<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 17, 1998
Registration No. 333_______
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------------
THE WASHINGTON WATER POWER COMPANY
(Exact name of registrant as specified in its charter)
WASHINGTON 4931 91-0462470
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
1411 East Mission Avenue
Spokane, Washington 99202
(509) 489-0500
(Address, including ZIP Code, and telephone number,including area code, of
registrant's principal executive offices)
------------------------------------------
J.E. ELIASSEN, Senior Vice President, J. ANTHONY TERRELL
Chief Financial Officer & Treasurer Thelen Reid & Priest LLP
The Washington Water Power Company 40 West 57th Street
1411 East Mission Avenue New York, New York 10019
Spokane, Washington 99202 (212) 603-2000
(509) 489-0500
(Name and address, including ZIP Code, and telephone number, including
area code, of agents for service)
------------------------------------------
It is respectfully requested that the Commission send copies of all
notices, orders and communications to:
LINDA A. SIMPSON
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the registration statement becomes effective. If the
securities being registered on this Form are being offered in connection with
the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act of 1933 registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. / /
----------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE AMOUNT PROPOSED MAXIMUM AGGREGATE AMOUNT OF
OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEPOSITARY SHARES, EACH CONSTITUTING A ONE-TENTH
INTEREST IN ONE SHARE OF $12.40 PREFERRED STOCK,
CONVERTIBLE SERIES L, NO PAR VALUE. . . . . . . . . 20,000,000 SHARES N/A N/A N/A(1)
- -------------------------------------------------------------------------------------------------------------------------------
$12.40 PREFERRED STOCK, CONVERTIBLE SERIES L,
NO PAR VALUE. . . . . . . . . . . . . . . . . . . . 2,000,000 SHARES $206.5625(2) $413,125,000 $121,872(3)
- -------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK, NO PAR VALUE. . . . . . . . . . . . . 20,000,000 SHARES(4) N/A N/A N/A(5)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 457, no registration fee separate from the registration
fee for the Preferred Stock is required.
(2) Solely for the purpose of calculating the registration fee pursuant to
Rule 457(c) under the Securities Act of 1933, as amended ("Securities
Act"), the proposed maximum offering price has been determined by
multiplying (1) the average of the high and low prices for the Common
Stock on August 11, 1998 as reported in the consolidated reporting system
for securities traded on the New York Stock Exchange by (2) a factor of
ten, representing the number of shares of Common Stock which will be
received by the Company in exchange for each share of Preferred Stock.
(3) The registration fee for the shares of the Preferred Stock registered
hereby has been calculated pursuant to Rule 457(f)(1) under the Securities
Act, which requires the registration fee to be based upon the market value
of the Common Stock of The Washington Water Power Company (the "Company")
to be received in exchange for the Preferred Stock.
(4) Represents the number of shares of Common Stock issuable upon conversion
of the Preferred Stock. Also being registered are such indeterminate
number of additional shares of Common Stock as may be issuable upon or in
connection with the conversion of the Preferred Stock as a consequence of
the payment of any conversion premium or of adjustments to the Common
Equivalent Rate (i.e. the rate at which shares of Preferred Stock are
converted into shares of Common Stock).
(5) No additional consideration will be received by the Company upon
conversion of the Preferred Stock and, therefore, pursuant to Rule 457(i)
under the Securities Act, no separate registration fee is required.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THE PREFERRED STOCK OR RECONS HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT EXCHANGE THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS SUBJECT TO COMPLETION DATED AUGUST 17, 1998
[WWP LOGO]
EXCHANGE OFFER - IMPORTANT
Dear Shareholder:
On August 14, 1998, the Board of Directors approved an initiative that will help
position our Company to grow -- a Common Stock dividend restructuring plan. We
believe this change will better position us to pursue our growth strategies and
provide greater value for your investment in Washington Water Power. To improve
financial flexibility and retain a larger share of earnings in order to fund
future growth, the Board of Directors announced a plan to lower the annual
dividend paid to you, as a shareholder, from $1.24 to $0.48 per Common Share.
Recognizing that some of you may rely on current income from the dividend, we
have also created an opportunity for you to exchange your Common Shares for a
new security called RECONS-SM- (Return Enhanced Convertible Securities).
A RECONS is a security that:
- - will pay an annual dividend of $1.24 ($.31 each quarter);
- - will allow you to participate in future appreciation in the value of the
Common Shares up to $[__] per share;
- - will automatically convert into one Common Share on November 1, 2001,
unless we choose to convert it earlier; and
- - we may convert, before its automatic conversion, into Common Shares, having
a value up to $[ ], but no more than one Common Share, and we would also
pay, either in cash or Common Shares, a premium, plus all accrued and
unpaid dividends
For a more complete description of the terms of the RECONS, see "Description of
RECONS" beginning on page 22.
Whether you should participate in the Exchange Offer depends on many factors.
FOR A DESCRIPTION OF RISK FACTORS ASSOCIATED WITH THE EXCHANGE OFFER, SEE "RISK
FACTORS/INVESTMENT CONSIDERATIONS" BEGINNING ON PAGE 6.
We will accept a maximum of 20,000,000 Common Shares for exchange into RECONS.
You may tender all or part of your Common Shares, but if shareholders tender
more than 20,000,000 shares, we will accept tendered shares on a pro rata basis.
Fractional shares may not be tendered.
This Exchange Offer is also subject to certain other conditions, including a
minimum tender of 6,000,000 Common Shares. THIS EXCHANGE OFFER WILL BE OPEN
UNTIL 12:00 MIDNIGHT, NEW YORK CITY TIME, ON _______, ___________, 1998, UNLESS
WE EXTEND IT. Until that time, you may tender your Common Shares or, if you
have tendered them and you change your mind, you may withdraw them by following
the procedures described in this document.
To assist you in connection with the Exchange Offer, we have retained
- - Morrow & Co., Inc., as Information Agent (1-800-566-9061 toll-free or
1-800-662-5200 if you are a bank or brokerage firm) and
- - J.P. Morgan Securities Inc., as Dealer Manager ((212)___-____).
You should call the Information Agent to request additional documents and either
the Information Agent or the Dealer Manager to ask any questions.
Our Common Shares are listed and traded on the New York Stock Exchange and the
Pacific Exchange, in each case under the symbol WWP.
We are excited about our future. WWP has a long history of innovation and
leadership. We trust you will find this Exchange Offer is consistent with that
legacy.
T.M. Matthews
Chairman of the Board
and Chief Executive Officer
The Washington Water Power Company
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE PREFERRED STOCK OR RECONS TO BE
ISSUED IN THE EXCHANGE OFFER OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR
ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DEALER MANAGER FOR THIS EXCHANGE OFFER IS:
J.P. MORGAN & CO.
__________, 1998
<PAGE>
THIS PROSPECTUS INCORPORATES BY REFERENCE IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT THE COMPANY THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS
PROSPECTUS. SHAREHOLDERS MAY OBTAIN COPIES OF DOCUMENTS CONTAINING SUCH
INFORMATION FROM US BY EITHER CALLING OR WRITING TO US AT:
THE WASHINGTON WATER COMPANY
POST OFFICE BOX 3727
SPOKANE, WASHINGTON 99220
ATTENTION: TREASURER
TELEPHONE: (509) 489-0500
IN ORDER TO OBTAIN TIMELY DELIVERY, A SHAREHOLDER MUST REQUEST DOCUMENTS FROM US
NO LATER THAN FIVE DAYS BEFORE THE EXPIRATION DATE OF THE EXCHANGE OFFER ON
_____, 1998.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Questions and Answers About the
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Risk Factors/Investment
Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Safe Harbor for Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . 11
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Pro Forma Consolidated
Statement of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Pro Forma Condensed Consolidated
Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Background and Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Terms of the Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . 16
Expiration of the Exchange Offer; Extension of the
Exchange Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Procedure for Tender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Withdrawal of Tendered Common Shares. . . . . . . . . . . . . . . . . . . . . 20
Acceptance; Delivery of Consideration . . . . . . . . . . . . . . . . . . . . 20
Conditions of the Exchange Offer. . . . . . . . . . . . . . . . . . . . . . . 21
Commissions and Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Status of Common Shares Acquired
Pursuant to the Exchange Offer. . . . . . . . . . . . . . . . . . . . . . . 22
Exchange Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Information Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Description of RECONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Issuance of Depositary Receipts . . . . . . . . . . . . . . . . . . . . . . . 24
Withdrawal of New Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 24
Conversion of RECONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Dividends and Other Distributions . . . . . . . . . . . . . . . . . . . . . . 25
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Procedures for Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Amendment and Termination of Deposit Agreement. . . . . . . . . . . . . . . . 26
Charges of Deferred Stock Depositary. . . . . . . . . . . . . . . . . . . . . 26
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Resignation and Removal of Preferred
Stock Depositary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Dividend Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Liquidation Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Classified Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 31
Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Preferred Share Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . 31
Pre-emptive Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Certain United States Federal Income
Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Dealer Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
List of Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Annex A - Recent transactions in Securities. . . . . . . . . . . . . . . . . . . .A-1
</TABLE>
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<PAGE>
QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER
Q1: WHY ARE WE CHANGING THE DIVIDEND POLICY NOW?
A1: The utility and energy industries are rapidly changing and abundant
opportunities are emerging to apply our capabilities to serve new markets and
grow the Company for the benefit of shareholders. Reducing the dividend we
currently pay on Common Shares will allow us to retain more of our earnings for
reinvestment in our Company and to fund our growth plans.
Q2: WHY ARE WE MAKING THE EXCHANGE OFFER?
A2: We recognize that some of you may rely on the income produced by the
dividend we currently pay on Common Shares. Once we made the decision to reduce
the dividend, we decided to create an opportunity for you to retain for a period
of time all or part of the income stream to which you may have been accustomed.
