of the population of
the State of Connecticut. The service area, largely urban and suburban in
character, includes the principal cities of Bridgeport (population 142,000)
and New Haven (population 130,000) and their surrounding areas. Situated in
the service area are retail trade and service centers, as well as large and
small industries providing a wide variety of products, including helicopters
and other transportation equipment, electrical equipment, chemicals and
pharmaceuticals. Of UI's 1994 retail electric revenues, approximately 41% were
derived from residential sales, 40% from commercial sales, 17% from industrial
sales and 2% from other sales.
In addition to United Capital, UI has three wholly-owned direct
subsidiaries. Research Center, Inc. ("RCI") has been formed to participate in
the development of one or more regulated power production ventures, including
possible participation in arrangements for the future development of
independent power production and cogeneration facilities. United Energy
International, Inc. ("UEI") was formed to facilitate participation in a
proposed joint venture relating to power production plants abroad. United
Resources, Inc. ("URI") serves as the parent corporation for UI's unregulated
businesses, each of which is incorporated separately to participate in
business ventures that will complement and enhance UI's electric utility
business and serve the interests of UI and its shareholders and customers.
Four wholly-owned subsidiaries of URI have been incorporated. Souwestcon
Properties, Inc. ("SPI") participated as a 25% partner in the ownership of a
medical hotel building in New Haven, which has recently been sold. SPI no
longer owns any property and is currently inactive. A second wholly-owned
subsidiary of
S-4
<PAGE>
URI is Thermal Energies, Inc., which is participating in the development of
district heating and cooling water facilities in the downtown New Haven area,
including the energy center for an office tower and participation as a 37%
partner in the energy center for a city hall and office tower complex. A third
URI subsidiary, Precision Power, Inc., provides power-related equipment and
services to the owners of commercial buildings and industrial facilities. A
fourth URI subsidiary, American Payment Systems, Inc., manages agents and
equipment for electronic data processing of bill payments made by customers of
utilities, including UI, at neighborhood businesses. In addition to these
subsidiaries, URI has an 90% ownership interest in Ventana Corporation, which
offers energy conservation engineering and project management services to
governmental and private institutions. The Board of Directors of UI has
authorized the investment of a maximum of $18.0 million, in the aggregate, of
UI's assets in all of these URI ventures, UEI and RCI, and, at December 31,
1994, approximately $14.5 million had been so invested.
UI has ownership and leasehold interests in three nuclear generating units
located in New England, including a 17.5% undivided ownership and leasehold
interest in Seabrook Unit 1, a 1,150-megawatt unit in Seabrook, New Hampshire
("Seabrook 1").
For further information about these and other matters affecting UI's
business, see "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus.
UNITED CAPITAL FUNDING PARTNERSHIP L.P.
United Capital is a limited partnership that was formed under the Delaware
Revised Uniform Limited Partnership Act, as amended (the "Delaware Act"), on
August 18, 1994. United Capital was formed for the sole purpose of issuing
Limited Partner Interests and lending the proceeds thereof to UI. UI is the
sole General Partner and will manage the business and affairs of United
Capital. Holders of Series A Preferred Capital Securities and other Limited
Partner Interests of United Capital will be limited partners of United
Capital. UI will make capital contributions from time to time to the extent
required so that the total contributions made by UI, as the General Partner,
shall at all times be at least equal to 1% of the total contributions made by
all partners. United Capital will lend such amounts to UI from time to time in
return for Indenture Securities of UI, including the Series A Debentures. The
rights and obligations of UI, as the General Partner, and the limited partners
of United Capital will be governed by the Delaware Act and by an Amended and
Restated Agreement of Limited Partnership of United Capital (the "Partnership
Agreement") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part. United Capital has
been advised by its special Delaware counsel that, assuming a holder of
Preferred Capital Securities acts in conformity with the provisions of the
Partnership Agreement, such holder (other than the General Partner) will not
be liable for the debts, obligations and liabilities of United Capital,
whether arising in contract, tort or otherwise, solely by reason of being a
limited partner of United Capital (subject to the obligation of a limited
partner to repay any funds wrongfully distributed to it). The principal
executive office of United Capital is c/o The United Illuminating Company, 157
Church Street, New Haven, Connecticut 06506-0901, telephone number (203) 499-
2000.
S-5
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following material, which is presented herein solely to furnish limited
financial information regarding UI, is qualified in its entirety by reference
to the detailed information and financial statements contained in the
Incorporated Documents (as defined in the accompanying Prospectus) and
available upon request from UI. See "Available Information" in the
accompanying Prospectus. Accordingly, the following should be read together
with the Incorporated Documents.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues............................ $ 656,748 $ 653,023 $ 667,325
Operating Income.............................. 127,392 114,814 108,022
Total Allowance for Funds Used During
Construction (1)............................. 3,463 4,067 3,232
Deferred Return (2)........................... -- 7,497 15,959
Total Interest Charges........................ 84,073 92,290 101,548
Net Income.................................... 46,795 40,481 56,768
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
----------------------------------------------------
ACTUAL AS ADJUSTED (3)
------------------------- --------------------------
PERCENT OF AMOUNT PERCENT OF
AMOUNT CAPITALIZATION (UNAUDITED) CAPITALIZATION
---------- -------------- ----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
CAPITALIZATION:
Long-Term Debt (including
current maturities)...... $ 901,473 65.6% $ 901,473 64.5%
Preferred Stock........... 44,700 3.3 17,200 1.2
Preferred Securities of
Subsidiary............... -- -- 50,000 3.6
Common Stock Equity....... 428,028 31.1 428,028 30.7
---------- ----- ---------- -----
Total Capitalization...... $1,374,201 100.0% $1,396,701 100.0%
========== ===== ========== =====
</TABLE>
--------
(1) Allowance for Funds Used During Construction ("AFUDC") is a non-cash
credit to income that represents the approximate cost of debt and equity
capital devoted to plant under construction. For balance sheet purposes,
AFUDC is capitalized to UI's Plant account and depreciated and recovered
over the life of the asset.
(2) Deferred Return is a non-cash credit to income that represents the
approximate cost of debt and equity capital devoted to the portion of
Seabrook 1 that had previously been excluded from rate base in accordance
with the phase-in to rate base of UI's investment in Seabrook 1. For
balance sheet purposes, Deferred Return is capitalized as a deferred debit
and amortized and recovered over a five-year period beginning in 1995.
(3) Adjusted to give effect to (i) the issuance by United Capital of 2,000,000
Series A Preferred Capital Securities (having an aggregate stated
liquidation preference of $50,000,000) and the use of the proceeds thereof
by United Capital to purchase the Series A Debentures from UI and (ii) the
intended use of the estimated net proceeds thereof by UI to redeem
outstanding preferred stock and repay outstanding short-term debt. See
"Use of Proceeds."
USE OF PROCEEDS
The proceeds from the sale of the Series A Preferred Capital Securities,
together with the related capital contribution made by the General Partner,
will be lent to UI in return for the Series A Debentures. UI intends to apply
the net proceeds from the Series A Debentures to the payment or purchase (on
the open market, in private transactions or otherwise) or redemption of
outstanding securities of UI, which may include the redemption of $12.5
million par value of its 7.60% Preferred Stock, Series E at 101% of the par
value thereof and of $15 million par value of its 7.60% Preferred Stock,
Series F at 101% of the par value thereof, and the repayment of outstanding
short-term debt.
S-6
<PAGE>
CERTAIN TERMS OF THE SERIES A PREFERRED CAPITAL SECURITIES
The following summary of certain terms of the Series A Preferred Capital
Securities supplements the description of the Preferred Capital Securities set
forth in the accompanying Prospectus under the heading "Description of the
Preferred Capital Securities," to which description reference is hereby made.
GENERAL
The Series A Preferred Capital Securities will be issued as the initial
series of Preferred Capital Securities pursuant to the Partnership Agreement.
An aggregate of 2,000,000 Series A Preferred Capital Securities, having an
aggregate stated liquidation preference of $50,000,000, are being offered
hereby.
DIVIDENDS
Dividends on the Series A Preferred Capital Securities will be cumulative
from the date of issue and will be payable monthly in arrears on the last day
of each calendar month of each year at an annual rate of 9 5/8% of the
liquidation preference of $25 per security. The first dividend payment date for
the Series A Preferred Capital Securities will be April 30, 1995. See
"Description of the Preferred Capital Securities--Dividends" in the
accompanying Prospectus.
UI has the right, from time to time, to extend interest payment periods on
the Series A Debentures for up to 60 consecutive months, and, as a consequence,
monthly dividends on the Series A Preferred Capital Securities will be deferred
by United Capital during any such extended interest payment period. For a
description of UI's right to so extend interest payment periods, and the effect
of any such extension on its ability to declare and pay dividends on shares of
its capital stock, see "Description of the Debentures and the Indenture--Option
to Extend Interest Payment Period" in the accompanying Prospectus.
REDEMPTION OR EXCHANGE
On or after April 30, 2000, United Capital may, at its option and at the
direction of UI, redeem the Series A Preferred Capital Securities in whole or
in part at the Redemption Price. In addition, if at any time United Capital or
UI, as a consequence of (i) the Series A Debentures not being treated as
indebtedness for United States Federal income tax purposes or (ii) United
Capital not being treated as a partnership for United States Federal income tax
purposes, is or would be required to pay certain additional amounts or to
withhold or deduct certain amounts, the Series A Preferred Capital Securities
are redeemable, at the option of United Capital, in whole or in part at the
Redemption Price. See "Certain Terms of the Series A Preferred Capital
Securities--Optional Redemption" and "--Redemption Procedures" in the
accompanying Prospectus.
Series A Preferred Capital Securities will be subject to mandatory redemption
upon the payment of Series A Debentures at maturity or redemption, as described
under "Description of the Preferred Capital Securities--Mandatory Redemption"
in the accompanying Prospectus, and may be subject to redemption in whole (and
not in part) or exchange for Series A Debentures upon the occurrence and
continuation of a Special Event (which relates to a change in law or regulation
or official interpretation thereof), as described under "Description of the
Preferred Capital Securities--Special Event Redemption or Exchange" in the
accompanying Prospectus.
CERTAIN TERMS OF THE SERIES A DEBENTURES
The following summary of certain terms and provisions of the Series A
Debentures supplements the description of the Debentures set forth in the
accompanying Prospectus under the heading "Description of the Debentures and
the Indenture," to which description reference is hereby made.
GENERAL
Pursuant to the Indenture dated as of April 1, 1995 between UI and The Bank
of New York, as trustee (as supplemented from time to time, the "Indenture"),
and to evidence the loan by United Capital to UI of the proceeds of the
issuance of the Series A Preferred Capital Securities and the related capital
contribution made by the General Partner, UI will issue the Series A Debentures
to United Capital in an aggregate principal amount equal to the sum of the
aggregate liquidation preference of the Series A Preferred Capital Securities
and the amount of such capital contribution.
S-7
<PAGE>
The entire principal amount of the Series A Debentures will become due and
payable, together with any accumulated and unpaid interest thereon, including
Additional Interest (as defined in the accompanying Prospectus), if any, on
April 30, 2025 (subject to UI's rights and obligations to redeem the Series A
Debentures). See "Redemption" below.
INTEREST
The Series A Debentures will bear interest at a rate of 9 5/8% per annum from
the date they are issued until paid. Such interest will be payable monthly on
the last day of each calendar month of each year, commencing April 30, 1995.
See "Description of the Debentures and the Indenture--Interest" and "--Option
to Extend Interest Payment Period" in the accompanying Prospectus.
REDEMPTION
The Series A Debentures may be redeemed at the option of UI, at any time on
or after April 30, 2000, in whole or in part, at a redemption price equal to
100% of the principal amount thereof plus any accrued but unpaid interest,
including Additional Interest, if any, to the date fixed for redemption. In
addition, if United Capital redeems Series A Preferred Capital Securities in
accordance with the terms thereof, UI shall redeem Series A Debentures in a
principal amount equal to the aggregate liquidation preference of the Series A
Preferred Capital Securities so redeemed, at a redemption price equal to 100%
of the aggregate principal amount of such Series A Debentures to be redeemed,
plus any accrued but unpaid interest, including Additional Interest, if any,
any such redemption to be made on the date the Series A Preferred Capital
Securities are redeemed or on such earlier date as United Capital and UI shall
agree.
UNITED STATES INCOME TAXATION
GENERAL
This section is a summary of certain United States Federal income tax
considerations that may be relevant to prospective purchasers of Series A
Preferred Capital Securities and represents the opinion of Reid & Priest,
special tax counsel to UI and United Capital, insofar as it relates to matters
of law and legal conclusions. This section is based upon current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed regulations thereunder and current administrative rulings and court
decisions, all of which are subject to change. Subsequent changes may cause tax
consequences to vary substantially from the consequences described below.
No attempt has been made in the following discussion to comment on all
Federal income tax matters affecting purchasers of Series A Preferred Capital
Securities. Moreover, the discussion focuses on holders of Series A Preferred
Capital Securities who are individual citizens or residents of the United
States and has only limited application to corporations, estates, trusts and
non-resident aliens. Accordingly, each prospective purchaser of Series A
Preferred Capital Securities should consult, and should depend upon, his or her
own tax advisor in analyzing the Federal, state, local and foreign income tax
consequences of the purchase, ownership or disposition of Series A Preferred
Capital Securities.
INCOME FROM SERIES A PREFERRED CAPITAL SECURITIES
In the opinion of Reid & Priest, United Capital will be treated as a
partnership for Federal income tax purposes. Accordingly, each Series A
Preferred Capital Securities holder will be required to include in gross income
his or her distributive share of United Capital's net income. Any amount so
included in a Series A Preferred Capital Securities holder's gross income will
increase his or her tax basis in the Series A Preferred Capital Securities, and
the amount of cash dividends distributed to the Series A Preferred Capital
Securities holder will be a non-taxable reduction in his or her tax basis in
the Series A Preferred Capital Securities. The income included in a Series A
Preferred Capital Securities holder's gross income should not exceed dividends
received on such Series A Preferred Capital Securities, except in the limited
circumstances described under "Potential Extension of Interest Payment Period"
below. No portion of such income will be eligible for the dividends received
deduction.
S-8
<PAGE>
DISPOSITION OF SERIES A PREFERRED CAPITAL SECURITIES
Upon the sale or redemption for cash of Series A Preferred Capital
Securities, gain or loss realized will be recognized by each Series A Preferred
Capital Securities holder in an amount equal to the difference between (i) the
amount realized by the Series A Preferred Capital Securities holder for such
Series A Preferred Capital Securities and (ii) such holder's tax basis in such
Series A Preferred Capital Securities. Depending upon the particular
circumstances of a Series A Preferred Capital Securities holder, gain or loss
recognized by such holder on the sale or exchange of Series A Preferred Capital
Securities held for more than one year will generally be taxable as long-term
capital gain or loss.