The Exchange Offer is structured to also allow you to benefit from a portion of
the longer term Common Share price growth potential.
Q3: WHAT DO I GET IF I EXCHANGE ANY OF MY COMMON SHARES FOR RECONS?
A3: For each Common Share exchanged you will receive one RECONS on which
quarterly dividends of $0.31 will be paid. Each RECONS will automatically be
converted into one Common Share at the end of three years, unless we choose to
convert earlier (see Question 14).
Q4: HOW DO RECONS DIFFER FROM PREFERRED STOCK?
A4: Each RECONS is a depositary share that constitutes a one-tenth (1/10)
interest in one share of a new series of Preferred Stock of The Washington Water
Power Company ("WWP"), to be designated the $12.40 Preferred Stock, Convertible
Series L, no par value ("New Preferred Stock"). WWP will issue up to 2,000,000
shares of New Preferred Stock from its total of 10,000,000 authorized shares of
Preferred Stock.
Q5: WHAT IS A DEPOSITARY SHARE?
A5: The Bank of New York, acting as a depositary, holds the New Preferred Stock
under a deposit agreement. The depositary shares, which we are calling RECONS,
are interests in the New Preferred Stock.
Q6: WILL RECONS BE PUBLICLY TRADED?
A6: There is currently no public market for the RECONS. We will apply to list
the RECONS on the New York Stock Exchange ("NYSE"), but if NYSE listing
requirements are not met, we expect that the RECONS will trade in the
over-the-counter market. You should not assume that there will be an active
trading market for the RECONS.
Q7: WILL I BE TAXED ON THE RECONS THAT I RECEIVE IN THE EXCHANGE OFFER?
A7: No. The Exchange Offer generally should be tax-free to WWP and its
shareholders. You should consult your tax advisor as to the particular
consequences of the Exchange Offer to you.
Q8: HOW DOES THE EXCHANGE OFFER WORK?
A8: You may tender some or all of your Common Shares, on a one-for-one basis,
for RECONS. Only whole shares may be tendered. The specifics of this Exchange
Offer are described in this document.
Q9: WHAT MUST I DO IF I WANT TO EXCHANGE MY
COMMON SHARES?
A9: If your Common Shares are held by your broker you should follow the
instructions from your broker on how to participate in the Exchange Offer, or
contact your broker directly. If you hold your Common Shares directly, you
should follow the instructions for tendering Common Shares in this document
under the caption "The Exchange Offer -- Procedure for Tender" beginning on page
18.
Q10: WHAT MUST I DO IF I DO NOT WANT TO EXCHANGE MY COMMON SHARES?
A10: IF YOU WANT TO RETAIN YOUR COMMON SHARES, YOU DO NOT NEED TO TAKE ANY
ACTION. Note, however, that as a holder of Common Shares your interests will
be affected by this Exchange Offer whether or not you choose to exchange your
Common Shares, as explained in this document.
Q11: WHAT WILL I GET TO REPRESENT MY OWNERSHIP OF RECONS?
A11: You will NOT receive a stock certificate, but will instead get:
-if your Common Shares were held by your broker, a statement confirming your
exchange of Common Shares and the number of your RECONS; or
-if you held your Common Shares directly, a depositary receipt evidencing
your RECONS.
Q12: WILL PARTICIPANTS IN WWP'S DIVIDEND REINVESTMENT PLAN BE ABLE TO
PARTICIPATE IN THE EXCHANGE OFFER?
A12: Yes. Each participant in the Dividend Reinvestment Plan may withdraw and
tender some or all of the whole Common Shares held in his or her plan account.
However, dividend payments on RECONS will be paid in cash and cannot be
automatically reinvested.
Q13: WHAT HAPPENS AT THE END OF THREE YEARS?
A13: On November 1, 2001, each RECONS will be converted into one Common Share,
unless we choose to convert earlier.
Q14: WHAT HAPPENS IF THE COMPANY CONVERTS EARLY?
A14: If we choose to convert before November 1, 2001, for each RECONS you will
receive Common Shares having a maximum value equal to $[____], but no more than
one Common Share. This means that you may receive less than one Common Share for
each RECONS, depending upon the value of Common Shares at the time of the
conversion. You will also receive accrued and unpaid dividends and a premium
payable in cash or Common Shares.
Q15: HOW DO I LEARN MORE ABOUT THE EXCHANGE
OFFER?
A15: This document contains a complete description of the terms of the Exchange
Offer and you are strongly encouraged to read the entire document. If, after
reading this document, you have further questions, please contact the
Information Agent or the Dealer Manager referred to in the letter of the
Chairman of the Board and Chief Executive Officer at the beginning of this
document.
-1-
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND DOES NOT
CONTAIN ALL THE INFORMATION THAT YOU SHOULD CONSIDER. TO UNDERSTAND THE EXCHANGE
OFFER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE
EXCHANGE OFFER, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS
TO WHICH WE HAVE REFERRED YOU. SEE "QUESTIONS AND ANSWERS ABOUT THE EXCHANGE
OFFER" ON PAGE 1 AND "ADDITIONAL INFORMATION" ON PAGE 40. WE HAVE INCLUDED PAGE
REFERENCES IN PARENTHESES TO DIRECT YOU TO A MORE COMPLETE DESCRIPTION OF THE
TOPICS PRESENTED IN THIS SUMMARY.
THE COMPANY (SEE PAGE 12)
THE WASHINGTON WATER POWER COMPANY
Post Office Box 3727
Spokane, Washington 99220
(509) 489-0500
Washington Water Power is an energy services company with utility and subsidiary
operations located throughout the United States. We operate as a regional
utility providing electric and natural gas sales and services and as a national
entity providing both energy and non-energy products and services. We provide
electricity and natural gas in eastern Washington and northern Idaho and natural
gas service in northeast and southwest Oregon and the South Lake Tahoe region of
California. Washington Water Power also operates Avista Corp. (expected to be
renamed Avista Capital) ("Avista"), which owns all the Company's non-regulated
energy and non- energy businesses. Avista's subsidiaries include Pentzer
Corporation ("Pentzer"), Avista Energy, Avista Advantage and Avista Labs.
Changes now underway in the utility and energy industries are creating new
opportunities to expand the Company's businesses and serve new markets. In
pursuing such opportunities, the Company is shifting to a more growth-oriented
strategy in order to achieve its goal of becoming a diversified North American
energy company. Our principal offices are at 1411 East Mission Avenue, Spokane,
Washington 99202.
RECENT DEVELOPMENTS
On August 17, 1998, we announced a dividend restructuring and broad corporate
refocus aimed at strengthening our financial position and providing needed
capital to fund our new growth strategy. As part of that initiative, we
announced that we are reducing the annual dividend on our Common Shares from
$1.24 to $.48 per share, effective with the quarterly dividend expected to be
paid in December 1998. This reduced dividend will permit us to use more of our
operating cash flow for growth initiatives and new investment opportunities in
each of our lines of business. We also announced that we intend to change our
corporate name to Avista Corporation and align our businesses under this name in
order to promote a cohesive brand identity.
BACKGROUND AND PURPOSE OF THE EXCHANGE OFFER
We chose to make the Exchange Offer because we wanted to give those of you whose
primary objective may be current income the chance to continue receiving over
the next few years the same dividend the Common Shares now pay. We believe that
the Exchange Offer will help our investors adjust to the Company's transition to
a more growth-oriented strategy. In deciding to pursue the Exchange Offer, we
considered, among other things, the advice of our financial advisors, J.P.
Morgan Securities Inc.
To review the reasons for the Exchange Offer in greater detail, see page 16.
THE EXCHANGE OFFER GENERALLY
EFFECTS OF THE EXCHANGE OFFER
WWP shareholders will be affected by the Exchange Offer whether or not they
tender their Common Shares in the Exchange Offer. If you tender all of your
Common Shares and all such shares are accepted for exchange, you will not have a
voting common equity interest in WWP until such time as your RECONS are
converted. As long as you hold RECONS, you will participate only up to a certain
level of appreciation in the value of Common Shares. If you do not tender any of
your Common Shares, you will continue to have a voting common equity interest in
WWP and your ownership interest in the common equity will have increased on a
percentage basis as a result of the Exchange Offer.
THE POSITION OF WWP ON THE EXCHANGE OFFER
Neither WWP nor any of its directors makes any recommendation as to whether you
should tender your Common Shares. Among the factors which you should consider
when deciding whether to tender your Common Shares are (1) your view of the
relative value of a single Common Share and a single RECONS, (2) the relative
importance you place on current income versus potential long-term capital
appreciation, (3) your expectation of what the price of a Common Share will be
during the next three years and (4) your investment strategy, including tax
considerations. You must make your own decision as to whether to tender, and, if
so, how many of your shares to tender after reading this Prospectus and
consulting with your advisors based on your own financial position and
requirements. We urge you to read this document very carefully.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (SEE
PAGE 33)
The Exchange Offer generally should be tax-free to WWP and its shareholders. You
should consult your tax advisor as to the particular consequences of the
Exchange Offer to you.
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER (SEE PAGE 16)
WWP is offering to exchange up to 20,000,000 RECONS for Common Shares at an
exchange ratio of one-for-one.
-2-
<PAGE>
Each Common Share properly tendered and not withdrawn will be exchanged for one
RECONS, on the terms and subject to the conditions of the Exchange Offer,
including the proration provisions. Promptly after the expiration of the
Exchange Offer, the Exchange Agent will return to shareholders any Common Shares
not accepted for exchange.
EXPIRATION DATE; EXTENSION; TERMINATION (SEE PAGE 17)
The Exchange Offer will expire at 12:00 midnight, New York City time, on
________, 1998, unless extended. You must tender your Common Shares prior to
such expiration date if you wish to participate in the offer. The Exchange Offer
may also terminate or be terminable in certain circumstances.
WITHDRAWAL RIGHTS (SEE PAGE 20)
You may withdraw tenders of Common Shares any time before the expiration of the
Exchange Offer. If you change your mind again, you may tender your Common Shares
again by following the tender procedures prior to the expiration of the Exchange
Offer.
CONDITIONS OF THE EXCHANGE OFFER (SEE PAGES 21)
The Exchange Offer is subject to certain conditions, including that at least
6,000,000 Common Shares are tendered.
PROCEDURE FOR TENDERING (SEE PAGE 18)
If your Common Shares are held by your broker, your broker should have sent you
instructions along with the Prospectus on how to participate in the Exchange
Offer. If you have not yet received such instructions, please contact your
broker directly.
If you hold your shares directly, you should complete and sign the Letter of
Transmittal indicating the number of Common Shares you wish to tender. Send it,
together with your share certificates and any other documents required by the
Letter of Transmittal, by registered mail, return receipt requested, so that it
is received by the Exchange Agent at one of the addresses set forth on the back
cover of this Prospectus before the expiration of the Exchange Offer. You may
also comply with the procedures for guaranteed delivery. DO NOT SEND YOUR
CERTIFICATES TO WWP, THE DEALER MANAGER (J.P. MORGAN SECURITIES INC.) OR THE
INFORMATION AGENT (MORROW & CO.).
PRORATION (SEE PAGE 17)
If more than 20,000,000 Common Shares are tendered, tendered Shares will be
accepted for exchange on a pro rata basis. Announcement of any final proration
factor should occur approximately five NYSE trading days after the expiration
date.
THE EXCHANGE AGENT (SEE PAGE 23)
The Bank of New York is serving as the Exchange Agent in connection with the
Exchange Offer.
THE INFORMATION AGENT (SEE PAGE 23)
Morrow & Co., Inc. is serving as the Information Agent in connection with the
Exchange Offer. Morrow's telephone number is 1-800-566-9061 toll-free (you
should call 1-800-662-5200 if you are a bank or brokerage firm).
THE DEALER MANAGER (SEE PAGE 38)
J.P. Morgan Securities Inc. is serving as the Dealer Manager for the Exchange
Offer. J.P. Morgan's telephone number is (212) _______.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
On August 14, 1998, the last trading day before announcement of the proposed
Exchange Offer, the closing sale price per Common Share on the NYSE was $20 7/8.
On _______, 1998, the last trading day before the commencement of the Exchange
Offer, the closing sale price per Common Share was $______. We urge you to
obtain a current market quotation for the Common Shares.
-3-
<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF RECONS AND COMMON SHARES
The following table presents certain features of the RECONS and the Common
Shares. This summary, which is based on the current authorized capitalization of
WWP, is not complete, and is subject to the provisions of the Company's Restated
Articles of Incorporation (the "Restated Articles") authorizing the issuance of
the New Preferred Stock and the Articles of Amendment designating the terms of
the New Preferred Stock (the "Articles of Amendment"). You should read this
comparison in conjunction with the more detailed descriptions under "Description
of RECONS" and "Description of Capital Stock". Each RECONS will constitute a
one-tenth interest in a share of New Preferred Stock that we will issue.
<TABLE>
<CAPTION>
RECONS COMMON SHARES
<S> <C>
DIVIDENDS
$0.31 per RECONS payable quarterly $0.12 per share, payable quarterly
($1.24 yearly), beginning December 15, ($0.48 yearly), effective with the
1998. December 15, 1998 dividend payment
date. The Board of Directors may
change the dividend level at its
discretion. The December dividend
has not yet been declared.
LIQUIDATION RIGHTS
If WWP is liquidated, holders of If WWP is liquidated, holders of
RECONS will be entitled to a Common Shares will receive a pro rata
liquidation preference after WWP pays amount of the proceeds of liquidation
all of its debts and on a parity with of WWP remaining after WWP pays all
all other series of Preferred Stock. of its debts and all liquidation
The liquidation preference per RECONS preferences on all series of
will be the average of the high and Preferred Stock, including the New
low sale prices of the Common Shares Preferred Stock represented by the
on the trading date next preceding the RECONS.
date the RECONS are issued plus an
amount equal to accrued but unpaid
dividends.
MANDATORY CONVERSION
On November 1, 2001 (the "Mandatory Does not apply.
Conversion Date"), the RECONS will be
mandatorily converted into (1) one
Common Share per RECONS (subject to
certain antidilution adjustments), and
(2) the right to receive a cash amount
equal to all accrued but unpaid
dividends thereon.
OPTIONAL CONVERSION
We will have the option at any time on Does not apply.
or after December 15, 1998 and before
November 1, 2001 to convert some or
all of the outstanding RECONS. We may
exercise this right more than once.
On such an optional conversion date, a
holder will receive for each RECONS
(1) the "RECONS Optional Conversion
Price" plus (2) a cash amount equal to
all accrued and unpaid dividends to
the conversion date plus (3) the
"RECONS Optional Conversion Premium."
-4-
<PAGE>
<CAPTION>
RECONS COMMON SHARES
<S> <C>
The RECONS Optional Conversion Price
equals the number of Common Shares
equal to the lesser of (i) the amount
of $____ (which is ___% of the closing
price of a Common Share on _______
1998) divided by the Current Market
Price (as defined herein) as of the
close of business on the second
trading day immediately preceding the
day on which the Company gives notice
of such conversion, and (ii) one
Common Share (subject to certain
antidilution adjustments).
The RECONS Optional Conversion Premium
means an amount, in cash, initially
equal to $2.09 declining by $.002111
for each day following December 15,
1998 to the optional conversion date
(computed on the basis of a 360-day
year consisting of twelve 30-day
months) and equal to zero on and after
September 15, 2001; provided, that the
Company may, at its option, deliver a
number of shares of Common Stock equal
to the quotient of such amount divided
by the Current Market Price on the
second trading day immediately
preceding the day on which the Company
gives notice of such conversion.
The initial RECONS Optional Conversion
Premium of $2.09 represents the
difference between the annual dividend
of $1.24 on each RECONS and an assumed
annual dividend of $0.48 for each
Common Share for the period after
December 15, 1998 through September
15, 2001 (i.e. $0.19 per quarter for
eleven quarters). The premium
declines to zero on September 15,
2001; no premium will be paid on or
after September 15, 2001. Dividends
will accrue on the RECONS through the
conversion date.
VOTING RIGHTS
Holders of RECONS will not have the
right to vote with the holders of
Common Shares, but if we fail to pay
quarterly dividend payments for 18
months, then holders of RECONS will be
entitled, with the holders of other
Preferred Stock of WWP, to elect a
majority of the Board of Directors of
WWP. In that situation, each RECONS
would receive one-tenth of the vote
allotted to one share of Preferred
Stock.
The RECONS will be newly issued. The Common Shares are listed and
There is currently no market for trade on the NYSE and the Pacific
RECONS. We will apply to list the Exchange, in each case under the
RECONS on the NYSE subject to listing symbol "WWP."
requirements, including the
requirement that the shares be broadly
distributed. We anticipate that the
RECONS will be listed and trade under
the symbol "WWPPrL." If the
conditions to listing on the NYSE are
not met, we expect that the RECONS
will trade in the over-the-counter
market. You should not assume that
there will be an active trading market
for the RECONS.
</TABLE>
-5-
<PAGE>
RISK FACTORS/INVESTMENT CONSIDERATIONS
You should consider certain risk factors in deciding whether to participate in
the Exchange Offer, including: the limited potential of holders of RECONS to
benefit from gains in the price of Common Shares; the anticipated relative
trading values of the RECONS and the Common Shares; the possible volatility of
the price of Common Shares; the uncertainty of whether there will be a public
market for the RECONS; the loss of voting power if you exchange Common Shares
for RECONS; the reduction in the dividends on Common Shares; the dividend
preference of the RECONS; and the dilution of the Common Shares upon conversion
of the RECONS. See "Risk Factors/Investment Considerations" on page 10.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table contains certain summary historical consolidated financial
data of WWP. These data have been derived from and should be read in conjunction
with the audited consolidated financial statements (and the related notes) of
WWP for the five years ended December 31, 1997 and the unaudited consolidated
financial statements (and the related notes) of WWP for the six month periods
ended June 30, 1998 and 1997 incorporated by reference herein and other
information that we have filed with the Securities and Exchange Commission (the
"SEC"). See "Additional Information" on page 39.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
AT OR FOR THE FISCAL YEAR ENDED DECEMBER 31 AT OR FOR THE SIX MONTHS
ENDED JUNE 30
1993 1994 1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
IN THOUSANDS, EXCEPT PER SHARE AND
RATIO DATA
INCOME STATEMENT DATA:
Operating revenues. . . . . . . . . . . . $ 640,599 $ 670,765 $ 755,009 $ 944,957 $1,302,172 $ 520,285 $1,204,664
Income from operations. . . . . . . . . . 160,850 155,458 189,840 186,921 189,464 98,727 98,642
Net income. . . . . . . . . . . . . . . . 82,776 77,197 87,121 83,453 114,797 78,323 47,875
Preferred stock dividend
requirements . . . . . . . . . . . . . 8,335 8,656 9,123 7,978 5,392 3,590 1,612
Income available for common
stock . . . . . . . . . . . . . . . . . 74,441 68,541 77,998 75,475 109,405 74,733 46,263
Earnings per share
Total, basic and diluted. . . . . . . . $1.44 $1.28 $1.41 $1.35 $1.96 $1.34 $0.83
Cash dividends paid per common share. . $1.24 $1.24 $1.24 $1.24 $1.24 $0.62 $0.62
Outstanding common stock (000s)
Weighted average, basic and
diluted . . . . . . . . . . . . . . . . 51,616 53,538 55,173 55,960 55,960 55,960 55,960
Shares outstanding at end of
period. . . . . . . . . . . . . . . . . 52,758 54,421 55,948 55,960 55,960 55,960 55,960
Ratio of earnings to fixed charges
and preferred dividend
requirements. . . . . . . . . . . . . . 2.77 2.59 2.61 2.50 3.12 3.06(a) 2.68(a)
BALANCE SHEET DATA:
Total assets. . . . . . . . . . . . . . . $1,837,838 $1,994,253 $2,098,902 $2,177,298 $2,411,785 $2,194,731 $3,069,475
Long term debt. . . . . . . . . . . . . . 647,229 721,146 738,287 764,526 762,185 653,462 788,481
Preferred trust securities. . . . . . . . 110,000 110,000 110,000
Preferred stock cumulative. . . . . . . . 135,000 135,000 135,000 115,000 45,000 95,000 35,000
Common equity . . . . . . . . . . . . . . 634,379 677,494 717,125 710,736 748,812 755,646 759,358
Book value per share. . . . . . . . . . . $12.02 $12.45 $12.82 $12.70 $13.38 $13.50 $13.57
</TABLE>
(a) For purposes of computing the ratios of earnings to fixed charges plus
preferred dividend requirements, "earnings" consist of net income before
interest charges and cumulative preferred dividend requirements, plus income
taxes, plus the estimated interest component of rentals. "Earnings" also include
allowance for borrowed and other funds used during construction. Fixed charges
consist of interest charges, the estimated interest component of rentals and the
pretax dividend requirements on cumulative preferred stock. The ratio shown for
the June 30 period is based on information for the twelve months ended June 30.