EXCHANGE OF SERIES A PREFERRED CAPITAL SECURITIES FOR SERIES A DEBENTURES
Under certain circumstances relating to changes in law, as described under
the caption "Description of the Series A Preferred Capital Securities--Special
Event Redemption or Exchange" in the accompanying Prospectus, United Capital
may distribute the Series A Debentures to Series A Preferred Capital Securities
holders in exchange for the Series A Preferred Capital Securities. As described
in "Description of the Series A Preferred Capital Securities--Special
Redemption or Exchange" in the accompanying Prospectus, in the case of a
Special Event, Series A Debentures may not be distributed to the holders of
Series A Preferred Capital Securities unless United Capital receives an opinion
of counsel to the effect that holders of Series A Preferred Capital Securities
will not recognize gain or loss for Federal income tax purposes as a result of
such distribution. Such an exchange will result in each Series A Preferred
Capital Securities holder receiving an aggregate basis in its Series A
Debentures equal to such holder's aggregate tax basis in its Series A Preferred
Capital Securities. A Series A Preferred Capital Securities holder's holding
period in the Series A Debentures received in such an exchange will include the
period for which the Series A Preferred Capital Securities were held by such
holder, provided the Series A Preferred Capital Securities were held as a
capital asset.
UNITED CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES
UI, as the General Partner of United Capital, will furnish each Series A
Preferred Capital Securities holder with a Schedule K-1 for each year setting
forth such Series A Preferred Capital Securities holder's allocable share of
income for the prior calendar year. Because UI and United Capital believe that
the Series A Debentures will be properly treated as indebtedness for federal
income tax purposes, such allocable share of income will generally be reflected
as interest income on such Schedule K-1. UI is currently required to furnish
such Schedule K-1 to each holder as soon as practicable following the end of
each year, but in any event prior to March 31.
Any person who holds Series A Preferred Capital Securities as a nominee for
another person is required to furnish to United Capital: (i) the name, address
and taxpayer identification number of the beneficial owner and nominee; (ii)
information as to whether the beneficial owner is (A) a person that is not a
United States person, (B) a foreign government, an international organization
or any wholly-owned agency or instrumentality of the foregoing or (C) a tax-
exempt entity; (iii) the amount and description of the Series A Preferred
Capital Securities held, acquired or transferred for the beneficial owner; and
(iv) certain information including the dates of acquisitions and transfers,
means of acquisitions and transfers, and acquisition costs for purchases, as
well as the amount of net proceeds from sales. Brokers and financial
institutions are required to furnish additional information, including whether
they are United States persons, and certain information on Series A Preferred
Capital Securities that they acquire, hold or transfer for their own accounts.
A penalty of $50 per failure (up to a maximum of $100,000 per calendar year) is
imposed by the Code for failure to report such information to United Capital.
The nominee is required to supply the beneficial owners of the Series A
Preferred Capital Securities with the information furnished to United Capital.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
Under the terms of the Indenture, UI has the right to extend from time to
time interest payment periods on the Series A Debentures for up to 60
consecutive months. Because the interest payment period is extendable, the
interest on the Series A Debentures will be treated as "original issue
discount" ("OID") pursuant to Code sections 1271 et seq. and the Treasury
Regulations promulgated thereunder. Pursuant
S-9
<PAGE>
thereto, United Capital will be required to include the interest on the Series
A Debentures in income as it accrues in accordance with a constant yield method
based upon a compounding of interest, before actual receipt of the cash payment
representing such interest.
Accrued income includible by United Capital during an extended interest
payment period pursuant to the OID rules will be allocated, but not
distributed, to Series A Preferred Capital Securities holders of record on the
Business Day (as defined in the accompanying Prospectus) preceding the last day
of each calendar month. As a result, during an extended interest payment
period, Series A Preferred Capital Securities holders of record will include
interest in gross income in advance of the receipt of cash and any such holders
who dispose of Series A Preferred Capital Securities prior to the record date
for the payment of dividends following such extended interest payment period
will include interest in gross income but will not receive any cash related
thereto from United Capital. The tax basis of Series A Preferred Capital
Securities will be increased by the amount of any interest that is included in
a Series A Preferred Capital Securities holder's income without receipt of
cash, and will be decreased when and if such cash is subsequently received by
such Series A Preferred Capital Securities holder from United Capital.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien holder" is any holder
of Series A Preferred Capital Securities that is (i) a nonresident alien
individual, (ii) a foreign corporation or partnership or (iii) an estate or
trust that has a foreign fiduciary, in each case not subject to Federal income
taxation on a net income basis in respect of such Series A Preferred Capital
Securities.
Under current Federal income tax law, subject to the discussion below with
respect to backup withholding:
(a) payments by United Capital or any of its paying agents to any United
States Alien holder will not be subject to Federal withholding tax provided
that (i) the beneficial owner of Series A Preferred Capital Securities does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of UI entitled to vote, (ii) the beneficial
owner of Series A Preferred Capital Securities is not a controlled foreign
corporation that is related to UI through stock ownership, and (iii) either
(A) the beneficial owner of Series A Preferred Capital Securities certifies
to United Capital or its agent, under penalties of perjury, that it is a
United States Alien holder and provides its name and address or (B) the
holder of Series A Preferred Capital Securities is 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 such Financial Institution certifies to United Capital or
its agent under penalties of perjury that such certification has been
received from the beneficial owner by it or by another Financial
Institution between it and the beneficial owner and furnishes United
Capital or its agent with a copy thereof; and
(b) a United States Alien holder will generally not be subject to Federal
tax on any gain realized upon the sale or exchange of Series A Preferred
Capital Securities unless such holder is an individual present in the
United States for 183 days or more in the taxable year of the sale and
either has a "tax home" in the United States or certain other requirements
are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments to
noncorporate United States holders of Series A Preferred Capital Securities of
the sale proceeds of Series A Preferred Capital Securities within the United
States, and "backup withholding" at a rate of 31% will apply to such payments
if any such Series A Preferred Capital Securities holder fails to provide to
United Capital an accurate taxpayer identification number.
In general, information reporting requirements will also apply to payments of
principal of and interest on Series A Debentures distributed to noncorporate
United States holders of Series A Preferred Capital Securities and to the
proceeds received by such holders from the sale of Series A Debentures prior to
maturity within the United States, and "backup withholding" at a rate of 31%
will apply to such payments or proceeds if the United States holder fails to
provide an accurate taxpayer identification number or to report all interest
and dividends required to be shown on his or her Federal income tax returns.
S-10
<PAGE>
Information reporting and backup withholding will not apply to payments of
principal and interest made by UI or a paying agent to a United States Alien
holder in respect of Series A Debentures distributed to such holder if the
certification described in clause (iii) of paragraph (a) under "United States
Alien Holders" above is received, provided that the payor does not have actual
knowledge that the holder is a United States Alien holder.
Payments of the proceeds from the sale by a United States Alien holder of
Series A Preferred Capital Securities or Series A Debentures distributed to
such a holder made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding. However, if the broker
is a United States person, a controlled foreign corporation for United States
Federal income tax purposes or a foreign person 50% or more of whose gross
income is effectively connected with a United States trade or business for a
specified three year period, information reporting may apply to such payments.
Payments of the proceeds from the sale by a United States Alien holder of
Series A Preferred Capital Securities or Series A Debentures distributed to a
Series A Preferred Capital Securities holder to or through the United States
office of a broker is subject to information reporting and backup withholding,
unless the holder or beneficial owner certifies as to its non-United States
status or otherwise establishes an exemption from information reporting and
backup withholding.
S-11
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of an Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), United Capital has agreed
to sell to each of the Underwriters named below (the "Underwriters"), and each
of the Underwriters, for whom Morgan Stanley & Co. Incorporated, Bear, Stearns
& Co. Inc., Goldman, Sachs & Co., Legg Mason Wood Walker, Incorporated, Lehman
Brothers Inc. and Prudential Securities Incorporated are acting as
representatives (the "Representatives"), has severally agreed to purchase from
United Capital, the respective number of Series A Preferred Capital Securities
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SERIES A
PREFERRED
CAPITAL
UNDERWRITERS SECURITIES
------------ ----------
<S> <C>
Morgan Stanley & Co. Incorporated.................................... 250,000
Bear, Stearns & Co. Inc. ............................................ 250,000
Goldman, Sachs & Co. ................................................ 250,000
Legg Mason Wood Walker, Incorporated................................. 250,000
Lehman Brothers Inc. ................................................ 250,000
Prudential Securities Incorporated................................... 250,000
Advest, Inc. ........................................................ 12,500
J.C. Bradford & Co. ................................................. 12,500
Alex. Brown & Sons Incorporated...................................... 25,000
Cowen & Company...................................................... 12,500
Craigie Incorporated................................................. 12,500
Crowell, Weedon & Co. ............................................... 12,500
CS First Boston Corporation.......................................... 25,000
Dain Bosworth Incorporated........................................... 12,500
Dillon, Read & Co. Inc. ............................................. 25,000
Donaldson, Lufkin & Jenrette
Securities Corporation............................................. 25,000
A.G. Edwards & Sons, Inc. ........................................... 25,000
First Albany Corporation............................................. 12,500
Furman Selz Incorporated............................................. 12,500
Gruntal & Co., Incorporated.......................................... 12,500
J.J.B. Hilliard, W.L. Lyons, Inc. ................................... 12,500
Interstate/Johnson Lane Corporation.................................. 12,500
Janney Montgomery Scott Inc. ........................................ 12,500
Kemper Securities, Inc. ............................................. 12,500
Kennedy, Cabot & Co. ................................................ 12,500
McDonald & Company Securities, Inc. ................................. 12,500
McGinn, Smith & Co., Inc. ........................................... 12,500
Morgan Keegan & Company, Inc. ....................................... 12,500
The Ohio Company..................................................... 12,500
Oppenheimer & Co., Inc. ............................................. 25,000
Piper Jaffray Inc. .................................................. 12,500
Rauscher Pierce Refsnes, Inc. ....................................... 12,500
Raymond James & Associates, Inc. .................................... 12,500
The Robinson-Humphrey Company, Inc. ................................. 12,500
Salomon Brothers Inc................................................. 25,000
Muriel Siebert & Co., Inc. .......................................... 12,500
Stifel, Nicolaus & Company Incorporated.............................. 12,500
Tucker Anthony Incorporated.......................................... 12,500
Wheat, First Securities, Inc. ....................................... 12,500
---------
Total.............................................................. 2,000,000
=========
</TABLE>
S-12
<PAGE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Series A Preferred Capital
Securities are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are committed to take
and pay for all such Series A Preferred Capital Securities offered hereby, if
any are taken.
The Underwriters propose to offer all or part of the Series A Preferred
Capital Securities directly to the public at the public offering price set
forth on the cover page hereof, and all or part to certain dealers at a price
that represents a concession not in excess of $.50 per security, except that
such concession will be $.30 per security sold to certain institutions. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $.25 per security to certain other dealers. After the initial
offering date of the Series A Preferred Capital Securities, the offering price
and other selling terms may from time to time be varied by the Representatives.
Because the proceeds of the sale of the Series A Preferred Capital Securities
will be loaned to UI, UI has agreed, in the Underwriting Agreement, to pay to
the Underwriters as compensation for their services an amount of $.7875 per
security ($.50 per security sold to certain institutions) for the accounts of
the several Underwriters.
Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, UI in the ordinary course of business.
The Series A Preferred Capital Securities have been approved for listing on
the New York Stock Exchange, subject to official notice of issuance. Listing
will be contingent upon meeting the requirements of the New York Stock
Exchange, including those relating to distribution. Trading of the Series A
Preferred Capital Securities on the New York Stock Exchange is expected to
commence within a seven-day period after the initial delivery of the Series A
Preferred Capital Securities. UI and United Capital have been advised by the
Representatives that the Underwriters intend to make a market in the Series A
Preferred Capital Securities prior to the commencement of trading on the New
York Stock Exchange, but are not obligated to do so and may discontinue market
making at any time without notice.
United Capital and UI have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended, or to contribute with respect to payments that the
Underwriters may be required to make in respect thereof.
S-13
<PAGE>
PROSPECTUS
$100,000,000
The United Illuminating Company
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
----------------
United Capital Funding Partnership L.P.
PREFERRED CAPITAL SECURITIES
(Liquidation Preference $25 per Security) Guaranteed to the extent the
Partnership has legally available funds, as described herein, by
The United Illuminating Company
----------------
The United Illuminating Company ("UI") may offer, from time to time, in one
or more series, its junior subordinated deferrable interest debentures (the
"Debentures"). The Debentures may be offered in amounts, at prices and on
terms to be determined at the time of offering. The Debentures will rank
subordinate in right of payment to all Senior Indebtedness (as defined herein)
of UI.
United Capital Funding Partnership L.P., a Delaware special purpose limited
partnership ("United Capital"), the sole general partner of which is UI, may
offer, from time to time, in one or more series, its preferred capital
securities ("Preferred Capital Securities"), which represent limited partner
interests in United Capital ("Limited Partner Interests"). The Preferred
Capital Securities may be offered in amounts, at prices and on terms to be
determined at the time of offering. United Capital was formed for the sole
purpose of issuing Limited Partner Interests and lending the proceeds thereof
to UI. United Capital will lend the proceeds of the sale of Preferred Capital
Securities to UI, together with the related capital contributions made by UI,
in return for Debentures of UI issued in connection with the investment of
such proceeds in aggregate principal amount equal to the aggregate liquidation
preference of, bearing interest at an annual rate equal to the annual dividend
rate on, and having certain redemption terms that correspond to redemption
terms for, such Preferred Capital Securities (any such Debentures, herein
referred to as Debentures of a "corresponding" series).
The payment of cash distributions ("dividends") and payments on liquidation
or redemption with respect to the Preferred Capital Securities, to the extent
of funds held by United Capital and legally available therefor, will be
guaranteed under a Payment and Guarantee Agreement (the "Guarantee") of UI to
the extent described herein. The Guarantee will also rank subordinate in right
of payment to all Senior Indebtedness of UI. Such funds will be limited to
payments by UI on the Debentures corresponding to any Preferred Capital
Securities and other Indenture Securities (as defined herein) issued under the
Indenture (as defined herein) in connection with the investment of the
proceeds from any offering of Limited Partner Interests. If UI fails to make
interest payments on such Debentures, United Capital will have insufficient
funds to pay dividends on such Preferred Capital Securities and the Guarantee
will not cover payment of such dividends. In such event, the holders of such
Preferred Capital Securities may enforce certain rights in respect of such
Debentures under the Indenture. See "Description of the Guarantee" and
"Description of the Debentures and the Indenture--Enforcement of Certain
Rights by Holders of Preferred Capital Securities."
Interest on the Debentures may be deferred at the option of UI, for up to 60
consecutive months, as described under "Description of the Debentures and the
Indenture--Option to Extend Interest Payment Period" (whether or not such
Debentures correspond to Preferred Capital Securities) and, as a consequence,
monthly dividends on the Preferred Capital Securities may be deferred by
United Capital. See "Description of the Guarantee" and "Description of the
Debentures and the Indenture" herein for a description of the terms and
limitations of the obligations of UI relating to Preferred Capital Securities.