-6-
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma information is provided to you to aid in your
analysis of the financial aspects of the Exchange Offer. This information was
derived from the audited consolidated financial statements of WWP for the fiscal
year ended December 31, 1997 and the unaudited consolidated financial statements
of WWP for the six month period ended June 30, 1998. This information is only a
summary and you should read it in conjunction with the historical consolidated
financial statements of WWP that are incorporated by reference herein and other
information that we have filed with the SEC. See "Additional Information" on
page 39.
The Unaudited Pro Forma Condensed Consolidated Financial Statements give effect
to the following transactions and events: (1) the planned reduction in the
annualized Common Stock dividend from $1.24 per share ($.31 per share each
quarter) to $.48 per share ($.12 per share each quarter), (2) the proposed
exchange of 20,000,000 Common Shares for 20,000,000 RECONS representing
2,000,000 shares of New Preferred Stock and (3) the planned dividend on New
Preferred Stock of $1.24 per share. The Pro Forma Consolidated Statement of
Income Data assumes that these transactions occurred on the first day of the
respective periods presented and the Pro Forma Consolidated Balance Sheet Data
assumes that these transactions occurred on June 30, 1998.
This information is presented to show you what WWP might have looked like if the
Exchange Offer had occurred for such amount and at the times outlined above. You
should not rely on the pro forma information as being indicative of the
historical results that would have been achieved, the future results that WWP
will experience after the Exchange Offer or the number of Common Shares that
will be exchanged in the Exchange Offer.
<TABLE>
<CAPTION>
--------------------------------------------------
--------------------------------------------------
FISCAL YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31 JUNE 30
1997 1998
---------------- --------------
<S> <C> <C>
IN THOUSANDS, EXCEPT PER SHARE DATA
PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA:
Operating revenues.................................... $1,302,172 $1,204,664
Income from operations................................ 189,464 98,642
Net income............................................ 114,797 47,875
Preferred stock dividend requirements................. 30,192 (a) 14,012 (a)
Income available for common stock..................... 84,605 33,863
Earnings per share
Basic.............................................. $2.35 (a) $0.94 (a)
Diluted............................................ $1.96 (b) $0.83 (b)
Dividends paid per common share....................... $0.48 $0.24
Outstanding common stock (000s)
Weighted average basic............................. 35,960 (a) 35,960 (a)
Weighted average diluted........................... 55,960 (b) 55,960 (b)
Shares outstanding at end of period................ 35,960 35,960
Ratio of earnings to fixed charges and
preferred dividend requirements.................... 2.07 1.84
</TABLE>
PRO FORMA CONSOLIDATED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT
JUNE 30
1998
--------------
<S> <C>
Total assets......................................................................... $ 3,061,675
Long term debt....................................................................... 788,481
Preferred trust securities........................................................... 110,000
Preferred stock--cumulative........................................................... 35,000
Convertible preferred stock.......................................................... 440,000
Common equity........................................................................ 311,558
Book value per share................................................................. $8.66
</TABLE>
- ------------------------------------------
(a) The Series L Preferred Stock is not common stock equivalent for basic
earnings per share purposes. The estimated preferred stock dividend of $24.8
million for 1997 and $12.4 million for the first half of 1998 have been deducted
from net income for purposes of determining basic earnings per common share.
(b) For purposes of determining diluted earnings per share, the Series L
Preferred Stock is common stock equivalent (assumed conversion). The
estimated preferred stock dividends of $24.8 million for 1997 and $12.4
million for the first half of 1998 have been added to income available for
common stock for diluted earnings per common share.
-7-
<PAGE>
HISTORICAL AND PRO FORMA CAPITALIZATION
The following table presents the historical consolidated capitalization of WWP
as of June 30, 1998, and the unaudited pro forma capitalization of WWP after
giving effect to the Exchange Offer. See "Summary Pro Forma Financial Data" for
further discussion of these transactions.
<TABLE>
<CAPTION>
----------------------------------
----------------------------------
AT JUNE 30, 1998
HISTORICAL PRO FORMA
---------------- ---------------
<S> <C> <C>
DOLLARS IN THOUSANDS
Long-term debt............................................................. $ 788,481 $ 788,481
Preferred trust securities................................................. 110,000 110,000
---------------- ---------------
Preferred stock cumulative:
10,000,000 shares authorized:
Subject to mandatory redemption:
$6.95 Series K; 350,000 shares outstanding ($100 stated
value)............................................................... 35,000 35,000
Not subject to mandatory redemption:
$12.40 Convertible Series L; 2,000,000 shares outstanding
(assumed $220 stated value).......................................... 440,000 (a)
---------------- ---------------
Total...................................................... 35,000 475,000
---------------- ---------------
Common equity.............................................................. 759,358 311,558 (b)
Total capitalization....................................................... $1,692,839 $1,685,039
</TABLE>
(a) Reflects the issuance of $440 million, or 2,000,000 shares, of Series L
Preferred Stock assumed to be exchanged for 20,000,000 shares of Common Stock.
Series L Preferred Stock will be issued in exchange for shares of Common Stock
on a one-for-ten basis. Each share of Series L Preferred Stock will be recorded
at its stated value which will be fixed at the market price of the Common Stock
received in exchange therefor (assumed to be $22 per share).
(b) Common Shares received in exchange for the Series L Preferred Stock will be
recorded as a charge against common equity at cost (market value at the time of
the exchange) on the Company's Balance Sheet. This will have the effect of
reducing common equity by $440 million (assuming 20,000,000 shares at $22 per
share). An estimate of $7.8 million of expenses for the Exchange Offer has
been included as a charge to equity.
-8-
<PAGE>
PRICE RANGE OF COMMON SHARES AND DIVIDEND INFORMATION
The Common Shares are listed and principally traded on the NYSE. The high and
low closing prices for the Common Shares (as reported on the consolidated
reporting system) and the quarterly cash dividend per share declared and paid on
all the Common Shares in 1996, 1997 and 1998 are listed below.
<TABLE>
<CAPTION>
-------------------------------------------------------
-------------------------------------------------------
STOCK PRICE CASH DIVIDEND
HIGH LOW DECLARED AND PAID
------------- ------------- --------------------
<S> <C> <C> <C>
1996
First Quarter............................ $ 19 1/8 $ 17 1/4 $.31
Second Quarter........................... 19 7/8 17 3/4 .31
Third Quarter............................ 19 3/4 17 7/8 .31
Fourth Quarter........................... 19 3/4 18 .31
1997
First Quarter............................ $ 19 $ 17 3/8 $.31
Second Quarter........................... 19 7/8 17 3/8 .31
Third Quarter............................ 21 1/4 18 7/8 .31
Fourth Quarter........................... 24 13/16 18 15/16 .31
1998
First Quarter............................ $ 24 13/16 $ 21 3/4 $.31
Second Quarter........................... 24 7/8 20 13/16 .31
Third Quarter (through August 14)........ 22 13/16 20 1/16
</TABLE>
The high and low sales prices per Common Share as reported on the consolidated
reporting system on _________, 1998, the last full trading day prior to
commencement of the Exchange Offer, were $[ ] and $[ ], respectively.
On August 17, 1998, the Company announced that it reduced the quarterly dividend
paid with respect to the Common Shares from $.31 to $.12 per share, effective
with the next quarterly dividend payable on December 15, 1998.
-9-
<PAGE>
RISK FACTORS/INVESTMENT CONSIDERATIONS
In considering whether or not to tender Common Shares pursuant to the Exchange
Offer, you should consider carefully all of the information set forth or
incorporated in this Prospectus and, in particular, the following risk factors
and investment considerations. In addition, for a discussion of certain
additional uncertainties associated with (1) the business of WWP, as well as (2)
forward-looking statements in this Prospectus, please see "Safe Harbor for
Forward-Looking Statements" on page 11.
LIMITED POTENTIAL TO BENEFIT FROM GAINS IN THE COMMON SHARE PRICE
We may convert your RECONS before November 1, 2001, in which case you will
receive the number of Common Shares having a value equal to the RECONS Optional
Conversion Price, plus cash equal to accrued and unpaid dividends and the RECONS
Optional Conversion Premium (payable in cash or, at the Company's option, in
Common Shares). If at any time while the RECONS are outstanding the Common
Shares are trading in the marketplace at a price higher than the RECONS Optional
Conversion Price, you may expect that we would convert your RECONS. This would
limit your potential to profit from any increase in the price of the Common
Shares above the RECONS Optional Conversion Price, since you would receive less
than one Common Share for each RECONS required to be exchanged. On the other
hand, you are not protected from any decrease in the trading price of the Common
Shares. On the trading day immediately prior to the commencement of the Exchange
Offer, Common Shares closed at $___ per share on the NYSE.