Under certain circumstances described herein, UI may cause United Capital to
distribute the Debentures that correspond to Preferred Capital Securities in
exchange for such Preferred Capital Securities. See "Description of the
Preferred Capital Securities--Special Event Redemption or Exchange."
Certain specific terms of the Debentures of any series and the Preferred
Capital Securities of any series in respect of which this Prospectus is being
delivered (the "Offered Securities") will be set forth in an accompanying
Prospectus Supplement (the "Prospectus Supplement") with respect to such
series, which will describe, in the case of the Debentures, the aggregate
principal amount, maturity and interest rate, and, in the case of the
Preferred Capital Securities, the number of securities and dividend rate, and,
in each case, the series designation and any other terms.
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering; provided, however, that the aggregate
initial public offering price of all Offered Securities shall not exceed
$100,000,000.
----------------
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 Offered Securities will be sold directly, through agents, underwriters
and dealers, including Morgan Stanley & Co. Incorporated, as designated from
time to time, or through a combination of such methods. The names of such
agents, dealers or underwriters and any applicable commissions or discounts
will be set forth in or may be calculated from the Prospectus Supplement. See
"Plan of Distribution."
The Prospectus Supplement relating to any series of Offered Securities will
contain information concerning certain United States Federal income tax
considerations, if applicable, to such series.
This Prospectus may not be used to consummate sales of the Offered
Securities unless accompanied by the Prospectus Supplement.
----------------
MORGAN STANLEY & CO.
Incorporated
March 24, 1995
<PAGE>
AVAILABLE INFORMATION
UI 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
"Commission"). Such reports and other information filed by UI can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and
at the following Regional Offices of the Commission: 7 World Trade Center, 13th
Floor, New York, New York 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such reports and other information
concerning UI may also be inspected at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 that UI and United Capital have filed with
the Commission under the Securities Act of 1933, as amended (the "Securities
Act"), of which this Prospectus forms a part. Statements contained or
incorporated by reference herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to such Registration Statement, including the documents
filed as exhibits thereto (the "Registration Statement").
No separate financial statements of United Capital have been included or
incorporated by reference herein. UI and United Capital do not consider that
such financial statements would be material to holders of Preferred Capital
Securities because United Capital is a newly organized special purpose entity,
has no operating history and no independent operations and is not engaged in,
and does not propose to engage in, any activity other than as described herein.
United Capital is a special purpose limited partnership organized under the
laws of the State of Delaware, and UI is the sole general partner. United
Capital exists for the sole purpose of issuing Limited Partner Interests and
lending the proceeds thereof to UI. See "United Capital Funding Partnership
L.P."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
UI's Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(the "1994 Form 10-K") has been filed with the Commission pursuant to the
Exchange Act and is hereby incorporated herein by reference. All documents
subsequently filed by UI pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act prior to the termination of the offering of the securities offered
hereby shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing such documents. The documents
incorporated or deemed to be incorporated herein by reference are sometimes
referred to herein as the "Incorporated Documents." Any statement contained
herein or in an Incorporated Document shall be deemed to be modified or
superseded for all purposes to the extent that a statement contained herein, in
any Prospectus Supplement or in any subsequently filed Incorporated Document
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.
ANY PERSON RECEIVING A COPY OF THIS PROSPECTUS MAY OBTAIN WITHOUT CHARGE,
UPON REQUEST, A COPY OF ANY OF THE INCORPORATED DOCUMENTS (NOT INCLUDING THE
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE IN SUCH INCORPORATED DOCUMENTS). REQUESTS FOR SUCH COPIES SHOULD
BE DIRECTED TO MR. CHARLES J. PEPE, ASSISTANT TREASURER AND ASSISTANT
SECRETARY, THE UNITED ILLUMINATING COMPANY, P.O. BOX 1564, 157 CHURCH STREET,
NEW HAVEN, CONNECTICUT 06506-0901, TELEPHONE NUMBER (203) 499-2311.
2
<PAGE>
THE UNITED ILLUMINATING COMPANY
UI was formed under the laws of the State of Connecticut in 1899. UI is
engaged in the production, transmission, distribution and sale of electric
energy for residential, commercial and industrial purposes in a service area of
about 335 square miles in the southwestern part of Connecticut, including the
principal cities of Bridgeport and New Haven.
For further information about UI's business, see the 1994 Form 10-K and the
other Incorporated Documents. The principal executive offices of UI are located
at 157 Church Street, New Haven, Connecticut 06506-0901, telephone number (203)
499-2000.
UNITED CAPITAL FUNDING PARTNERSHIP L.P.
United Capital is a limited partnership that was formed under the Delaware
Revised Uniform Limited Partnership Act, as amended (the "Delaware Act"), on
August 18, 1994. United Capital was formed for the sole purpose of issuing
Limited Partner Interests and lending the proceeds thereof to UI. UI is the
sole General Partner of United Capital and will manage the business and affairs
of United Capital. Holders of Preferred Capital Securities will be limited
partners in United Capital. UI will make capital contributions from time to
time to the extent required so that the total contributions made by the General
Partner shall at all times be at least equal to 1% of the total contributions
made by all partners. United Capital will lend such amounts to UI from time to
time in return for Indenture Securities of UI, including the Debentures. The
rights and obligations of the General Partner and the limited partners of
United Capital will be governed by the Delaware Act and by an Amended and
Restated Agreement of Limited Partnership of United Capital (the "Partnership
Agreement") substantially in the form filed as an exhibit to the Registration
Statement. The principal executive office of United Capital is c/o The United
Illuminating Company, 157 Church Street, New Haven, Connecticut 06506-0901,
telephone number (203) 499-2000.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement, UI intends to apply
the net proceeds from the issuance of the Debentures to the payment or
provision for payment at maturity the purchase (on the open market, in private
transactions or otherwise) or redemption of outstanding securities of UI and
for general corporate purposes. United Capital will invest all proceeds from
the sale of the Preferred Capital Securities in corresponding Debentures.
3
<PAGE>
UI EARNINGS RATIOS
UI's Ratio of Earnings to Fixed Charges for each of the periods indicated was
as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges (A)....... 1.99 1.69 1.85 1.83 1.69
</TABLE>
UI's Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend
Requirements for each of the periods indicated was as follows:
<TABLE>
<CAPTION>
TWELVE
MONTHS ENDED DECEMBER 31,
-----------------------------
1994 1993 1992 1991 1990
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements (A)(B)... 1.86 1.57 1.74 1.71 1.59
</TABLE>
--------
(A) "Earnings," as defined by Commission Regulation S-K, represent the
aggregate of (1) net income, (2) taxes based on income, (3) investment tax
credit adjustments--net and (4) fixed charges. "Fixed Charges," as defined
by Commission Regulation S-K, represent interest (whether expended or
capitalized), related amortization and interest applicable to rentals
charged to operating expenses.
(B) "Preferred Stock Dividend Requirements," as defined by Commission
Regulation S-K, represent preferred stock dividends increased to reflect
the pre-tax earnings required to cover such dividend requirements.
DESCRIPTION OF THE PREFERRED CAPITAL SECURITIES
Set forth below is a summary of certain terms and provisions of the Preferred
Capital Securities. This summary does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the forms of Partnership
Agreement and Action of General Partner establishing the Preferred Capital
Securities of each series filed as exhibits to the Registration Statement.
GENERAL
The Partnership Agreement will authorize UI, as the General Partner, to
establish various series of Limited Partner Interests, including one or more
series of Preferred Capital Securities, having such designations, rights,
privileges, restrictions and other terms and provisions as the General Partner
may determine. The Preferred Capital Securities are Limited Partner Interests
in United Capital, and may be issued from time to time, having terms described
herein and in the Prospectus Supplement relating thereto. The Limited Partner
Interests, including the Preferred Capital Securities, will have a preference
with respect to cash distributions and amounts payable on liquidation over the
General Partner's interest in United Capital. The Action or Actions of General
Partner creating the Preferred Capital Securities will not permit the issuance
of any Limited Partner Interests of United Capital ranking, as to the payment
of dividends or participation in profits or the assets of United Capital,
senior to the Preferred Capital Securities.
Amounts payable in respect of the Preferred Capital Securities will be
guaranteed by UI to the extent set forth under "Description of the Guarantee"
below.
Under certain circumstances described herein, the Preferred Capital
Securities may be exchanged for corresponding Debentures of UI. See "Special
Event Redemption or Exchange" below. Each holder of Preferred Capital
Securities, by its acceptance thereof, agrees that such Debentures and the
Guarantee are subordinate and junior in right of payment to all Senior
Indebtedness. See "Description of the Guarantee--Status of Guarantee" and
"Description of the Debentures and the Indenture--Subordination."
4
<PAGE>
DIVIDENDS
Unless otherwise specified in a Prospectus Supplement, dividends on the
Preferred Capital Securities of each series will be cumulative, will accumulate
from the date of issue and will be payable monthly in arrears on the last day
of each calendar month of each year except as otherwise described below.
The annual dividend rate on the Preferred Capital Securities of each series
will be set forth in the Prospectus Supplement relating to the Preferred
Capital Securities of such series. Accrued and unpaid dividends on the
Preferred Capital Securities of each series will accrue additional dividends in
respect thereof after the dividend payment date therefor at the dividend rate
per annum applicable to the Preferred Capital Securities of such series. The
term "dividends" as used herein includes any such additional dividends payable
unless otherwise stated.
The amount of dividends payable for any period will be computed on the basis
of twelve 30-day months and a 360-day year and, for any period shorter than a
full monthly dividend period, will be computed on the basis of the actual
number of days elapsed in such period.
Payment of dividends on the Preferred Capital Securities is limited in
relation to the amount of funds held by United Capital and legally available
therefor. Dividends on the Preferred Capital Securities are required to be paid
to the extent that, on any scheduled dividend payment date, United Capital has
(x) funds legally available for the payment of such dividends, as determined by
the General Partner, and (y) cash on hand sufficient to permit such payment.
Such funds and cash on hand will be limited to UI's payments of interest on the
corresponding Debentures and other Indenture Securities issued in connection
with the investment of the proceeds of any offering of Limited Partner
Interests. See "Description of the Debentures and the Indenture."
UI has the right under the Indenture, from time to time, to extend the
interest payment periods on the Debentures for up to 60 consecutive months,
and, as a consequence, monthly dividends on the Preferred Capital Securities
will be deferred by United Capital (and will continue to accumulate with
additional dividends on any amounts so deferred) during any such extended
interest payment period. In the event that UI exercises its right to so extend
any such interest payment period, UI shall not, and shall not permit any of its
subsidiaries to, declare or pay dividends on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any capital stock of UI or its
subsidiaries. UI currently has no intention to so extend any such interest
payment period, and it believes that such an extension of an interest payment
period is unlikely. See "Voting Rights" below and "Description of the
Debentures and the Indenture--Option to Extend Interest Payment Period."
Dividends on the Preferred Capital Securities will be payable to the holders
thereof as they appear on the books and records of United Capital on the
relevant record dates, which will be one Business Day (as defined herein) prior
to each relevant payment date; provided, however, that if the Preferred Capital
Securities of any series are not held by a securities depositary, the General
Partner shall have the right to change such record dates. Subject to any
applicable laws and regulations and the provisions of the Partnership
Agreement, each such payment will be made as described under "Book-Entry-Only
Issuance" below. In the event that any date on which dividends are payable on
the Preferred Capital Securities is not a Business Day, then payment of the
dividends payable on such date will be made on the next succeeding day that is
a Business Day (and without any additional dividends or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect, and in the
same amount, as if made on such date. A "Business Day" shall mean any day other
than a day on which banking institutions in the City of New York or the City of
New Haven, Connecticut are authorized or required by law to close.
5
<PAGE>
CERTAIN RESTRICTIONS ON UNITED CAPITAL
If dividends or any Additional Amounts (as defined herein) have not been paid
in full on the Preferred Capital Securities of any series, United Capital shall
not:
(i) pay, or set aside for payment, any dividends on any other Limited
Partner Interests ranking pari passu with the Preferred Capital Securities
of such series as regards participation in profits of United Capital
("Dividend Parity Securities"), unless, at the time of such payment or
setting aside, there shall also be paid, or set aside for payment, as the
case may be, dividends on the Preferred Capital Securities of such series
on a pro rata basis, so that, after giving effect to the payment of all
such dividends, (x) the ratio of (a) the aggregate amount of dividends paid
on the Preferred Capital Securities of such series to (b) the aggregate
amount of dividends paid on such Dividend Parity Securities is the same as
(y) the ratio of (a) the aggregate of all accumulated arrears of unpaid
dividends and any Additional Amounts in respect of the Preferred Capital
Securities of such series to (b) the aggregate of all accumulated arrears
of unpaid dividends and any Additional Amounts in respect of such Dividend
Parity Securities;
(ii) pay, or set aside for payment, any dividends or other distributions
on any other securities of United Capital ranking junior to the Preferred
Capital Securities of such series as to dividends ("Dividend Junior
Securities"); or
(iii) redeem, purchase or otherwise acquire any Preferred Capital
Securities of such series, any Dividend Parity Securities or any Dividend
Junior Securities;
until, in each case, such time as all accumulated and unpaid dividends accrued
on the Preferred Capital Securities of such series and any Additional Amounts
in respect thereof shall have been paid in full for all dividend periods
terminating on or prior to, in the case of clauses (i) and (ii) above, such
payment and, in the case of clause (iii) above, the date of such redemption,
purchase or acquisition.
OPTIONAL REDEMPTION
Unless otherwise provided in a Prospectus Supplement relating to the
Preferred Capital Securities of any series, the Preferred Capital Securities of
such series will be redeemable, at the option of United Capital and at the
direction of UI, in whole or in part from time to time, on or after the date
set forth in such Prospectus Supplement, upon not less than 30 nor more than 60
days' notice, at a redemption price of $25 per security, plus an amount equal
to accumulated and unpaid dividends thereon and any Additional Amounts in
respect thereof to the date fixed for redemption (the "Redemption Price");
provided, however, that prior to giving any such notice of redemption United
Capital shall have received from UI a notice of redemption of Debentures of the
corresponding series having an aggregate principal amount equal to the
aggregate liquidation preference of the Preferred Capital Securities to be
redeemed.
If at any time after the issuance of any series of Preferred Capital
Securities, United Capital is or would be required to pay Additional Amounts in
respect thereof, as described under "Additional Amounts" below, or UI is or
would be required to withhold or deduct certain amounts, as described under
"Description of the Guarantee--Additional Amounts," then United Capital may, at
its option, redeem all of the Preferred Capital Securities of such series or,
if such requirement relates only to certain of the Preferred Capital Securities
of such series, the portion thereof that is subject to such requirement, upon
not less than 30 nor more than 60 days' notice, in each case at the Redemption
Price.
In the event that fewer than all the outstanding Preferred Capital Securities
of any series are to be so redeemed, the Preferred Capital Securities to be
redeemed will be selected as described under "Book-Entry-Only Issuance" below;
provided, however, that in the case of a partial redemption of any series of
Preferred Capital Securities resulting from a requirement that United Capital
pay Additional Amounts or UI withhold or deduct certain amounts, as described
in the immediately preceding paragraph, United Capital will (i) cause the
global certificate representing the Preferred Capital Securities of such series
to be withdrawn from the Depositary (as defined herein), (ii) issue
certificates in definitive form representing the Preferred Capital Securities
of such series and (iii) redeem the Preferred Capital Securities of such series
subject to such requirement. If a partial redemption would result in a
delisting of the Preferred Capital Securities of any
6
<PAGE>
series by any national securities exchange or other organization on which the
Preferred Capital Securities of such series are then listed, United Capital
may only redeem the Preferred Capital Securities of such series in whole.
MANDATORY REDEMPTION
If at any time UI (i) pays at maturity or (ii) redeems Debentures
corresponding to any Preferred Capital Securities, as described under
"Description of the Debentures and the Indenture--Optional Redemption," the
proceeds from such payment or redemption of principal of such Debentures will
be applied to redeem such Preferred Capital Securities at the Redemption Price
upon not less than 30 nor more than 60 days' notice (except that no such
notice will be required in the case of clause (i) above).
SPECIAL EVENT REDEMPTION OR EXCHANGE
If a Special Event (as defined below) shall occur and be continuing with
respect to any series of Preferred Capital Securities, the General Partner
will cause United Capital (i) to redeem the Preferred Capital Securities of
such series in whole (and not in part), upon not less than 30 nor more than 60
days' notice, at the Redemption Price within 90 days following the occurrence
of such Special Event, or (ii) to distribute corresponding Debentures to
holders of Preferred Capital Securities of such series in exchange for the
Preferred Capital Securities of such series within 90 days following the
occurrence of such Special Event; provided, however, that in the case of
clause (ii) above United Capital shall have received an opinion of nationally
recognized independent tax counsel experienced in such matters to the effect
that such holders will not recognize any gain or loss for Federal income tax
purposes as a result of such distribution. Notwithstanding the foregoing, if
the Special Event is solely a Tax Event (as defined below), neither the
General Partner nor United Capital shall be required to elect either of the
options described in clause (i) or (ii) above and the General Partner and
United Capital may, instead, allow the Preferred Capital Securities of such
series to remain outstanding.
In the event of a distribution of Debentures as described in clause (ii)
above, each holder of Preferred Capital Securities would receive corresponding
Debentures in an aggregate principal amount equal to the aggregate liquidation
preference of $25 per security on the Preferred Capital Securities held by
such holder, bearing interest at a rate per annum equal to the dividend rate
per annum on such Preferred Capital Securities and having accrued and unpaid
interest thereon at such rate from the last date on which dividends on such
Preferred Capital Securities were paid. Under such circumstances, if there are
no other Limited Partner Interests then outstanding, UI may cause United
Capital to be dissolved. In the event of such a distribution of Debentures, UI
would use its best efforts to have the Debentures listed on the same exchange
on which the Preferred Capital Securities are then listed.
After the date fixed for any such exchange, (i) such Preferred Capital
Securities will no longer be deemed to be outstanding, (ii) the Depositary (as
hereinafter defined) or its nominee, as the record holder thereof, will
exchange the global certificate or certificates representing such Preferred
Capital Securities for a registered global certificate or certificates
representing the corresponding Debentures to be delivered upon such exchange
and (iii) any certificates representing Preferred Capital Securities not held
by the Depositary or its nominee will be deemed to represent corresponding
Debentures having a principal amount equal to the liquidation preference of
such Preferred Capital Securities until such certificates are presented to UI
or its agent for exchange.
"Special Event" means an Investment Company Event or a Tax Event.
"Investment Company Event" means, with respect to Preferred Capital
Securities of any series, the occurrence of a change in law or regulation or a
written change in official interpretation of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a "1940
Act Change in Law") to the effect that United Capital is or will be considered
an "investment company" required to be registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), which 1940 Act Change in Law becomes
effective on or after the date of the first issuance of Preferred Capital
Securities of such series; provided that no Investment Company Event shall be
deemed to have occurred if UI or United Capital shall have obtained a written
opinion of nationally recognized independent counsel experienced in practice
under the 1940 Act to the effect that UI or United Capital has successfully
taken either of the steps set forth in clause (i) or (ii) below to avoid such
1940 Act Change in Law so that in the opinion of such counsel, notwithstanding
such 1940 Act Change in Law, United Capital is not required to be registered
as an
7
<PAGE>
"investment company" within the meaning of the 1940 Act. Such steps shall be
either (i) issuing an additional or supplemental irrevocable and unconditional
guarantee (x) of accumulated and unpaid dividends accrued on and any Additional
Amounts in respect of the Preferred Capital Securities of such series (whether
or not moneys are legally available therefor) and (y) upon a liquidation of
United Capital, of the full amount of the Liquidation Distribution (as defined
herein) on the Preferred Capital Securities of such series (regardless of the
amount of assets of United Capital otherwise available for distribution in such
liquidation) or (ii) the use of any other measures that do not adversely affect
holders of Preferred Capital Securities.
"Tax Event" means, with respect to Preferred Capital Securities of any
series, that UI or United Capital shall have obtained an opinion of nationally
recognized independent tax counsel experienced in such matters to the effect
that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein
affecting taxation, or any amendment to or change in an official interpretation
or application of such laws or regulations, which amendment or change is
effective on or after the date of the first issuance of Preferred Capital
Securities of such series, and which change cannot be avoided by the use of any
reasonable measures available to UI or United Capital, there is a substantial
increase in risk that (i) United Capital is subject to Federal income tax with
respect to interest received on the Debentures, (ii) interest payable on the
Debentures is not deductible for Federal income tax purposes or (iii) United
Capital is subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
REDEMPTION PROCEDURES
If (a) United Capital gives a notice of redemption in respect of Preferred
Capital Securities of any series (which notice will be irrevocable) or (b)
Preferred Capital Securities of any series shall become redeemable by virtue of
the maturity or redemption of the corresponding Debentures, then, on the date
fixed for redemption, which in the case of clause (b) above shall be the
applicable Debenture maturity date (the "Redemption Date"), United Capital will
pay the applicable Redemption Price to the record holders of Preferred Capital
Securities of such series. See "Book-Entry-Only Issuance" below. If notice of
redemption has been given and payment or provision for payment has been made on
the date fixed for redemption as required, then upon such date all rights of
holders of Preferred Capital Securities of such series so called for redemption
will cease, except the right of such holders to receive the Redemption Price,
but without interest thereon. In the event that any Redemption Date is not a
Business Day, payment of the Redemption Price payable on such date will be made
on the next succeeding day which is a Business Day (and without any additional
dividends 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 Redemption
Price in respect of any Preferred Capital Securities is not paid either by
United Capital or by UI pursuant to the Guarantee described under "Description
of the Guarantee," dividends on such Preferred Capital Securities will continue
to accumulate at the then applicable rate (but without any additional dividends
on amounts so accumulating) from the original Redemption Date to the date of
payment, in which case the actual payment date will be considered the
Redemption Date for purposes of calculating the Redemption Price.
Subject to the foregoing and applicable law (including, without limitation,
Federal securities laws), UI or its affiliates may at any time and from time to
time purchase outstanding Preferred Capital Securities by tender, on the open
market or by private agreement. In the event that UI surrenders any Preferred
Capital Securities to United Capital, United Capital will distribute, to or
upon the order of UI, Debentures of the corresponding series in aggregate
principal amount equal to the aggregate liquidation preference on the Preferred
Capital Securities so surrendered.
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary dissolution, liquidation or
winding up of United Capital, the holders of the Preferred Capital Securities
of each series at the time outstanding will be entitled to receive out of the
assets of United Capital available for distribution to partners of United
Capital, after satisfaction of liabilities to creditors, if any, as required by
the Delaware Act, before any distribution of assets is made to
8
<PAGE>
the General Partner or any other series of Limited Partner Interests ranking
junior to the Preferred Capital Securities of such series with respect to
participation in the assets of United Capital, but together with the holders of
every other series of Limited Partner Interests outstanding, if any, ranking
pari passu with the Preferred Capital Securities of such series with respect to
participation in the assets of United Capital ("Liquidation Parity
Securities"), an amount equal to the aggregate of the liquidation preference of
$25 per security plus an amount equal to all accumulated and unpaid dividends
on the Preferred Capital Securities of such series and any Additional Amounts
in respect thereof to the date of payment (the "Liquidation Distribution").
If, upon any such liquidation, the Liquidation Distribution for Preferred
Capital Securities of any series can be paid only in part because United
Capital has insufficient assets available to pay in full the aggregate
Liquidation Distribution for Preferred Capital Securities of such series and
the aggregate maximum liquidation distributions on the Liquidation Parity
Securities, then the amounts payable directly by United Capital on the
Preferred Capital Securities of such series and on such Liquidation Parity
Securities shall be paid on a pro rata basis, so that (i) the ratio of (x) the
aggregate amount paid in respect of the Liquidation Distribution to (y) the
aggregate amount paid in respect of liquidation distributions on the
Liquidation Parity Securities is the same as (ii) the ratio of (x) the
aggregate Liquidation Distribution to (y) the aggregate maximum liquidation
distributions on the Liquidation Parity Securities.
Pursuant to the Partnership Agreement, United Capital shall be dissolved and
its affairs shall be wound up upon any of the following events: (i) on December
31, 2046, the expiration of the term of United Capital, (ii) the withdrawal,
removal or bankruptcy of the General Partner, or the assignment by the General
Partner of its general partner interest in United Capital, or the occurrence of
any other event that results in the General Partner ceasing to be a general
partner of United Capital under the Delaware Act, except for a transfer to a
permitted successor of UI under the Indenture who is admitted as a General
Partner prior to the effective date of the assignment, unless in any such case
the business of United Capital is continued in accordance with the Delaware
Act, (iii) the entry of decree of a judicial dissolution or (iv) the written
consent of all partners of United Capital, including the holders of the
Preferred Capital Securities and other Limited Partner Interests.
SOURCE OF PAYMENT FOR PREFERRED CAPITAL SECURITIES
United Capital is a special purpose limited partnership formed on August 18,
1994 for the sole purpose of issuing Limited Partner Interests and lending the
proceeds thereof to UI in return for Indenture Securities of UI. The proceeds
of the Preferred Capital Securities will be loaned to UI in return for
Debentures. United Capital's revenues will be limited to payments by UI on such
Debentures and other Indenture Securities issued in connection with the
investment of the proceeds of offerings of Limited Partner Interests.
Dividends on the Preferred Capital Securities must be paid to the extent of
funds held by United Capital and legally available to make such payments. Under
the terms of the Guarantee, as described under "Description of the Guarantee--
General," such payments required to be made on the Preferred Capital Securities
will be irrevocably and unconditionally guaranteed by UI. Because the payment
terms of the Debentures corresponding to any Preferred Capital Securities will
generally correspond to the payment terms of such Preferred Capital Securities,
United Capital is expected to have sufficient funds to make payments on such
Preferred Capital Securities so long as UI is not in default in payment of such
Debentures. In addition, because UI will covenant in the Guarantee to perform
timely all of its duties as General Partner, including the duty to pay
dividends on the Preferred Capital Securities and the duty to pay all costs and
expenses of United Capital, it is expected that all payments on corresponding
Debentures will be available for the payment of dividends on such Preferred
Capital Securities. UI and United Capital believe that the obligations of UI
under the Guarantee, the Partnership Agreement and the Debentures corresponding
to any Preferred Capital Securities, taken together, are substantially
equivalent to a full and unconditional guarantee by UI of payments due on the
Preferred Capital Securities. The Guarantee will be one of payment and not of
collection, and holders of Preferred Capital Securities may enforce the
Guarantee directly against UI, without first proceeding against United Capital.
If UI fails to make interest payments on the Indenture Securities corresponding
to any Limited Partner Interests, United Capital will have insufficient funds
to pay dividends on the Limited Partner Interests, including the Preferred
Capital Securities, and the Guarantee will not cover
9
<PAGE>
payment of such insufficiency. In such event, the holders of Preferred Capital
Securities may enforce certain rights in respect of the corresponding
Debentures as third party beneficiaries under the Indenture. In addition, under
certain circumstances, holders of Preferred Capital Securities will have the
right to appoint a Special Representative (as defined herein) to enforce United
Capital's rights as holder of such Debentures.
See "Description of the Guarantee" and "Description of the Debentures and the
Indenture" herein for a description of the terms and limitations of the
obligations of UI relating to the Preferred Capital Securities.
MERGER, CONSOLIDATION, AMALGAMATION, ETC. OF UNITED CAPITAL
The General Partner is authorized and directed to conduct its affairs and to
operate United Capital in such a way that United Capital would not be deemed to
be an "investment company" required to be registered under the 1940 Act or
taxed as a corporation for Federal income tax purposes and so that the
Debentures will be treated as indebtedness of UI for Federal income tax
purposes. In this connection, the General Partner is authorized to take any
action that is not inconsistent with applicable law, the Certificate of Limited
Partnership of United Capital or the Partnership Agreement and that does not
adversely affect the interests of holders of Preferred Capital Securities that
the General Partner determines in its discretion to be necessary or desirable
for such purposes.
United Capital may not 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 partnership, corporation or other body,
except as described below. UI, as General Partner, may, without the consent of
the holders of the Preferred Capital Securities, cause United Capital to
consolidate, amalgamate, merge with or into, or be replaced by, or convey or
transfer its properties and assets substantially as an entirety to, a Delaware
limited partnership or "other business entity" (as defined in the Delaware Act
but not including any general partnership) organized under the laws of any
state of the United States or the Turks and Caicos Islands or the Cayman
Islands, provided that (i) such successor entity either (x) expressly assumes
all of the obligations of United Capital under the Preferred Capital Securities
or (y) substitutes for the Preferred Capital Securities other securities having
substantially the same terms as the Preferred Capital Securities (the
"Successor Securities") so long as the Successor Securities rank, with respect
to participation in the profits and assets of the successor entity, at least as
high as the Preferred Capital Securities rank, with respect to participation in
the profits and assets of United Capital, (ii) UI expressly acknowledges such
successor entity as the holder of the Debentures corresponding to the Preferred
Capital Securities and confirms its obligation under the Guarantee with respect
to the Preferred Capital Securities or the Successor Securities, (iii) such
merger, consolidation, amalgamation, replacement, conveyance or transfer does
not cause the Preferred Capital Securities to be delisted by any national
securities exchange or other organization on which the Preferred Capital
Securities are then listed unless the Preferred Capital Securities are promptly
relisted, or the Successor Securities are promptly listed, by such exchange or
other organization, (iv) such merger, consolidation, amalgamation, replacement,
conveyance or transfer does not cause the Preferred Capital Securities to be
downgraded or the Successor Securities to be rated lower than the Preferred
Capital Securities immediately prior to such merger, consolidation,
amalgamation, replacement, conveyance or transfer by any "nationally recognized
statistical rating organization" (as defined by the Commission), (v) such
merger, consolidation, amalgamation, replacement, conveyance or transfer does
not adversely affect the powers, preferences and other special rights of
holders of Preferred Capital Securities, (vi) such successor entity has a
purpose substantially identical to that of United Capital and (vii) prior to
such merger, consolidation, amalgamation, replacement, conveyance or transfer
UI has received an opinion of nationally recognized independent tax counsel to
United Capital experienced in such matters to the effect that (w) holders of
Preferred Capital Securities will not recognize any gain or loss for Federal
income tax purposes as a result of the merger, consolidation, amalgamation,
replacement, conveyance or transfer, (x) such successor entity will be treated
as a partnership for Federal income tax purposes, (y) following such merger,
consolidation, amalgamation, replacement, conveyance or transfer, UI and such
successor entity will be in compliance with the 1940 Act without registering
thereunder as an "investment company" and (z) such merger, consolidation,
amalgamation, replacement, conveyance or transfer will not adversely affect the
limited liability of holders of Preferred Capital Securities.