TRADING VALUE OF THE SECURITIES
Because the RECONS have a different economic structure than the Common Shares,
we do not expect that the two securities will trade at the same price. Depending
on the circumstances discussed in the next paragraph, the RECONS may trade at a
price higher or lower than the Common Shares.
POSSIBLE VOLATILITY OF COMMON STOCK PRICE
When your RECONS are converted, whether on November 1, 2001, or earlier, you
will receive a certain number of Common Shares in return. The price of these
Common Shares will be determined in the marketplace and may be influenced by
many factors, including how we perform as a company, how other investors in the
marketplace perceive us and our prospects, how many people are buying and
selling our Common Shares, and generally how the economy and stock markets are
performing.
NO PRIOR PUBLIC MARKET FOR RECONS; POSSIBLE WITHDRAWAL OF LISTING ON NYSE
At the time of the Exchange Offer, there will be no public market for the
RECONS. We will apply to have the RECONS listed for trading on the NYSE. Rules
of the NYSE require that the number, total value and number of holders of RECONS
meet certain minimum criteria in order to be listed. If any of these criteria
are not satisfied, the NYSE might not accept the RECONS for listing, in which
case we would withdraw our listing application. We cannot promise that the
RECONS will meet the NYSE's criteria or that, even if they do, the RECONS will
be accepted for listing on the NYSE. If the RECONS are not accepted for listing
on the NYSE, it might be more difficult for you to buy and sell the RECONS,
which could lower their value. In the event that the RECONS cannot be listed on
the NYSE, the Company will use its best efforts to cause them to be listed on
another securities exchange or included in the National Association of
Securities Dealers Automated Quotation System. Again, we cannot promise that we
would be successful in these efforts or that an active trading market for the
RECONS will develop.
-10-
<PAGE>
LOSS OF VOTING POWER
Once you exchange your Common Shares for RECONS, you will not have the same
rights as a holder of Common Shares. In particular, you will no longer be
entitled to vote for directors of the Company, except that if we fail to pay
dividends on the New Preferred Stock (and thus your RECONS) for eighteen
months the holders of Preferred Stock, as a class, you will have the right to
elect a majority of the Board of Directors. The voting power of those holders
of Common Shares who do not tender their shares in the Exchange Offer will be
increased proportionately.
REDUCTION IN COMMON SHARE DIVIDEND PAYMENT; DIVIDEND PREFERENCE OF THE NEW
PREFERRED STOCK AND THE RECONS
On September 15, 1998, we will pay a cash dividend of $0.31 per Common Share to
holders of record as of August 25, 1998. However, we expect that thereafter we
will pay dividends at an annual rate not exceeding $0.48 per share ($0.12 per
quarter), a reduction of approximately 61% compared to the $1.24 annual level
paid in the past. We are reducing the dividend in order to enable us to use a
greater portion of our operating cash flow for growth initiatives and new
investment opportunities in every area of our business. After the Exchange
Offer, we may pay a higher or lower dividend on the Common Shares, depending on
our future earnings, our financing needs, our financial condition and other
factors, all as determined by the Board of Directors from time to time. Holders
of RECONS will receive payment of dividends before holders of Common Shares
receive any dividend payments.
DILUTION OF COMMON EQUITY UPON CONVERSION OF THE RECONS
When your RECONS are converted back into a number of Common Shares, whether at
the Mandatory Conversion Date or earlier, the total number of Common Shares
outstanding will be increased by the number of such Common Shares given in
exchange for the RECONS. As a result, each Common Share will represent a smaller
percentage of the Company's total equity than it did while the RECONS were
outstanding.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
The Company is including the following cautionary statement in this Prospectus
to make applicable and to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements are
all statements other than statements of historical fact, including without
limitation those that are identified by the use of the words "anticipates,"
"estimates," "expects," "intends," "plans," "predicts," and similar expressions.
They appear in a number of places in this Prospectus and in the documents
incorporated herein by reference. Such statements are inherently subject to a
variety of risks and uncertainties that could cause actual results to differ
materially from those expressed. Such risks and uncertainties include, among
others, the specific risk factors described under the caption "Risk
Factors/Investment Considerations" and uncertainties associated with the
business of the Company described in the reports incorporated by reference
herein, including regulatory uncertainties and risks associated with
acquisitions and increasing competition. These forward-looking statements speak
only as of the date of this Prospectus. The Company expressly undertakes no
obligation to update or revise any forward-looking statement contained herein
to reflect any change in the Company's expectations with regard to thereto or
any change in events, conditions, or circumstances on which any such statement
is based.
-11-
<PAGE>
THE COMPANY
Washington Water Power is an energy services company with operations located
throughout the United States. The Company, which was incorporated in the State
of Washington in 1889, primarily operates in the electric and natural gas
utility businesses. WWP owns Avista, which in turn owns all the Company's
non-regulated energy and non-energy businesses. Avista's subsidiaries include
Pentzer, Avista Energy, Avista Advantage and Avista Labs. At December 31, 1997,
the Company's employees included 1,467 people in its utility operations and
approximately 1,751 people in its majority-owned non-regulated businesses
(energy and non-energy). The Company's corporate headquarters are located at
1411 East Mission Avenue, in Spokane, Washington 99202.
The Company's operations are organized into four lines of businesses, two of
which comprise its utility operations. The Energy Delivery business provides
electricity and natural gas in a 26,000 square mile area in eastern Washington
and northern Idaho, with a combined population of approximately 825,000, as of
December 31, 1997, as well as natural gas services in a 4,000 square mile area
in northeast and southwest Oregon and South Lake Tahoe region of California,
with a combined population of approximately 495,000, as of such date. The
Generation and Resources business includes the generation and production of
electric energy, and short- and long-term electric and natural gas wholesale
sales and wholesale marketing primarily to, and commodity trading with, other
utilities and power brokers in the Western Systems Coordinating Council. The
National Energy Trading and Marketing business, which is conducted through
subsidiaries, focuses on commodity trading, energy marketing and energy related
products and services on a national basis. The Non-energy business primarily
consists of Pentzer, a private investment firm.
Changes underway in the utility and energy industries are creating new
opportunities to expand the Company's businesses and serve new markets. In
pursuing such opportunities, the Company is shifting its strategic direction to
growth in order to achieve its goal of becoming a diversified North American
energy company. The Company's strategies are described below.
ENERGY
The Company seeks to strengthen its position of leadership in energy delivery
and generation as well as energy trading and marketing on a local, regional and
national basis. The Company will seek to increase its asset and customer base
through a focus on acquisitions and strategic alliances in all parts of its
business. The Company intends to focus on growing its core energy business by
seeking to acquire control of physical assets, specifically power generation
assets and electric and gas transmission and distribution assets. The Company
expects that initial growth will come at a local and regional level, with
national growth to follow. Key strengths of the Company today include its
position as one of the lowest cost producers of power in the nation, expertise
in hydroelectric and power system management, plus capabilities in trading and
wholesale and retail marketing of gas and electric energy. The Company is also
continuing to develop an unique approach to commercialization of fuel cell
technology.
LOCALLY. WWP is a long standing leader in the Northwest region of the United
States, providing some of the lowest cost energy to its customers. The Company's
strategy is to add selectively to its already strong foundation of
state-regulated utility assets to solidify its position as a leading supplier of
a low cost electric and natural gas energy services.
REGIONALLY. The Company intends to add to its regulated and non-regulated assets
on a regional basis and participate in industry consolidation to further
optimize its assets and create greater economies of scale. In addition to energy
delivery and generation, WWP plans to concentrate on growing its energy trading
and marketing business. The strong growth in this business is driven by the
Company's significant base of knowledge and experience in the operation of
physical systems for both natural gas and electric energy in the region,
as well as its relationship-focused approach to the customer.
-12-
<PAGE>
NATIONALLY. WWP's strong regional energy trading and marketing skills serve as a
platform for the Company's growing national presence. The Company will seek to
expand its customer base through relationships with other energy providers
outside WWP's Northwest stronghold and thereby leverage its existing trading and
marketing skills.
NON-ENERGY
WWP conducts the majority of its non-energy business through its wholly-owned
subsidiary Pentzer Corporation. Pentzer's business strategy is to acquire
controlling interests in a broad range of middle market companies, facilitate
improved productivity and growth, and ultimately sell such companies to the
public or a strategic buyer.
The Company's growth strategy will expose the Company to risks associated with
rapid expansion, challenges in recruiting and retaining qualified personnel,
risks associated with acquisitions and joint ventures and increasing
competition. In addition, growth in the energy and trading and marketing
business will expose the Company to increased financial and credit risks
associated with commodity trading activities. The Company believes that its
extensive experience in the electric and gas businesses, coupled with its strong
management team, will allow WWP to effectively manage its transition to a
diversified North American energy company.
-13-
<PAGE>
THE WASHINGTON WATER POWER COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
AND SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA 31-Dec Adjustments Pro Forma 30-June Adjustments Pro Forma
1997 1998
---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues. . . . . . . . . . . . . . . . $1,302,172 $1,302,172 $1,204,664 $1,204,664
---------- --------- ---------- ----------
Operating expenses: . . . . . . . . . . . . . . .