10
<PAGE>
VOTING RIGHTS
Except as provided below and under "Description of the Guarantee--Amendments
and Assignments" and as otherwise required by law and the Partnership
Agreement, the holders of the Preferred Capital Securities will have no voting
rights.
If (i) United Capital fails to pay in full dividends on and any Additional
Amounts in respect of the Preferred Capital Securities of any series for any
period of 18 consecutive months, (ii) any event that would (with notice or the
passage of time or both) constitute an Event of Default with respect to the
corresponding series of Debentures (as described under "Description of the
Debentures and the Indenture--Events of Default; Remedies") occurs and is
continuing or (iii) UI is in default on any of its payment or other
obligations under the Guarantee (as described under "Description of the
Guarantee--Certain Covenants of UI"), then the holders of the outstanding
Preferred Capital Securities of such series, together with the holders of any
other series of Limited Partner Interests having such right in such event,
acting as a single class, will be entitled, by vote of holders of a majority
in aggregate liquidation preference of all such Limited Partner Interests
having the right to vote, to appoint and authorize a representative (a
"Special Representative") to enforce United Capital's rights under the
corresponding Indenture Securities, including the corresponding Debentures,
and the Indenture against UI, to enforce the obligations undertaken by UI
under the Guarantee and to pay dividends on such Limited Partner Interests,
including the Preferred Capital Securities of such series (to the extent
United Capital has funds legally available for the payment of such dividends
and cash on hand sufficient to permit such payment). Notwithstanding the
failure of United Capital to pay in full dividends or Additional Amounts as
described in clause (i) above, and the election of a Special Representative on
account thereof, such Special Representative will not be able to compel UI to
make interest payments on the Debentures of any such series during such period
of time as UI has exercised its right to defer interest payments on such
Debentures. Interest on the Debentures of any series may be deferred at the
option of UI for up to 60 consecutive months, as described under "Description
of the Debentures and the Indenture--Option to Extend Interest Payment
Period." Any such Special Representative shall not be admitted as a partner in
United Capital or otherwise be deemed to be a partner in United Capital and
shall have no liability for the debts, obligations or liabilities of United
Capital, except to the extent otherwise required by applicable law in order
for such Special Representative to enforce the rights of United Capital and
the holders of Preferred Capital Securities under the Indenture Securities and
the Indenture and fulfill its other duties under the Partnership Agreement.
For purposes of determining whether United Capital has failed to pay
dividends in full for 18 consecutive months, dividends shall be deemed to
remain in arrears, notwithstanding any payments in respect thereof, until full
cumulative dividends and any Additional Amounts have been or contemporaneously
are set aside and paid with respect to all monthly dividend periods
terminating on or prior to the date of payment of such full cumulative
dividends and Additional Amounts. Not later than 30 days after such right to
appoint a Special Representative arises, the General Partner will convene a
general meeting for the above purpose. If the General Partner fails to convene
such meeting within such 30-day period, the holders of 10% in aggregate
liquidation preference of the outstanding Preferred Capital Securities of any
series will be entitled to convene such meeting. The provisions of the
Partnership Agreement relating to the convening and conduct of the general
meetings of partners of United Capital will apply with respect to any such
meeting. Any Special Representative so appointed shall vacate office
immediately if United Capital (or UI, pursuant to the Guarantee) shall have
paid in full all accumulated and unpaid dividends on and any Additional
Amounts in respect of the Preferred Capital Securities of such series or such
Event of Default or default under the Guarantee, as the case may be, shall
have been cured. The appointment of any such Special Representative by the
holders of Preferred Capital Securities shall not affect UI's rights under the
Indenture to extend the interest payment period as provided under "Description
of the Debentures and the Indenture--Option to Extend Interest Payment
Period."
If any proposed amendment to the Partnership Agreement provides for, or the
General Partner otherwise proposes to effect, (i) any action that would
adversely affect the rights, preferences and privileges of the holders of
Preferred Capital Securities of any series, whether by way of amendment to the
Partnership Agreement or otherwise (including, without limitation, the
authorization or issuance of any Limited Partner Interests ranking, as to
participation in the profits or assets of United Capital, senior to the
Preferred Capital Securities of such series or the authorization to dissolve,
liquidate or wind up United Capital) or (ii) the dissolution, liquidation or
winding up of United Capital (other than in connection with a distribution of
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Debentures upon, and dissolution of United Capital after, the occurrence of a
Special Event), then holders of outstanding Preferred Capital Securities of
such series will be entitled to vote on such amendment or proposed action of
the General Partner (but not on any other amendment or action) together as a
class with, in the case of an action described in clause (i) above that would
equally adversely affect the rights, preferences or privileges of holders of
any Dividend Parity Securities or any Liquidation Parity Securities, holders of
such Dividend Parity Securities or such Liquidation Parity Securities, as the
case may be, or, in the case of any amendment described in clause (ii) above,
holders of all Liquidation Parity Securities, and such amendment or action
shall not be effective except with the approval of the holders of 66 2/3% in
aggregate liquidation preference of such class; provided, however, that no such
approval shall be required if the dissolution, liquidation or winding up of
United Capital is proposed or initiated pursuant to the provisions of the
Partnership Agreement or upon the initiation of proceedings, or after
proceedings have been initiated, for the dissolution, liquidation or winding up
of UI.
The rights of holders of Preferred Capital Securities of any series will be
deemed not to be adversely affected by the creation or issue of, and no vote
will be required for the creation of, any further Limited Partner Interests
ranking junior to, or pari passu with, the Preferred Capital Securities of such
series with regard to participation in the profits or assets of United Capital.
Holders of Limited Partner Interests will have no preemptive rights.
The Partnership Agreement provides that the General Partner will not permit
or cause United Capital to file a voluntary petition in bankruptcy without the
affirmative vote of the holders of 66 2/3% in aggregate liquidation preference
of the outstanding Limited Partner Interests.
If any action is, by the terms of the Indenture, not permitted to be taken by
United Capital without the consent of holders of Limited Partner Interests or
any Special Representative, the General Partner shall not, without such
requisite consent, take any such action.
Any required approval of holders of Preferred Capital Securities of any
series may be given at a separate meeting of such holders convened for such
purpose, at a general meeting of partners of United Capital or pursuant to
written consent. United Capital will cause a notice of any meeting at which
holders of the Preferred Capital Securities of such series are entitled to
vote, or of any matter upon which action by written consent of such holders is
to be taken, to be mailed to each holder of record of the Preferred Capital
Securities of such series. Each such notice will include a statement setting
forth (i) the date of such meeting or the date by which such action is to be
taken, (ii) a description of any matter on which such holders are entitled to
vote or upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the holders of the Preferred Capital Securities will be
required for United Capital to redeem and cancel Preferred Capital Securities
in accordance with the Partnership Agreement.
Notwithstanding that holders of Preferred Capital Securities are entitled to
vote or consent under any of the circumstances described above, the holders of
Preferred Capital Securities that are owned by UI or any affiliate of UI shall
not be entitled to vote or consent, and such Preferred Capital Securities
shall, for the purposes of such vote or consent, be treated as if they were not
outstanding.
ADDITIONAL AMOUNTS
All payments in respect of Preferred Capital Securities by United Capital
will be made without withholding or deduction for or on account of any present
or future taxes, duties, assessments or governmental charges of whatever nature
imposed or levied upon or as a result of such payment by or on behalf of the
United States, any state thereof or any other jurisdiction through which or
from which such payment is made, or any authority therein or thereof having
power to tax, unless the withholding or deduction of such taxes, duties,
assessments or governmental charges is required by law. In the event that any
such withholding or deduction is required as a consequence of (i) the
Debentures not being treated as indebtedness for United States Federal income
tax purposes or (ii) United Capital not being treated as a partnership for
United States Federal income tax purposes, United Capital will pay as a
dividend such additional amounts as may be necessary in order that the net
amounts received by the holders of the Preferred Capital Securities
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after such withholding or deduction will equal the amount that would have been
receivable in respect of the Preferred Capital Securities in the absence of
such withholding or deduction ("Additional Amounts"), except that no such
Additional Amounts will be payable to a holder of Preferred Capital Securities
(or a third party on such holder's behalf) if:
(a) such holder is liable for such taxes, duties, assessments or
governmental charges in respect of the Preferred Capital Securities by
reason of such holder's having a connection with the United States, any
state thereof or any other jurisdiction through which or from which such
payment is made, or in which such holder resides, conducts business or has
other contacts, other than being a holder of Preferred Capital Securities,
or
(b) United Capital or UI has notified such holder of the obligation to
withhold or deduct taxes and requested but not received from such holder a
declaration of non-residence, a valid taxpayer identification number or
other claim for exemption, and such withholding or deduction would not have
been required had such declaration, taxpayer identification number or claim
been received.
BOOK-ENTRY-ONLY ISSUANCE
The Depository Trust Company ("DTC") will initially act as securities
depositary for the Preferred Capital Securities. The Preferred Capital
Securities will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). DTC and any other depositary that may
replace DTC as depositary for the Preferred Capital Securities are sometimes
referred to herein as the "Depositary." One or more fully-registered global
certificates will be issued for each series of Preferred Capital Securities,
representing in the aggregate the total number of Preferred Capital Securities
for such series, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, 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
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
("Direct Participants") include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others,
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Preferred Capital Securities under the DTC system must be made
by or through Direct Participants, which will receive a credit for the
Preferred Capital Securities on DTC's records. The ownership interest of each
actual purchaser of Preferred Capital Securities ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which Beneficial
Owners purchased Preferred Capital Securities. Transfers of ownership interests
in the Preferred Capital Securities are to be accomplished by entries made on
the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
Preferred Capital Securities, except in the event that use of the book-entry
system for the Preferred Capital Securities is discontinued.
To facilitate subsequent transfers, all Preferred Capital Securities
deposited by Participants with DTC are registered in the name of Cede & Co. DTC
has no knowledge of the actual Beneficial Owners of the Preferred Capital
Securities; DTC's records reflect only the identity of the Direct Participants
to whose
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accounts such Preferred Capital Securities are credited, which may or may not
be Beneficial Owners. Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners, will be governed by arrangements
among them, subject to any statutory or regulatory requirements that may be in
effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
Preferred Capital Securities of any series are being redeemed, DTC's practice
is to determine by lot the amount of the interest of each Direct Participant in
such series to be redeemed.
Although voting with respect to the Preferred Capital Securities is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will
consent or vote with respect to Preferred Capital Securities. Under its usual
procedures, DTC would mail its Omnibus Proxy to United Capital as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Preferred Capital Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Dividend payments on the Preferred Capital Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's
records, unless DTC has reason to believe that it will not receive payments on
such payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of
DTC, United Capital or UI, subject to any statutory or regulatory requirements
that may be in effect from time to time. Payment of dividends to DTC is the
responsibility of United Capital, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct Participants and Indirect
Participants.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Capital Securities at any time by giving reasonable
notice to United Capital. Under such circumstances, in the event that a
successor securities depositary is not obtained, certificates for the Preferred
Capital Securities are required to be printed and delivered. Additionally,
United Capital (with the consent of UI) may decide to select another Depositary
for the Preferred Capital Securities or to discontinue use of the system of
book-entry transfers through DTC (or a successor Depositary). In the latter
event, certificates for the Preferred Capital Securities will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC. United Capital and UI believe such information to
be reliable, but neither United Capital nor UI takes any responsibility for the
accuracy thereof.
None of UI, United Capital, any paying agent or any other agent of UI or
United Capital will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in Preferred Capital Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The Bank of New York will act as registrar and co-transfer agent, and UI will
act as co-transfer agent and paying agent, for the Preferred Capital
Securities.
Registration of transfers of Preferred Capital Securities will be effected
without charge by or on behalf of United Capital, but upon payment in respect
of any tax or other governmental charges that may be imposed in relation to it,
together with the giving of such indemnity as United Capital or UI may require.
Neither UI nor United Capital will be required to register or cause to be
registered the transfer of any Preferred Capital Securities that have been
called for redemption.
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DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of certain terms and provisions of the Payment
and Guarantee Agreement that will be executed and delivered by UI for the
benefit of the holders of any series from time to time of the Limited Partner
Interests, including the Preferred Capital Securities (the "Guarantee"). This
summary does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the form of Guarantee filed as an exhibit to the
Registration Statement.
GENERAL
UI will irrevocably and unconditionally agree, to the extent set forth
herein, to pay in full, to the holders of the Limited Partner Interests
(including any series of Preferred Capital Securities), the Guarantee Payments
(as defined below), as and when due, regardless of any defense, right of set-
off or counterclaim that United Capital may have or assert. As used herein,
Guarantee Payments means the following payments, without duplication, to the
extent not paid by United Capital ("Guarantee Payments"): (i) any accumulated
and unpaid dividends on and any Additional Amounts in respect of the Limited
Partner Interests, but only to the extent that United Capital has (a) funds
legally available for the payment of such dividends, as determined by the
General Partner, and (b) cash on hand sufficient to make such payment; (ii) the
Redemption Price payable with respect to Limited Partner Interests called for
redemption by United Capital, but only to the extent that United Capital has
(a) funds legally available for the payment of such Redemption Price, as
determined by the General Partner, and (b) cash on hand sufficient to make such
payment; and (iii) upon a liquidation of United Capital, the lesser of (a) the
Liquidation Distribution and (b) the amount of assets legally available to
United Capital for distribution to holders of Limited Partner Interests. UI's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by UI to holders of Limited Partner Interests or by
causing United Capital to pay such amounts to such holders.
If UI fails to make payments of principal of or interest on the Debentures
(including as a result of the extension of any interest payment period for the
Debentures as described under "Description of the Debentures and the
Indenture--Option to Extend Interest Payment Period"), United Capital will not
have sufficient funds to make corresponding payments in respect of the
Redemption Price or the Liquidation Distribution, as the case may be, of, or
dividends on, the Preferred Capital Securities. The Guarantee does not cover
payment of amounts in respect of the Preferred Capital Securities to the extent
that United Capital does not have legally available assets for the payment
thereof and cash on hand sufficient to make such payment. In such event, a
holder of Preferred Capital Securities may enforce certain rights in respect of
the Debentures under the Indenture. See "Description of the Preferred Capital
Securities--Voting Rights" and "Description of the Debentures and the
Indenture--Enforcement of Certain Rights by Holders of Preferred Capital
Securities."