Resource costs . . . . . . . . . . . . . . . . 719,905 719,905 885,256 885,256
Operations and maintenance . . . . . . . . . . 176,354 176,354 97,864 97,864
Administrative and general . . . . . . . . . . 96,611 96,611 62,418 62,418
Depreciation and amortization. . . . . . . . . 69,893 69,893 34,602 34,602
Taxes other than income taxes. . . . . . . . . 49,945 49,945 25,882 25,882
---------- --------- ---------- ----------
Total operating expense. . . . . . . . . . . 1,112,708 1,112,708 1,106,022 1,106,022
---------- --------- ---------- ----------
Income from operations. . . . . . . . . . . . . . 189,464 189,464 98,642 98,642
---------- --------- ---------- ----------
Other income (expense): . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . (66,275) (66,275) (34,060) (34,060)
Interest on income tax recovery. . . . . . . . 47,338 47,338 - -
Net gain on subsidiary transactions. . . . . . 11,218 11,218 7,611 7,611
Other income (deductions)-net. . . . . . . . . (5,873) (5,873) 4,947 4,947
---------- --------- ---------- ----------
Total other income (expense)-net . . . . . . (13,592) (13,592) (21,502) (21,502)
---------- --------- ---------- ----------
Income before income taxes. . . . . . . . . . . . 175,872 175,872 77,140 77,140
Income taxes. . . . . . . . . . . . . . . . . . . 61,075 61,075 29,265 29,265
---------- --------- ---------- ----------
Net income. . . . . . . . . . . . . . . . . . . . 114,797 114,797 47,875 47,875
Deduct Preferred stock dividend
requirements . . . . . . . . . . . . . . . . . . 5,392 24,800 30,192 1,612 12,400 14,012
---------- --------- ---------- ----------
Income available for common stock . . . . . . . . $109,405 $84,605 $46,263 $33,863
---------- --------- ---------- ----------
---------- --------- ---------- ----------
Average common shares outstanding (thousands) . .
Basic. . . . . . . . . . . . . . . . . . . . . 55,960 (20,000) 35,960 55,960 (20,000) 35,960
Diluted. . . . . . . . . . . . . . . . . . . . 55,960 55,960 55,960 55,960
Earnings per share of common stock
Basic and diluted. . . . . . . . . . . . . . . .
Basic. . . . . . . . . . . . . . . . . . . . . $1.96 $2.35 $0.83 $0.94
Diluted. . . . . . . . . . . . . . . . . . . . $1.96 $1.96 $0.83 $0.83
. . . . . . . . . . . . . . . . . . . . . .
Dividends paid per common share . . . . . . . . . $1.24 ($0.76) $0.48 $0.62 ($0.38) $0.24
Retained earnings, January 1. . . . . . . . . . . $131,301 $131,301 $199,105 $199,105
Net income. . . . . . . . . . . . . . . . . . . . $114,797 $114,797 $47,875 $47,875
Dividend declared:. . . . . . . . . . . . . . . .
Preferred stock. . . . . . . . . . . . . . . . ($5,339) ($24,800) ($30,139) ($1,612) ($12,400) ($14,012)
Common Stock . . . . . . . . . . . . . . . . . ($69,390) $52,129) ($17,261) ($34,695) $26,065 ($8,630)
ESOP dividend tax savings . . . . . . . . . . . . $407 $407 $195 $195
---------- --------- ---------- ----------
Retained earnings at end of period. . . . . . . . $171,776 $27,329 $199,105 $210,868 $13,665 $224,533
---------- --------- ---------- -------- ----------
---------- --------- ---------- -------- ----------
</TABLE>
-14-
<PAGE>
THE WASHINGTON WATER POWER COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS June 30, Adjustments Pro Forma
1998
----------
<S> <C> <C> <C>
Total assets: . . . . . . . . . . . . . . . . . . . . . . . . . . $3,069,475 $(7,800) (b) $3,061,675
---------- --------- ----------
Liabilities and capitalization. . . . . . . . . . . . . . . . . .
Total current and non current liabilities . . . . . . . . . . . . 1,376,636 1,376,636
---------- ----------
Long term debt. . . . . . . . . . . . . . . . . . . . . . . . . . 788,481 788,481
---------- ----------
Company obligated mandatorily redeemable
preferred trust securities
7 7/8%, Series A, due 2037 . . . . . . . . . . . . . . . . . . 60,000 60,000
Floating Rate, Series B, due 2037. . . . . . . . . . . . . . . 50,000 50,000
---------- ----------
Total company obligated mandatorily
redeemable preferred trust securities. . . . . . . . . . . . 110,000 110,000
---------- ----------
Preferred stock cumulative:
10,000,000 shares authorized:
Subject to mandatory redemption:
$6.95 Series K; 350,000 shares outstanding
($100 stated value). . . . . . . . . . . . . . . . . . . . . 35,000 35,000
Not subject to mandatory redemption:
Convertible Preferred
$12.40 Convertible Series L; 2,000,000
shares outstanding (assumed $220 stated value) . . . . . . . -- 440,000 440,000
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 440,000 475,000
---------- ---------- ----------
Common equity:
Common stock, no par value; 200,000,000 shares
authorized; 55,960,360 shares outstanding;
35,960,360 outstanding . . . . . . . . . . . . . . . . . . . 594,852 (336,248) (a) 258,604
Note receivable from employee stock ownership plan . . . . . . (9,770) (9,770)
Capital stock expense and other paid in capital. . . . . . . . (10,173) (7,800) (b) (17,973)
Unrealized investment gain - net . . . . . . . . . . . . . . . 946 946
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . 183,503 (103,752) (a) 79,751
---------- ---------- ----------
Total common equity. . . . . . . . . . . . . . . . . . . . . 759,358 (447,800) 311,558
---------- ---------- ----------
Total capitalization. . . . . . . . . . . . . . . . . . . . . . . $1,692,839 $(7,800) $1,685,039
---------- ---------- ----------
Total liabilities and capitalization. . . . . . . . . . . . . . . $3,069,475 $(7,800) 3,061,675
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(a) The allocation of the assumed $440 million to common equity was performed
on a percentage basis.
(b) The estimated expenses associated with the Exchange Offer.
-15-
<PAGE>
THE EXCHANGE OFFER
BACKGROUND AND PURPOSE
The Company is making the Exchange Offer to provide those shareholders whose
primary objective may be current income with an opportunity, subject to the
terms and conditions of the Exchange Offer, to exchange all or a portion of
their Common Shares for an equal number of RECONS entitled to receive an annual
cash dividend of $1.24 per share. The Exchange Offer provides holders of Common
Shares with the option of exchanging their shares for RECONS and receiving a
stated dividend higher than the dividend expected on Common Shares. However,
because the Company may convert the RECONS at any time at the RECONS Optional
Conversion Price (plus the RECONS Optional Conversion Premium and accrued
dividends), which may, at the time of such conversion, be less than the then
existing market price of the Common Shares, an investment in the RECONS does not
provide the holder with the same opportunity for share price appreciation
afforded by an investment in the Common Shares.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions described herein and in the related
Letter of Transmittal (which together constitute the Exchange Offer), the
Company is offering to exchange RECONS for up to 20,000,000 Common Shares at a
rate of one RECONS for each Common Share validly tendered prior to the
Expiration Date and not theretofore withdrawn as described under "--Withdrawal
of Tendered Common Shares." If the Exchange Offer is oversubscribed as described
below, only Common Shares validly tendered pursuant to the Exchange Offer and
not withdrawn prior to the Expiration Date will be eligible for proration. All
Common Shares not acquired pursuant to the Exchange Offer, including Common
Shares not purchased because of proration, will be returned to the tendering
shareholders at the Company's expense as promptly as practicable following the
Expiration Date.
The Company's obligation to accept Common Shares for exchange pursuant to the
Exchange Offer is subject to certain conditions set forth under "--Conditions of
the Exchange Offer." Among other conditions, the Exchange Offer is conditioned
upon a minimum of 6,000,000 Common Shares being validly tendered and not
withdrawn prior to the Expiration Date (the "Minimum Condition"). If the Minimum
Condition is not satisfied prior to the Expiration Date, the Company reserves
the right (but shall not be obligated) to (i) decline to accept for exchange and
exchange any of the Common Shares tendered and terminate the Exchange Offer,
(ii) waive or reduce the Minimum Condition and, subject to complying with the
applicable rules and regulations of the SEC, accept for exchange and exchange
all Common Shares validly tendered pursuant to the Exchange Offer, or (iii)
extend the Exchange Offer and, subject to the right of shareholders to withdraw
Common Shares until the Expiration Date, retain the Common Shares which have
been tendered during the period or periods for which the Exchange Offer is
extended.
The Company reserves the right at any time or from time to time to amend the
Exchange Offer in any respect by making a public announcement of such amendment
subject to complying with the applicable rules and regulations of the SEC. If
the Company materially changes the terms of the Exchange Offer or the
information concerning the Exchange Offer, the Company will extend the duration
of the Exchange Offer to the extent required by the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Certain rules promulgated under the
Exchange Act provide that the minimum period during which an offer must remain
open following material changes in the terms of the offer or information
concerning the offer (other than a change in price or a change in percentage of
securities sought) will depend on the facts and circumstances, including the
relative materiality of such terms or information. The SEC has stated that, as a
general rule, it is of the view that an offer should remain open for a minimum
of five business days from the date that notice of such material is first
published, sent or given, and that if material changes are made with respect to
information that approaches the significance of price and share levels, a
minimum of ten business days may be required to allow adequate dissemination and
investor response.
The tender of any Common Shares pursuant to the Exchange Offer will include the
tender of the associated Rights (as defined herein) under the Rights Agreement
(as defined herein), as described in "Description of Capital Stock--Preferred
Share Purchase Rights." No separate consideration will be paid for such Rights.
-16-
<PAGE>
EXPIRATION OF THE EXCHANGE OFFER; EXTENSION OF THE EXCHANGE OFFER
The Exchange Offer will expire on the Expiration Date, unless theretofore
extended. The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on ______, ______ ___, 1998, unless and until the Company shall have
extended the period of time for which the Exchange Offer is open, in which event
"Expiration Date" shall mean the latest time and date on which the Exchange
Offer, as so extended by the Company, shall expire.