CERTAIN COVENANTS OF UI
In the Guarantee, UI will covenant that, so long as any Limited Partner
Interests remain outstanding, UI shall not, and shall not permit any of its
subsidiaries to, declare or pay any dividend on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any capital stock of UI or its
subsidiaries, or make any guarantee payments with respect to the foregoing
(other than payments under the Guarantee), if at such time UI is in default
with respect to its payment or other obligations under the Guarantee or there
has occurred and is continuing any event that would (with notice or the passage
of time or both) constitute an Event of Default under the Indenture.
In the Guarantee, UI will also covenant that, so long as any Limited Partner
Interests remain outstanding, it will (i) maintain direct or indirect ownership
of all interests in United Capital other than such Limited Partner Interests;
(ii) not voluntarily (to the extent permitted by law) dissolve, liquidate or
wind up United Capital; (iii) remain the sole General Partner of United Capital
and timely perform all of its duties as General Partner of United Capital
(including the duty to pay dividends on such Limited Partner Interests and the
duty to pay all costs and expenses of United Capital), provided that any
permitted successor of UI
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under the Indenture may succeed to UI's duties as General Partner; (iv) use its
reasonable efforts to cause United Capital to remain a limited partnership and
otherwise continue to be treated as a partnership for Federal income tax
purposes; and (v) use its best efforts to conduct the affairs of and operate
United Capital in such a way that United Capital would not be an "investment
company" required to be registered under the 1940 Act; provided that UI may
permit United Capital to consolidate or merge with or into another limited
partnership or other permitted successor as described above under "Description
of the Preferred Capital Securities--Merger, Consolidation, Amalgamation, etc.
of United Capital" so long as UI agrees to comply with the covenants described
in clauses (i) through (v) above with respect to such successor limited
partnership or other permitted successor.
ADDITIONAL AMOUNTS
All Guarantee Payments will be made without withholding or deduction for or
on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied upon or as a result of such
payment by or on behalf of the United States, any state thereof or any other
jurisdiction through which or from which such payment is made, or any authority
therein or thereof having power to tax, unless the withholding or deduction of
such taxes, duties, assessments or governmental charges is required by law. In
the event that any such withholding or deduction is required as a consequence
of (i) the Debentures not being treated as indebtedness for United States
Federal income tax purposes or (ii) United Capital not being treated as a
partnership for United States Federal income tax purposes, UI will pay such
additional amounts as may be necessary in order that the net amounts received
by the holders of the Preferred Capital Securities after such withholding or
deduction will equal the amount that would have been receivable in respect of
the Preferred Capital Securities in the absence of such withholding or
deduction, except that no such additional amounts will be payable to a holder
of Preferred Capital Securities (or a third party on such holder's behalf) if:
(a) such holder is liable for such taxes, duties, assessments or
governmental charges in respect of the Preferred Capital Securities by
reason of such holder's having a connection with the United States, any
state thereof or any other jurisdiction through which or from which such
payment is made, or in which such holder resides, conducts business or has
other contacts, other than being a holder of Preferred Capital Securities,
or
(b) United Capital or UI has notified such holder of the obligation to
withhold or deduct taxes and requested but not received from such holder a
declaration of non-residence, a valid taxpayer identification number or
other claim for exemption, and such withholding or deduction would not have
been required had such declaration, taxpayer identification number or claim
been received.
AMENDMENTS AND ASSIGNMENTS
Except with respect to any changes that do not adversely affect the rights of
holders of Limited Partner Interests of any series (in which case no vote will
be required), the Guarantee may be amended only with the prior approval of the
holders of not less than 66 2/3% in aggregate liquidation preference of the
outstanding Limited Partner Interests of each affected series (voting together
as one class). All guarantees and agreements contained in the Guarantee will
bind the successors, assigns, receivers and trustees of UI and will inure to
the benefit of the holders of the Limited Partner Interests. UI may not assign
any of its rights or obligations under the Guarantee, except as contemplated by
and in accordance with the provisions of the Indenture described under
"Description of the Debentures and the Indenture--Merger, Consolidation, Sale,
etc. of UI."
TERMINATION OF GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of all Limited Partner Interests or upon full
payment of the Liquidation Distribution of all Limited Partner Interests upon
liquidation of United Capital. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Limited
Partner Interests must restore payment of any sums paid under the Limited
Partner Interests or the Guarantee.
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STATUS OF GUARANTEE
The Guarantee will constitute an unsecured obligation of UI and will rank,
like the Debentures and other Indenture Securities, subordinate in right of
payment to all Senior Indebtedness. The Guarantee provides that each holder of
Limited Partner Interests by acceptance thereof agrees that (1) amounts payable
under the Guarantee will be subordinate in right of payment to amounts payable
upon the Senior Indebtedness to the same extent that amounts payable under the
Indenture and in respect of Indenture Securities (including the Debentures) are
so subordinated and (2) the subordination provisions of the Indenture
applicable to holders of Indenture Securities (including the Debentures) will
be equally applicable to it. For a discussion of the subordination provisions
relating to the Debentures and other Indenture Securities, see "Description of
the Debentures and the Indenture--Subordination."
The Guarantee will constitute a guarantee of payment and not of collection. A
holder of Limited Partner Interests may enforce the Guarantee directly against
UI, and UI will waive any right or remedy to require that any action be brought
against United Capital or any other person or entity before proceeding against
UI. The Guarantee will not be discharged except by payment of the Guarantee
Payments in full to the extent not paid by United Capital and by complete
performance of all obligations under the Guarantee.
EFFECT OF OBLIGATIONS UNDER DEBENTURES AND GUARANTEE
As set forth in the Partnership Agreement, the sole purpose of United Capital
is to issue Limited Partner Interests and lend the proceeds thereof to UI.
As long as payments of principal and interest are made when due on the
Indenture Securities corresponding to Limited Partner Interests, such payments
will be sufficient to enable United Capital to make all payments of dividends
on and any Additional Amounts in respect of the Limited Partner Interests,
because (i) the aggregate principal amount of such Indenture Securities will be
equal to the sum of the aggregate liquidation preference of the Limited Partner
Interests and the General Partner's capital contribution to United Capital in
respect of the Limited Partner Interests; (ii) the interest rate and interest
and other payment dates of such Indenture Securities of each series will match
the dividend rate and dividend and other payment dates for the Limited Partner
Interests of such series; (iii) the Partnership Agreement provides that the
General Partner will pay for all costs and expenses of United Capital; and (iv)
the Partnership Agreement further provides that the General Partner will not
cause or permit United Capital, among other things, to engage in any activity
that is not consistent with the limited purposes of United Capital.
If UI fails to make interest or other payments on the Debentures issued in
connection with the Preferred Capital Securities when due, the Partnership
Agreement provides a mechanism whereby the holders of the Preferred Capital
Securities may elect a Special Representative to enforce the rights of United
Capital on the Debentures. Payments of dividends on and any Additional Amounts
with respect to the Preferred Capital Securities out of monies held by United
Capital are guaranteed by UI to the extent set forth under "--General" above.
The Partnership Agreement also provides, and UI, under the Guarantee,
acknowledges, that a Special Representative may be appointed to enforce the
Guarantee if UI is in default on any payment or other obligations under the
Guarantee. In addition, if UI, as the General Partner, or the Special
Representative fails to enforce the Guarantee, a holder of Preferred Capital
Securities may institute a legal proceeding directly against UI to enforce such
holder's rights under the Guarantee without first instituting a legal
proceeding against United Capital or any other person or entity.
UI and United Capital believe that the effect of the above-described
obligations, taken together, are equivalent to a full and unconditional
guarantee by UI of payments due on the Preferred Capital Securities.
GOVERNING LAW
The Guarantee will be governed by and construed and interpreted in accordance
with the laws of the State of New York.
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DESCRIPTION OF THE DEBENTURES AND THE INDENTURE
Set forth below is a summary of certain terms and provisions of the Indenture
and the Debentures to be issued thereunder. UI may issue the Debentures to the
public, institutional investors and other purchasers (other than United
Capital) or to United Capital in connection with the investment of the proceeds
from any offering of Preferred Capital Securities. See "Plan of Distribution."
This summary does not purport to be complete and is subject to, and qualified
in its entirety by reference to, the detailed provisions of the forms of
Indenture and Supplemental Indentures establishing the Debentures filed as
exhibits to the Registration Statement. Under certain circumstances following
the occurrence of a Special Event, Debentures may be distributed to the holders
of the corresponding Preferred Capital Securities and United Capital may be
dissolved. See "Description of the Preferred Capital Securities--Special Event
Redemption or Exchange."
GENERAL
The Indenture dated as of April 1, 1995 between The Bank of New York, as
trustee (the "Indenture Trustee"), and UI (as supplemented from time to time,
the "Indenture") provides that, in addition to the Debentures, additional
junior subordinated deferrable interest debentures may be issued thereunder,
without limitation as to the aggregate principal amount. The Debentures and all
other such debentures hereafter issued under the Indenture are collectively
referred to as the "Indenture Securities." The Indenture does not limit the
amount of other debt, secured or unsecured, that may be issued by UI. The
Indenture Securities will be subordinate and junior to all Senior Indebtedness
of UI. As of December 31, 1994, UI had approximately $987 million of Senior
Indebtedness outstanding (exclusive of certain guarantees and other contingent
obligations, but inclusive of capitalized lease obligations and current
installments and short-term notes payable).
OPTIONAL REDEMPTION
Unless otherwise provided in the Prospectus Supplement, UI will have the
right to redeem the Debentures of any series at any time on or after the date
specified in the Prospectus Supplement, in whole or in part, at a redemption
price equal to 100% of the aggregate principal amount of such Debentures to be
redeemed, plus any accrued but unpaid interest (including, in the case of
Debentures corresponding to Preferred Capital Securities, Additional Interest
(as defined herein), if any) to the date fixed for redemption, upon not less
than 30 nor more than 60 days' notice.
INTEREST
The Debentures of any series will bear interest at the annual rate set forth
in the Prospectus Supplement for such series, accruing from the date they are
issued until paid. Except as may otherwise be provided in the Prospectus
Supplement, such interest will be payable monthly in arrears on the last day of
each calendar month of each year to the holder of record one Business Day prior
to the relevant interest payment date (except that interest payable at maturity
or upon redemption will be paid to the person to whom principal is paid),
subject to the right of UI to extend any interest payment period as described
below; provided, however, that if the Debentures of any series are held neither
by United Capital nor by a securities depositary, UI shall have the right to
change such record dates. Any overdue principal of and (to the extent
enforceable under applicable law) any overdue installment of interest on the
Debentures of any series will bear interest at the same rate.
The amount of interest payable for any monthly interest payment period will
be computed on the basis of twelve 30-day months and a 360-day year and, for
any period shorter than a full monthly interest period, will be computed on the
basis of the actual number of days elapsed in such period.
In the event that any date on which interest or principal is payable on the
Debentures is not a Business Day, then payment of the amounts 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), except
that if such
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Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect, and in the same amount, as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
UI shall have the right at any time or times during the term of the Indenture
Securities of any series, so long as UI is not in default in the payment of
interest thereunder, to extend interest payment periods for up to 60
consecutive months but not beyond the date on which the principal thereof
becomes due and payable (whether at maturity, by declaration of acceleration,
upon redemption or otherwise), and at, or at any time prior to, the end of any
such extended interest payment period UI will pay all interest then accrued and
unpaid including, if the Indenture Securities of such series correspond to
Limited Partner Interests, Additional Interest, if any, thereon (together with
interest thereon at the rate specified for such Indenture Securities to the
extent permitted by applicable law); provided that, during any such extended
interest payment period, UI shall not, and shall not permit any of its
subsidiaries to, declare or pay any dividend on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any capital stock of UI or its
subsidiaries, or make any guarantee payments with respect to the foregoing
(other than payments under any guarantee by UI with respect to any capital
stock of any such subsidiary, provided that the proceeds of such capital stock
were used to purchase Indenture Securities); and provided, further, that any
such extended interest payment period may only be selected with respect to
Indenture Securities of any series if an extended interest payment period of
identical length is simultaneously selected for Indenture Securities of all
series. Prior to the end of any such extended interest payment period of less
than 60 consecutive months, UI may further extend the interest payment period;
provided that such extended interest payment period, together with all such
further extensions thereof, may not exceed a period of 60 consecutive months.
Following the termination of any extended interest payment period, if UI has
paid all accrued and unpaid interest required by the Indenture Securities of
all series for such period, UI shall have the right to again extend interest
payment periods for up to 60 consecutive months as herein described. In the
case of any series of the Indenture Securities corresponding to any series of
Limited Partner Interests, so long as United Capital is the sole holder of the
Indenture Securities of such series, UI shall give United Capital notice of its
selection of any such extended interest payment period one Business Day prior
to the earlier of (i) the date dividends on any series of Limited Partner
Interests would otherwise be payable and (ii) the date United Capital is
required to give notice of the record or payment date of such dividends to any
national securities exchange on which any series of Limited Partner Interests
shall be listed or to holders of any series of Limited Partner Interests, but
in any event not less than two Business Days prior to such record date. UI will
cause United Capital to give such notice of UI's selection of any such extended
interest payment period to the holders of the Limited Partner Interests. If
United Capital is not the sole holder of the Debentures of any series, UI shall
give the holders of Debentures of such series notice of its selection of such
extended interest payment period ten Business Days prior to the related
interest payment date.
ADDITIONAL INTEREST
If at any time United Capital is required to pay any Additional Amounts in
respect of any Preferred Capital Securities pursuant to the terms thereof, as
described under "Description of the Preferred Capital Securities--Additional
Amounts," or in respect of any other Limited Partner Interests pursuant to the
terms thereof, then UI will pay as interest ("Additional Interest") on the
Indenture Securities corresponding to such Limited Partner Interests an amount
equal to such Additional Amounts. In addition, if United Capital shall be
required to pay, with respect to its income derived from the interest payments
on any Indenture Securities corresponding to any Limited Partner Interests, any
amounts for or on account of any taxes, duties, assessments or governmental
charges of whatever nature (other than withholding taxes) imposed by the United
States, or any other taxing authority, then, in any such case, UI will also pay
as Additional Interest on such Indenture Securities such amounts as may be
necessary in order that the net amounts received and retained by United Capital
after the payment of such taxes, duties, assessments or governmental charges
shall result in United Capital's having such funds as it would have had in the
absence of the payment of such taxes, duties, assessments or governmental
charges.
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BOOK-ENTRY SYSTEM AND SETTLEMENT
In the event that Debentures are (i) issued to the public, institutional
investors or other purchasers (other than United Capital) or (ii) distributed
to the holders of the Preferred Capital Securities in connection with the
occurrence and continuance of a Special Event, it is anticipated that, in the
case of clause (ii) above, such distribution would occur in book-entry form and
that, in either case, DTC, or any successor Depositary for the Preferred
Capital Securities, would act as securities depositary for such Debentures and
that the depositary arrangements for such Debentures would be substantially
identical to those in effect for the Preferred Capital Securities. For a
description of DTC and the terms of the depositary arrangements relating to
payments, transfers, voting rights, redemption and other notices and other
matters, see "Description of the Preferred Capital Securities--Book-Entry-Only
Issuance."
Except under certain limited circumstances as described under "Description of
the Preferred Capital Securities--Book-Entry-Only Issuance" for delivery of
certificates evidencing beneficial ownership in Preferred Capital Securities,
the Debentures will not be issuable as, or exchangeable for, Debentures in
definitive certificated form. In the event that Debentures are issued in
certificated form, unless otherwise indicated in the Prospectus Supplement,
such Debentures will be in denominations of $25 and integral multiples thereof
and principal and interest on such Debentures will be payable at, and transfers
or exchanges of such Debentures will be effected at, the office or agency of UI
designated for such purposes.
SUBORDINATION
The Indenture will provide that each of the Debentures is subordinate and
junior in right of payment to all Senior Indebtedness. The Indenture defines
"Senior Indebtedness" as all obligations (other than non-recourse obligations
and the indebtedness issued under the Indenture) of, or guaranteed or assumed
by, UI for borrowed money (including both senior and subordinated indebtedness
for borrowed money (other than the Indenture Securities and intercompany debt))
or for the payment of money relating to any lease that is capitalized on the
consolidated balance sheet of UI and its subsidiaries in accordance with
generally accepted accounting principles as in effect from time to time, or
evidenced by bonds, debentures, notes or other similar instruments, and in each
case, amendments, renewals, extensions, modifications and refundings of any
such indebtedness or obligations, whether existing as of the date of the
Indenture or subsequently incurred by UI; provided that UI's obligations under
the Guarantee shall not be deemed to be "Senior Indebtedness" for purposes of
the Indenture (or the Guarantee).
Upon the maturity of any Senior Indebtedness of UI by lapse of time,
acceleration or otherwise, all such Senior Indebtedness then due and owing
shall first be paid in full, before any payment is made on account of, or UI
can acquire, any Indenture Securities (including the Debentures).
In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
respect of UI or a substantial part of its property or of any proceedings for
liquidation, dissolution or other winding up of UI, whether or not involving
insolvency or bankruptcy, or (b) that (i) a default shall have occurred with
respect to the payment of principal of or interest on or other monetary amounts
due and payable on any Senior Indebtedness, or (ii) there shall have occurred a
default (other than a default in the payment of principal or interest, or other
monetary amounts due and payable) in respect of any Senior Indebtedness, as
defined therein or in the instrument under which the same is outstanding,
permitting the holder or holders thereof to accelerate the maturity thereof
(with notice or lapse of time or both), and such default shall have continued
beyond the period of grace, if any, in respect thereof, and, in the cases of
subclauses (i) and (ii) of this clause (b), such default shall not have been
cured or waived or shall not have ceased to exist, or (c) that the principal of
and the accrued interest on the Indenture Securities of any series shall have
been declared due and payable upon an Event of Default and such declaration
shall not have been rescinded and annulled as provided under the Indenture,
then the holders of all Senior Indebtedness shall first be entitled to receive
payment of the full amount due thereon, or provision shall be made for such
payment in money or money's worth, before the holders of any of the Indenture
Securities are entitled to receive a payment on account of the principal of or
any interest on the indebtedness
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evidenced by their Indenture Securities. Any payment or distribution, whether
in cash, securities or other property, that would otherwise (but for the
subordination provisions) be payable or deliverable in respect of the Indenture
Securities shall be paid or delivered directly to the holders of such Senior
Indebtedness (or their representative or trustee) in accordance with the
priorities then existing among such holders, until all Senior Indebtedness of
UI shall have been paid in full, before any payment or distribution is made to
the holders of Indenture Securities. In the event that, notwithstanding such
subordination provisions, any payment or distribution of assets of any kind or
character is made on the Indenture Securities before all Senior Indebtedness is
paid in full, the Indenture Trustee or the holders of Indenture Securities
receiving such payment will be required to pay over such payment or
distribution to the holders of such Senior Indebtedness.
No present or future holder of any Senior Indebtedness of UI shall be
prejudiced in the right to enforce subordination of the indebtedness under the
Indenture by any act or failure to act on the part of UI.
Senior Indebtedness will not be deemed to have been paid in full unless the
holders thereof shall have received cash (or securities or other property
satisfactory to such holders) in full payment of such Senior Indebtedness then
outstanding. Upon the payment in full of all Senior Indebtedness, the holders
of Indenture Securities shall be subrogated to all the rights of any holders of
such Senior Indebtedness to receive any further payments or distributions of
cash, property or securities of UI applicable to such Senior Indebtedness until
the Indenture Securities shall have been paid in full, and such payments or
distributions of cash, property or securities received by the holders of
Indenture Securities, by reason of such subrogation, that otherwise would be
paid or distributed to the holders of such Senior Indebtedness, shall, as
between UI and its creditors other than the holders of Senior Indebtedness, on
the one hand, and the holders of Indenture Securities on the other, be deemed
to be a payment on account of Senior Indebtedness, and not on account of the
Indenture Securities.
CERTAIN COVENANTS OF UI
The Indenture will provide that UI shall not, and shall not permit any of its
subsidiaries to, declare or pay any dividend on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any capital stock of UI or its
subsidiaries, or make any guarantee payments with respect to the foregoing
(other than, so long as Preferred Capital Securities of any series remain
outstanding, payments under the Guarantee), if at such time (i) UI will be in
default with respect to its payment or other obligations under the Guarantee
(so long as Preferred Capital Securities of any series remain outstanding),
(ii) there has occurred and is continuing any event that would (with the
passage of time or giving of notice or both) constitute an Event of Default
under the Indenture or (iii) UI has given notice of its election to extend any
interest payment period as provided in the Indenture, and such period, or any
extension thereof, shall be continuing.
So long as Preferred Capital Securities of any series remain outstanding, UI
will (i) maintain direct or indirect ownership of all interests in United
Capital other than Limited Partner Interests; (ii) not voluntarily (to the
extent permitted by law) dissolve, liquidate or wind up United Capital; (iii)
remain the sole General Partner of United Capital and timely perform in all
material respects all of its duties as the General Partner of United Capital
(including the duty to pay dividends on the Preferred Capital Securities as
described in the fourth paragraph under "Description of the Preferred Capital
Securities--Dividends" and the duty to pay all costs and expenses of United
Capital), provided that any permitted successor to UI under the Indenture may
succeed to UI's duties as General Partner; (iv) use reasonable efforts to cause
United Capital to remain a limited partnership and otherwise continue to be
treated as a partnership for Federal income tax purposes; and (v) use its best
efforts to conduct the affairs of and operate United Capital in such a way that
United Capital would not be an "investment company" required to be registered
under the 1940 Act; provided that UI may permit United Capital to consolidate
or merge with or into another limited partnership or other permitted successor
as described above under "Description of the Preferred Capital Securities--
Merger, Consolidation, Amalgamation, etc. of United Capital" so long as UI
agrees to comply with the covenants described in clauses (i) through (v) above
with respect to such successor limited partnership or other permitted
successor.
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So long as United Capital holds the Indenture Securities of any series, it
may not waive compliance or waive any default in compliance by UI with any
covenant or other term in the Indenture Securities of such series or the
Indenture, or any past default under the Indenture, without the approval or
consent of the holders of at least 66 2/3% in aggregate liquidation preference
of the outstanding Limited Partner Interests affected.
EVENTS OF DEFAULT; REMEDIES
The following events shall constitute Events of Default with respect to each
series of Indenture Securities (including each series of Debentures) issued
under the Indenture:
(a) UI shall fail to pay any interest (including, if the Indenture
Securities of such series correspond to Limited Partner Interests remaining
outstanding, any Additional Interest) on any Indenture Securities of such
series within 15 days after the same becomes due and payable (whether or
not payment is prohibited by the provisions described under "Subordination"
above or otherwise); provided that a valid extension of an interest payment
period by UI shall not constitute a failure to pay interest (other than any
such Additional Interest) for this purpose;
(b) UI shall fail to pay when due any principal of or premium, if any, on
any Indenture Securities of such series, whether at maturity, upon
redemption (unless such redemption is conditioned upon receipt of moneys by
the Trustee on or prior to the date fixed for redemption and such moneys
are not so received), by declaration of acceleration or otherwise (whether
or not payment is prohibited by the provisions described above under
"Subordination" above or otherwise);
(c) UI shall fail to perform or breach any covenant or warranty in the
Indenture (other than a covenant or warranty a default in the performance
of which or breach of which is dealt with elsewhere under this paragraph)
for a period of 30 days after there has been given to UI by the Indenture
Trustee, or to UI and the Indenture Trustee by the holders of at least 25%
in principal amount of outstanding Indenture Securities of such series, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default," unless the
Indenture Trustee, or the Indenture Trustee and the holders of not less
than the principal amount of Indenture Securities of such series the
holders of which gave such notice, as the case may be, agree in writing to
an extension of such period prior to its expiration;
(d) Certain events relating to reorganization, bankruptcy or insolvency
of UI (or, if the Indenture Securities of such series correspond to Limited
Partner Interests remaining outstanding, United Capital) or the appointment
of a receiver or trustee for its property; or
(e) any other Event of Default specified with respect to Indenture
Securities of such series.
No Event of Default with respect to any series of Indenture Securities
necessarily constitutes an Event of Default with respect to the Indenture
Securities of any other series issued under the Indenture.
If an Event of Default due to the default in payment of principal of or
interest on any series of Indenture Securities or due to the default in the
performance or breach of any other covenant or warranty of UI applicable to
the Indenture Securities of such series but not applicable to all series
occurs and is continuing, then either the Indenture Trustee, or the holders of
25% in principal amount of the outstanding Indenture Securities of such
series, or, if the Indenture Securities of such series correspond to Limited
Partner Interests, a Special Representative appointed in respect of such
Limited Partner Interests as described under "Description of the Preferred
Capital Securities--Voting Rights," may declare the principal of all of the
Indenture Securities of such series and interest accrued thereon to be due and
payable immediately (subject to the subordination provisions of the
Indenture); provided that, upon certain events of reorganization, bankruptcy
or insolvency of UI or the appointment of a receiver for its property, the
principal of all of the Indenture Securities and interest accrued thereon
shall immediately become due and payable without any declaration or other
action by the Indenture Trustee or such holders. If an Event of Default due to
default in the performance of any other covenants or agreements in the
Indenture applicable to all outstanding Indenture Securities has occurred and
is continuing, either the Indenture Trustee or the holders of not less
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than 25% in principal amount of all outstanding Indenture Securities,
considered as one class, or any such Special Representative or Special
Representatives appointed in respect of series of outstanding Indenture
Securities representing not less than 25% in principal amount of all Indenture
Securities then outstanding, and not the holders of the Indenture Securities of
any one of such series or any such Special Representative appointed in respect
of any one series, may make such declaration of acceleration (subject to the
subordination provisions of the Indenture); provided that, upon certain events
of reorganization, bankruptcy or insolvency of UI or the appointment of a
receiver for its property, the principal of all of the Indenture Securities and
interest accrued thereon shall immediately become due and payable without any
declaration or other action by the Indenture Trustee or such holders.
At any time after the declaration of acceleration with respect to the
Indenture Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained, the Event or Events of
Default giving rise to such declaration of acceleration will, without further
act, be deemed to have been waived, and such declaration and its consequences
will, without further act, be deemed to have been rescinded and annulled, if
(a) UI has paid or deposited with the Indenture Trustee a sum sufficient to pay
(1) all overdue interest on all Indenture Securities of such series, including
interest upon overdue interest at the rate or rates prescribed therefor in such
Indenture Securities to the extent that payment of such interest is lawful; (2)
the principal of and premium, if any, on any Indenture Securities of such
series that have become due otherwise than by such declaration of acceleration
and interest thereon at the rate or rates prescribed therefor in such Indenture
Securities; and (3) all amounts due to the Indenture Trustee under the
Indenture; and (b) any other Event or Events of Default with respect to the
Indenture Securities of such series, other than the nonpayment of the principal
of the Indenture Securities of such series that has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture.
If an Event of Default with respect to the Indenture Securities of any series
occurs and is continuing, the holders of 25% in principal amount of the
outstanding Indenture Securities of such series or, if the Indenture Securities
of such series correspond to Limited Partner Interests, the Special
Representative appointed in respect of such Limited Partner Interests, if any,
may direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee or exercising any trust or power
conferred on the Indenture Trustee with respect to the Indenture Securities of
such series; provided, however, that if an Event of Default occurs and is
continuing with respect to more than one series of Indenture Securities, the
holders of 25% in aggregate principal amount of the outstanding Indenture
Securities of all such series, considered as one class, or such Special
Representative or Special Representatives appointed with respect to series of
outstanding Indenture Securities representing 25% in aggregate principal amount
of the outstanding Indenture Securities of all such series, if any, will have
the right to make such direction, and not the holders of the Indenture
Securities of any one of such series or such Special Representative of any one
of such series; and provided, further, that such direction will not be in
conflict with any rule of law or with the Indenture. Before proceeding to
exercise any right or power under the Indenture at the direction of such
holders or any such Special Representative, the Indenture Trustee shall be
entitled to receive from such holders or any such Special Representative
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with any such direction.
UI will be required to furnish to the Indenture Trustee annually a statement
of an officer of UI to the effect that, to the best of such officer's
knowledge, UI is not in default in the performance of the terms of the
Indenture or, if such officer has knowledge that UI is in default, specifying
such default.
The Indenture provides that no holder of Indenture Securities issued under
the Indenture may institute any proceeding against UI with respect to the
Indenture unless (a) the holder has previously given to the Indenture Trustee
written notice of a continuing Event of Default and unless the holders of not
less than 25% in principal amount of the Indenture Securities of all series of
Indenture Securities in respect of which an Event of Default has occurred and
is continuing (considered as one class) have requested the Indenture Trustee to
institute such action and shall have offered the Indenture Trustee reasonable
indemnity, (b) the Indenture Trustee shall not have instituted such action
within 60 days of such request and (c) the Indenture
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Trustee shall not have received direction inconsistent with such written
request by the holders of 25% in principal amount of the outstanding Indenture
Securities of such affected series (considered as one class). Furthermore, no
holder will be entitled to institute any such action if and to the extent that
such action would disturb or prejudice the rights of other holders of
Indenture Securities. Notwithstanding the foregoing, each holder of an
Indenture Security has a right, which is absolute and unconditional, to
receive payment of the principal of and premium, if any, and interest, subject
to the right of UI to extend interest payment periods in accordance with the
Indenture, if any, on such Indenture Security when due and to institute suit
for the enforcement of any such payment, and such rights may not be impaired
without the consent of such holder.