The Company expressly reserves the right, in its sole discretion, at any time or
from time to time, to extend the period of time during which the Exchange Offer
is open by giving oral or written notice of such extension to the Exchange
Agent. There can be no assurance, however, that the Company will exercise its
right to extend the Exchange Offer. If the Company decides, in its sole
discretion, to increase (except for any increase not in excess of 2% of the
outstanding Common Shares) or decrease the number of Common Shares being sought
in the Exchange Offer and, at the time that notice of such increase or decrease
is first published, sent or given to holders of Common Shares in the manner
specified below, the Exchange Offer is scheduled to expire at any time earlier
than the tenth business day from the date that such notice is first so
published, sent or given, the Exchange Offer will be extended until the
expiration of such ten business day period. As used herein, a "business day"
means any day other than a Saturday, Sunday or federal holiday and consists of
the time period from 12:01 a.m. through 12:00 midnight, New York City time.
PRORATION
Upon the terms and subject to the conditions of the Exchange Offer (including
the Minimum Condition), if 20,000,000 or fewer Common Shares have been validly
tendered pursuant to the Exchange Offer and not withdrawn prior to the
Expiration Date, the Company will accept all such Common Shares for exchange.
Upon the terms and subject to the conditions of the Exchange Offer, if more than
20,000,000 Common Shares have been validly tendered pursuant to the Exchange
Offer and not withdrawn prior to the Expiration Date, the Company will accept
for exchange all Common Shares validly tendered pursuant to the Exchange Offer
and not withdrawn prior to the Expiration Date on a pro rata basis (with
appropriate adjustments to avoid purchases of fractional Common Shares).
The Company does not expect that it would be able to announce the final
proration factor or to commence delivery of RECONS until approximately five NYSE
trading days after the Expiration Date if proration of tendered Common Shares is
required, because of the difficulty in determining the number of Common Shares
validly tendered (including Common Shares tendered pursuant to the guaranteed
delivery procedure described below) and not withdrawn prior to the Expiration
Date. Preliminary results of proration will be announced by press release as
promptly as practicable after the Expiration Date. Holders of Common Shares may
obtain such preliminary information from the Information Agent and may also be
able to obtain such information from their brokers.
REGULATORY APPROVALS
Prior to commencing the Exchange Offer, the Company will have received all
material federal or state regulatory approvals necessary to consummate the
Exchange Offer or any transactions contemplated in connection therewith.
APPRAISAL RIGHTS
The Exchange Offer will not give rise to dissenter's rights of appraisal under
Washington law.
ACCOUNTING TREATMENT
Each share of New Preferred Stock will be recorded on the Company's Balance
Sheet at its stated value which will be fixed at the market price of the Common
Stock received in exchange therefor. Common Stock received in exchange for the
New Preferred
-17-
<PAGE>
Stock will be recorded on the Company's Balance Sheet as a charge against common
equity at cost (market value at the time of the exchange).
PROCEDURE FOR TENDER
To tender Common Shares pursuant to the Exchange Offer, either (a) a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signature guarantees, or an Agent's Message (as
defined below) in the case of a book-entry transfer of shares, and any other
documents required by the Letter of Transmittal must be received by the Exchange
Agent at one of its addresses set forth on the back cover of this Prospectus and
either (i) certificates for the Common Shares to be tendered must be received by
the Exchange Agent at one of such addresses or (ii) such Common Shares must be
delivered pursuant to the procedures for book-entry transfer described below
(and a confirmation of such delivery must be received by the Exchange Agent), in
each case by the Expiration Date, or (b) the guaranteed delivery procedure
described below must be complied with.
The Exchange Agent will establish accounts with respect to the Common Shares at
The Depository Trust Company ("DTC"), for purposes of the Exchange Offer within
two business days after the date of this Prospectus, and any financial
institution that is a participant in DTC's system may make delivery of Common
Shares by causing DTC to transfer such Common Shares into the Exchange Agent's
account in accordance with DTC's procedures. Although delivery of Common Shares
may be effected through book-entry transfer, the Letter of Transmittal (or
manually signed facsimile thereof), or an Agent's Message, and any other
required documents must, in any case, be received by the Exchange Agent at one
of its addresses set forth on the back cover of this Prospectus by the
Expiration Date, or the guaranteed delivery procedure described below must be
complied with. "Agent's Message" means a message transmitted through electronic
means by DTC to and received by the Exchange Agent and forming a part of a
book-entry confirmation, which states that DTC has received an express
acknowledgment from the participant tendering the shares that such participant
has received and agrees to be bound by the Letter of Transmittal. Delivery of
the Letter of Transmittal and any other required documents to DTC does not
constitute delivery to the Exchange Agent.
Except as otherwise provided below, all signatures on a Letter of Transmittal
must be guaranteed by a firm that is a participant in the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Program or the Stock Exchange Medallion Program (each being an "Eligible
Institution"). Signatures on a Letter of Transmittal need not be guaranteed if
(a) the Letter of Transmittal is signed by the registered holder of the Common
Shares tendered therewith and such holder has not completed the boxes entitled
"Special Issue Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (b) such Common Shares are tendered for the account of an
Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal.
If a shareholder desires to tender Common Shares pursuant to the Exchange Offer
and cannot deliver such Common Shares and all other required documents to the
Exchange Agent by the Expiration Date, such Common Shares may nevertheless be
tendered if all of the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Company is received by the Exchange
Agent (as provided below) by the Expiration Date; and
(iii) the certificates for such Common Shares (or a confirmation of a
book-entry transfer of such Common Shares into the Exchange Agent's account at
DTC), together with a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) and any other documents required by the
Letter of Transmittal, are received by the Exchange Agent within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Exchange Agent and must
include a Guarantee by an Eligible Institution in the form set forth in such
Notice.
-18-
<PAGE>
Shareholders who are participants in the Company's Dividend Reinvestment Plan
may tender some or all of the Common Shares held in their plan account. However,
dividend payments on RECONS received in exchange for such Common Shares will be
paid in cash and cannot be automatically reinvested under the plan. Participants
in the Company's Investment and Employee Stock Ownership Plan (the "ESOP Plan")
may tender Common Shares held in their Deferral and Rollover Accounts, but not
in their Matching Accounts. Dividend payments on RECONS received in exchange for
such Common Shares will automatically be invested in Common Shares. Shareholders
who wish to tender Common Shares held in their Deferral and Rollover Accounts
under the ESOP Plan should complete and return the ESOP Exchange Letter to the
plan trustee. All other holders wishing to tender Common Shares should so
indicate by checking the appropriate box in the section of the Letter of
Transmittal captioned "Description of Common Shares Tendered in the Exchange
Offer" and returning the properly completed and duly executed Letter of
Transmittal or manually signed facsimile thereof with any required signature
guarantees and any other documents required by the Letter of Transmittal to the
Exchange Agent. Any plan account Common Shares tendered but not accepted for
exchange will be returned to the shareholder's applicable plan account.
If any certificate representing Common Shares has been mutilated, destroyed,
lost or stolen, the shareholder must (i) furnish to the Exchange Agent evidence,
satisfactory to it in its discretion, of the ownership of and destruction, loss
or theft of such certificate and (ii) comply with such other reasonable
regulations as the Exchange Agent may proscribe.
The tender of Common Shares pursuant to the Exchange Offer in accordance with
the procedures described above will constitute an agreement between the
tendering shareholder and the Company upon the terms and subject to the
conditions of the Exchange Offer, including the tendering shareholder's
representation and warranty that (i) such shareholder owns the Common Shares
being tendered within the meaning of Rule 14e-4 under the Exchange Act and (ii)
the tender of such Common Shares complies with Rule 14e-4.
It is a violation of Rule 14e-4 under the Exchange Act for a person, directly or
indirectly, to tender Common Shares for his own account unless the person so
tendering (i) has a net long position equal to or greater than the number of (x)
Common Shares tendered or (y) other securities immediately convertible into, or
exercisable or exchangeable for, the number of Common Shares tendered and will
acquire such Common Shares for tender by conversion, exercise or exchange of
such other securities and (ii) will cause such Common Shares to be delivered in
accordance with the terms of the Exchange Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person. The tender of Common Shares pursuant to the procedures described
above will constitute the tendering shareholder's representation and warranty
that (i) such shareholder has a net long position in the Common Shares being
tendered within the meaning of Rule 14e-4 under the Exchange Act and (ii) the
tender of such Common Shares complies with Rule 14e-4.
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for exchange of any tender of Common
Shares will be determined by the Company, in its sole discretion, which
determination shall be final and binding. The Company reserves the absolute
right to reject any or all tenders of Common Shares determined by it not to be
in proper form or to reject Common Shares the acceptance of exchange or exchange
of which may, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any defect or irregularity in any
tender of Common Shares. None of the Company, the Exchange Agent, the
Information Agent or any other person will be under any duty to give
notification of any defect or irregularity in tenders or incur any liability for
failure to give any such notification.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR COMMON
SHARES, IN CONNECTION WITH TENDERING PURSUANT TO THE EXCHANGE OFFER IS AT THE
ELECTION AND RISK OF THE TENDERING SHAREHOLDER AND, EXCEPT AS OTHERWISE PROVIDED
IN THE LETTER OF TRANSMITTAL, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED AND SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
-19-
<PAGE>
WITHDRAWAL OF TENDERED COMMON SHARES
Tenders of Common Shares made pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date. Thereafter, such tenders are irrevocable,
except that they may be withdrawn after ___________, 1998 unless theretofore
accepted for exchange as provided in this Prospectus. If the Company extends the
period of time during which the Exchange Offer is open, is delayed in accepting
for exchange or exchanging Common Shares or is unable to accept for exchange or
to exchange Common Shares pursuant to the Exchange Offer for any reason, then,
without prejudice to the Company's rights under the Exchange Offer, the Exchange
Agent may, on behalf of the Company, retain all Common Shares tendered, and such
Common Shares may not be withdrawn except as otherwise provided herein, subject
to Rule 13e-4(f)(5) under the Exchange Act, which provides that the issuer
making the tender offer shall either pay the consideration offered, or return
the tendered securities, promptly after the termination or withdrawal of the
tender offer.