The Indenture requires the Indenture Trustee to give to all holders of
outstanding Indenture Securities of any series notice of any default to the
extent required by the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), unless such default has been cured or waived; provided that,
in the case of any default of the character specified above in paragraph (c)
under this "Events of Default; Remedies," no such notice will be given to such
holders until at least 15 days after the occurrence thereof. The Trust
Indenture Act currently permits the Indenture Trustee to withhold notices of
default (except for certain payment defaults) if the Indenture Trustee in good
faith determines the withholding of such notice to be in the interests of the
holders.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED CAPITAL SECURITIES
In the case of Debentures corresponding to Preferred Capital Securities of
any series, the holders of the Preferred Capital Securities of such series
will have the rights referred to under "Description of the Preferred Capital
Securities--Voting Rights," including the right under certain circumstances to
appoint a Special Representative, which Special Representative shall be
authorized to exercise United Capital's and such holders' right to accelerate
the principal amount of such Debentures and to enforce United Capital's and
such holders' other rights under such Debentures and the Indenture.
In addition, in the case of Debentures corresponding to Preferred Capital
Securities of any series, the Indenture provides that, so long as the
Preferred Capital Securities of such series remain outstanding, the
obligations of UI under such Debentures are for the benefit of the holders of
the Preferred Capital Securities of such series. The holders of the Preferred
Capital Securities of such series, or a Special Representative appointed by
and acting on behalf of such holders, may enforce UI's obligations under the
Indenture and such Debentures directly against UI as a third party beneficiary
of UI's obligations thereunder to the same extent as if such holders held a
principal amount of Debentures equal to the liquidation preference of the
Preferred Capital Securities of such series held by such holders.
MODIFICATION OF INDENTURE
Without the consent of any holders of Indenture Securities, UI and the
Indenture Trustee may enter into one or more supplemental indentures for any
of the following purposes: (a) to evidence the assumption by any successor to
UI of the covenants of UI in the Indenture and the Indenture Securities; or
(b) to add one or more covenants of UI or other provisions for the benefit of
the holders of all or any series of outstanding Indenture Securities or to
surrender any right or power conferred upon UI by the Indenture; or (c) to add
any additional Events of Default with respect to all or any series of
outstanding Indenture Securities; or (d) to change or eliminate any provision
of the Indenture or to add any new provision to the Indenture, provided that
if such change, elimination or addition will adversely affect the interests of
the holders of Indenture Securities of any series, such change, elimination or
addition will become effective with respect to such series only when there is
no Indenture Security of such series remaining outstanding under the
Indenture; or (e) to provide collateral security for the Indenture Securities;
or (f) to establish the form or terms of Indenture Securities of any series as
permitted by the Indenture; or (g) to evidence and provide for the acceptance
of appointment of a successor Indenture Trustee under the Indenture with
respect to the Indenture Securities of one or more series and to add to or
change any of the provisions of the Indenture as shall be necessary to provide
for or to facilitate the administration of the trusts under the Indenture by
more than one trustee; or (h) to provide for the procedures required to permit
the utilization of a noncertificated
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system of registration for any series of Indenture Securities; or (i) to
change any place where (1) the principal of and premium, if any, and interest,
if any, on any Indenture Securities shall be payable, (2) any Indenture
Securities may be surrendered for registration of transfer or exchange, and
(3) notices and demands to or upon UI in respect of Indenture Securities and
the Indenture may be served; or (j) to cure any ambiguity or inconsistency or
to make or change any other provisions with respect to matters and questions
arising under the Indenture, provided such changes or additions shall not
adversely affect the interests of the holders of Indenture Securities of any
series.
Without limiting the generality of the foregoing, if the Trust Indenture Act
is amended after the date of the original Indenture in such a way as to
require changes to the Indenture or the incorporation therein of additional
provisions or so as to permit changes to, or the elimination of, provisions
that, at the date of the original Indenture or at any time thereafter, were
required by the Trust Indenture Act to be contained in the Indenture, UI and
the Indenture Trustee may, without the consent of any holders, enter into one
or more supplemental indentures to effect or reflect any such amendment.
Except as otherwise provided above, the consent of the holders of not less
than a majority in aggregate principal amount of the Indenture Securities of
all series then outstanding under the Indenture, considered as one class, is
required for the purpose, pursuant to an indenture or supplemental indenture,
of adding any provisions to, or changing in any manner or eliminating any of
the provisions of, the Indenture or modifying in any manner the rights of the
holders of all such series; provided, however, that if less than all of the
series of Indenture Securities outstanding under the Indenture are directly
affected by a supplemental indenture, then the consent only of the holders of
a majority in aggregate principal amount of the outstanding Indenture
Securities of all series so directly affected, considered as one class, will
be required; and provided, further, that no such supplemental indenture will,
without the consent of the holder of each Indenture Security outstanding under
the Indenture of each such series directly affected thereby, (a) change the
stated maturity of, or any installment of principal of or the rate of interest
on or method of calculating the rate of interest on (or the amount of any
installment of interest on), any Indenture Security, or reduce the principal
thereof or redemption premium thereon, if any, or change the currency in which
any Indenture Security is payable, or impair the right to institute suit for
the enforcement of payment on any Indenture Security; (b) reduce the
percentage in principal amount of the Indenture Securities outstanding under
such series (or, in the case of Indenture Securities corresponding to Limited
Partner Interests of any series, if applicable, in liquidation preference of
the Limited Partner Interests of such series) required to consent to any
supplemental indenture or waiver under the Indenture or to reduce the
requirements for quorum and voting; (c) change the redemption provisions
applicable to the Indenture Securities adversely to the holders thereof; (d)
change the subordination provisions applicable to the Indenture Securities
adversely to the holders thereof; or (e) modify the provisions in the
Indenture relating to supplemental indentures, waivers of certain covenants
and waivers of past defaults. A supplemental indenture that changes or
eliminates any covenant or other provision of the Indenture that has expressly
been included solely for the benefit of one or more particular series of
Indenture Securities, or that modifies the rights of the holders of Indenture
Securities of such series with respect to such covenant or other provision,
shall be deemed not to affect the rights under the Indenture of the holders of
any other Indenture Securities.
Notwithstanding the foregoing, so long as any of the Limited Partner
Interests remain outstanding, United Capital shall not agree to any such
amendment that affects the holders of such Limited Partner Interests then
outstanding, without the prior consent of the holders of not less than 66 2/3%
in aggregate liquidation preference of all such affected Limited Partner
Interests then outstanding considered as one class (or, in the case of changes
described in clauses (a) through (e) of the immediately preceding paragraph,
100% in aggregate liquidation preference of all such affected Limited Partner
Interests then outstanding considered as one class).
SATISFACTION AND DISCHARGE
The Indenture Securities of any series, or any portion of the principal
amount thereof, will be deemed to have been paid for purposes of the
Indenture, and the entire indebtedness of UI in respect thereof will be
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deemed to have been satisfied and discharged, if there shall have been
irrevocably deposited with the Indenture Trustee or any paying agent other than
UI, in trust: (a) money in an amount that will be sufficient, or (b) Government
Obligations (as defined below), the principal of and the interest on which when
due, without any regard to reinvestment thereof, will provide monies that,
together with the money, if any, deposited with or held by the Indenture
Trustee, will be sufficient, or (c) a combination of such clauses (a) and (b)
that will be sufficient, to pay when due the principal of and premium, if any,
and interest, if any, due and to become due on such Indenture Securities or
portions thereof on and prior to the maturity thereof. For this purpose,
Government Obligations include direct obligations of, or obligations
unconditionally guaranteed by, the United States of America entitled to the
benefit of the full faith and credit thereof, which do not contain provisions
permitting the redemption or other prepayment thereof at the option of the
issuer thereof, and certificates, depositary receipts or other instruments that
evidence a direct ownership interest in such obligations or in any specific
interest or principal payments due in respect thereof. In connection with such
a satisfaction and discharge, UI, among other things, will deliver to the
Trustee an opinion of counsel to the effect that (i) based upon a ruling to
such effect received from or published by the Internal Revenue Service or a
change in the applicable Federal income tax law, such deposit, and related
satisfaction and discharge, would not cause the holders of the Indenture
Securities of such series to recognize income, gain or loss for Federal income
tax purposes (provided that the Indenture Securities of such series shall be
deemed to have been paid for purposes of the Indenture, but the indebtedness of
UI in respect thereof will not be deemed to have been satisfied and discharged,
if such opinion of counsel is delivered to such effect without either any such
ruling or change in law); and (ii) the trust resulting from such a satisfaction
and discharge is a valid trust and will not constitute an "investment company"
under the 1940 Act.
MERGER, CONSOLIDATION, SALE, ETC. OF UI
The Indenture provides that UI may consolidate or merge with, or sell,
convey, transfer or lease its properties and assets substantially as an
entirety to, any other corporation, provided that such successor corporation
expressly assumes all obligations of UI under the Indenture and certain other
conditions are met.
RESIGNATION OR REMOVAL OF INDENTURE TRUSTEE
The Indenture Trustee may resign at any time by giving written notice thereof
to UI, or may be removed at any time by act of the holders of a majority in
principal amount of Indenture Securities then outstanding delivered to the
Indenture Trustee and UI; provided that so long as any Limited Partner
Interests remain outstanding, United Capital shall not enter into any act to
remove the Indenture Trustee without the consent of the holders of 66 2/3% in
aggregate liquidation preference of such Limited Partner Interests outstanding.
No resignation or removal of the Indenture Trustee and no appointment of a
successor trustee will become effective until the acceptance of appointment by
a successor trustee in accordance with the requirements of the Indenture. So
long as no Event of Default or event that (after notice or lapse of time or
both) becomes an Event of Default has occurred and is continuing, if UI has
delivered to the Indenture Trustee a resolution of UI's Board of Directors
appointing a successor trustee and such successor has accepted such appointment
in accordance with the terms of the Indenture, the Indenture Trustee will be
deemed to have resigned and the successor will be deemed to have been appointed
as trustee in accordance with the Indenture.
CONCERNING THE INDENTURE TRUSTEE
The Bank of New York also serves as trustee under an indenture relating to
certain Senior Indebtedness, under an indenture executed as part of a sale and
leaseback of one of UI's fossil-fuel generating units and under an indenture
executed as part of a sale and leaseback of a portion of UI's interest in
Seabrook Unit 1. The Bank of New York also participates, along with other
banks, in a revolving credit and a term loan agreement, both of which permit UI
to borrow funds on a short-term basis.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The Bank of New York will act as co-transfer agent, and UI will act as
registrar, co-transfer agent and its own paying agent, for the Debentures.
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Registration of transfers or exchanges of Debentures will be effected without
charge, but UI may require payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection therewith (other than with
certain exchanges not involving any transfer).
UI shall not be required to execute or to provide for the registration of
transfers or exchanges of the Debentures of any series during a period of 15
days immediately preceding the date notice is to be given of the redemption of
the Debentures of such series or any Debenture so selected for redemption in
whole or in part, except the unredeemed portion of any such Debenture being
redeemed in part.
GOVERNING LAW
The Indenture and the Indenture Securities will be governed by and construed
and interpreted in accordance with the laws of the State of New York, without
regard to conflicts of laws principles thereof, except to the extent that the
laws of any other jurisdiction shall be mandatorily applicable.
PLAN OF DISTRIBUTION
UI may sell any series of Debentures, and United Capital may sell any series
of Preferred Capital Securities, through underwriters, dealers or agents,
including Morgan Stanley & Co. Incorporated, or directly, in each case to the
public, institutional investors and other purchasers (including United
Capital). The Prospectus Supplement relating to the Offered Securities of any
series will set forth the terms of such offering, including the names of any
underwriters, dealers or agents involved in the sale of Offered Securities of
such series, the amount of Offered Securities of such series to be purchased by
any underwriters, dealers or agents and any applicable commissions or
discounts. The net estimated proceeds to UI from such series of Offered
Securities will also be set forth in the Prospectus Supplement.
If underwriters are used in the sale, the Offered Securities being sold will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. Unless otherwise set forth in the Prospectus Supplement relating to the
Offered Securities of any series, the obligations of the underwriters to
purchase Offered Securities of such series will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all of
the Offered Securities of such series if any of the Offered Securities of such
series are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If dealers are used in the sale, unless otherwise indicated in the Prospectus
Supplement relating to the Offered Securities of any series, United Capital or
UI will sell the Offered Securities of such series to such dealers as
principals. Such dealers may then resell the Offered Securities of such series
to the public at varying prices to be determined by such dealers at the time of
resale.
Offered Securities of any series may also be sold through agents designated
by United Capital or UI from time to time or directly by United Capital or UI.
Any agent involved in the offering and sale of Offered Securities of such
series will be named, and any commissions payable by UI to such agent will be
set forth, in the Prospectus Supplement relating to the Offered Securities of
such series. Unless otherwise indicated in such Prospectus Supplement, any such
agent will act on a reasonable efforts basis for the period of its appointment.
Underwriters, dealers and agents may be entitled under agreements entered
into with UI or United Capital to indemnification by UI or United Capital
against certain civil liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments that the underwriters, dealers
or agents may be required to make in respect thereof. Underwriters, dealers and
agents may be customers of, engage in transactions with, or perform services
for, UI and United Capital in the ordinary course of business.
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Each series of Offered Securities will be a new issue of securities and will
have no established trading market. Any underwriter to whom Offered Securities
of any series are sold by UI or United Capital for public offering and sale may
make a market in such series of Offered Securities, but such underwriters will
not be obligated to do so and may discontinue any market making at any time
without notice. If so indicated in the Prospectus Supplement for any series of
Offered Securities, the Offered Securities of such series will be listed on a
national securities exchange. No assurance can be given as to the liquidity of,
or the trading markets for, any Offered Securities.
LEGAL OPINIONS
The validity of the Preferred Capital Securities will be passed upon by
Prickett, Jones, Elliott, Kristol & Schnee, as special Delaware counsel to
United Capital. The validity of the Preferred Capital Securities, the
Debentures and the Guarantee will be passed upon on behalf of UI and United
Capital by Wiggin & Dana, general counsel to UI. The validity of the Preferred
Capital Securities, the Debentures and the Guarantee will be passed upon on
behalf of any underwriters by Winthrop, Stimson, Putnam & Roberts, as counsel
to such underwriters. Certain tax matters in connection with the Preferred
Capital Securities and the Debentures will be passed upon for UI and United
Capital by Reid & Priest, special tax counsel to UI and United Capital. Wiggin
& Dana and Winthrop, Stimson, Putnam & Roberts may rely on the opinion of
Prickett, Jones, Elliott, Kristol & Schnee as to matters of Delaware law.
EXPERTS
The consolidated financial statements and related financial statement
schedule incorporated in this Prospectus by reference to the 1994 Form 10-K
have been audited by Coopers & Lybrand L.L.P., independent accountants, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
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