To be effective, a written, telegraphic, telex or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at one of its
addresses set forth on the back cover of this Prospectus and must specify the
name of the person who tendered the Common Shares to be withdrawn and the number
of Common Shares to be withdrawn with respect to the Exchange Offer. If the
Common Shares to be withdrawn have been delivered to the Exchange Agent, a
signed notice of withdrawal with signatures guaranteed by an Eligible
Institution (except in the case of Common Shares tendered by an Eligible
Institution) must be submitted prior to the release of such Common Shares. In
addition, such notice must specify, in the case of Common Shares tendered by
delivery of certificates, the name of the registered holder (if different from
that of the tendering shareholder) and the certificate numbers shown on the
particular certificates evidencing the Common Shares to be withdrawn or, in the
case of Common Shares tendered by book-entry transfer, the name and number of
the account at the DTC to be credited with the withdrawn Common Shares.
Withdrawals may not be rescinded and Common Shares withdrawn will thereafter be
deemed not validly tendered for purposes of the Exchange Offer. However,
withdrawn Common Shares may be tendered again by following one of the procedures
described in "--Procedure for Tender" at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Company, in its sole discretion,
which determination shall be final and binding. None of the Company, the
Exchange Agent, the Information Agent or any other person will be under any duty
to give notification of any defect or irregularity in any notice of withdrawal
or incur any liability for failure to give any such notification.
ACCEPTANCE; DELIVERY OF CONSIDERATION
Upon the terms and subject to the conditions of the Exchange Offer, and as
promptly as practicable after the Expiration Date, the Company will (subject to
the proration provisions of the Exchange Offer) accept for exchange (and thereby
acquire) and exchange for RECONS the Common Shares validly tendered pursuant to
the Exchange Offer by the Expiration Date and not withdrawn as permitted under
"--Withdrawal of Tendered Common Shares" above. In all cases, delivery of the
RECONS to exchanging holders of Common Shares will be made as soon as
practicable after the Expiration Date (subject to possible delay in the event of
proration) but only after timely receipt by the Exchange Agent of certificates
for Common Shares (or of a confirmation of a book-entry transfer of such Common
Shares into the Exchange Agent's account at DTC), a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof), or an
Agent's Message in the case of a book-entry transfer of Common Shares, and any
other required documents. In addition, the Company reserves the right, in its
sole discretion (subject to Rule 13e- 4(f)(5) under the Exchange Act), to delay
the acceptance for exchange or to delay exchange of any Common Shares in order
to comply in whole or in part with applicable law.
For purposes of the Exchange Offer, the Company will be deemed to have accepted
for exchange (and thereby acquired), subject to the proration provisions of the
Exchange Offer, Common Shares that are validly tendered pursuant to the Exchange
Offer prior to the Expiration Date and not withdrawn as, if and when it gives
oral or written notice to the Exchange Agent of its acceptance for exchange of
Common Shares tendered pursuant to the Exchange Offer. The Exchange Agent will
act as agent for tendering shareholders for the purpose of (i) receiving RECONS
from the Company in exchange for Common Shares tendered pursuant to the
Exchange Offer and (ii) delivering RECONS to tendering shareholders. Under no
circumstances will interest be paid on RECONS to be delivered to tendering
shareholders by the Company by reason of any delay in making such delivery.
-20-
<PAGE>
Certificates for all Common Shares not acquired by the Company pursuant to the
Exchange Offer for any reason will be returned (or, in the case of Common Shares
tendered by book-entry transfer, such Common Shares will be credited to an
account maintained with DTC) as soon as practicable (subject to possible delay
in the event of proration) without expense to the tendering shareholder. The
Company will pay all stock transfer taxes, if any, payable on the transfer to it
of Common Shares purchased pursuant to the Exchange Offer, except as set forth
in Instruction 7 of the Letter of Transmittal.
Delivery of RECONS in exchange for Common Shares may be delayed in the event of
difficulty in determining the number of Common Shares validly tendered or if
proration is required. See "--Proration" above. In addition, if certain
conditions are not satisfied, the Company may not be obligated to exchange
RECONS pursuant to the Exchange Offer. See "--Conditions of the Exchange Offer"
below. As provided in Rules 13e-4(f)(4) and (8)(ii) under the Exchange Act, the
Company will deliver the same consideration per Common Share for each Common
Share accepted pursuant to the Exchange Offer.
CONDITIONS OF THE EXCHANGE OFFER
It is a condition of the Exchange Offer that a minimum of 6,000,000 Common
Shares be validly tendered pursuant to the Exchange Offer by the Expiration Date
and not withdrawn.
In addition, notwithstanding any other provision of the Exchange Offer, the
Company shall not be required to accept for exchange or to exchange any Common
Shares tendered pursuant to the Exchange Offer, and may terminate or amend the
Exchange Offer or may postpone (subject to the requirements of the Exchange Act
for prompt exchange or return of Common Shares) the acceptance for exchange and
exchange of Common Shares tendered, if at any time on or after ___________, 1998
and before acceptance for exchange or exchange of any such Common Shares any of
the following shall have occurred:
(a) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or administrative
agency or authority or tribunal or any other person, domestic or foreign, before
any court, authority, agency or tribunal which (i) challenges the making of the
Exchange Offer, the issuance of the New Preferred Stock, the acquisition of some
or all of the Common Shares pursuant to the Exchange Offer or otherwise relates
in any manner to the Exchange Offer, or (ii) in the Company's sole judgment,
could materially affect the business, condition (financial or other), income,
operations or prospects of the Company and its subsidiaries, taken as a whole,
or otherwise materially impair in any way the contemplated future conduct of the
business of the Company or any of its subsidiaries or materially impair the
contemplated benefits of the Exchange Offer to the Company;
(b) there shall have been any action threatened, pending or taken, or approval
withheld, or any statute, rule, regulation, judgment, order or injunction
threatened, proposed, sought, promulgated, enacted, entered, amended, enforced
or deemed to be applicable to the issuance of the New Preferred Stock or the
Exchange Offer or the Company or any of its subsidiaries, by any court or any
authority, agency or tribunal which, in the Company's sole judgment, would or
might directly or indirectly (i) make the issuance of the New Preferred Stock or
the acceptance for exchange or exchange of some or all of the Common Shares
illegal or otherwise restrict or prohibit consummation of the Exchange Offer;
(ii) delay or restrict the ability of the Company, or render the Company unable,
to issue the New Preferred Stock or to accept for exchange or to exchange some
or all of the Common Shares; (iii) materially impair the contemplated benefits
of the Exchange Offer to the Company; or (iv) materially affect the business,
condition (financial or other), income, operations or prospects of the Company
and its subsidiaries, taken as a whole, or otherwise materially impair in any
way the contemplated future conduct of the business of the Company or any of its
subsidiaries;
(c) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market, (ii) the declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States, (iii)
the commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States, (iv)
any limitation (whether or not mandatory) by any governmental, regulatory or
administrative agency or authority on, or any event which, in the Company's
sole judgment, might affect the extension of credit by banks or other lending
institutions in the United States, (v) any significant decrease in the market
price of the Common Shares or any change in the general political, market,
economic or financial conditions in the United States or abroad that could,
in the sole judgment of the Company, have a material adverse effect on the
Company's business, operations or prospects or
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the trading in the Common Shares, (vi) in the case of any of the foregoing
existing at the time of the commencement of the Exchange Offer, a material
acceleration or worsening thereof or (vii) any decline in either the Dow
Jones Industrial Average (________ at the close of business on ___________,
1998) or the Standard and Poor's 500 Index (________ at the close of business
on ___________, 1998) by an amount in excess of ___ percent measured from the
close of business on ___________, 1998;
(d) any tender or exchange offer with respect to some or all of the Common
Shares (other than the Exchange Offer), or a merger, acquisition or other
business combination proposal for the Company, shall have been proposed,
announced or made by any person or entity;
(e) any change shall occur or be threatened in the business, condition
(financial or other), income, operations, Common Share ownership or prospects of
the Company and its subsidiaries, taken as a whole, which, in the sole judgment
of the Company, is or may be material to the Company; or
(f) (i) any person, entity or "group" (as that term is used in Section 13(d)(3)
of the Exchange Act) shall have acquired, or proposed to acquire, beneficial
ownership of more than 5% of the outstanding Common Shares (other than a person,
entity or group which had publicly disclosed such ownership in a Schedule 13D or
13G (or an amendment thereto) on file with the SEC prior to ___________, 1998
(date of commencement of the Exchange Offer), (ii) any such person, entity or
group which had publicly disclosed such ownership prior to such date shall have
acquired, or proposed to acquire, beneficial ownership of additional Common
Shares constituting more than 2% of the outstanding Common Shares (options for
and other rights to acquire Common Shares which are so acquired or proposed to
be acquired being deemed for this purpose to be immediately exercisable) or
(iii) any new group shall have been formed which beneficially owns more than 5%
of the outstanding Common Shares;
and, in the sole opinion of the Company, in any such case and regardless of the
circumstances (including any action or omission to act by the Company) giving
rise to such condition, such event makes it inadvisable to proceed with the
Exchange Offer or with such acceptance for exchange or such exchange.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such condition, and any such
condition may be waived by the Company, in whole or in part, at any time and
from time to time in its sole discretion, with respect to the Exchange Offer.
The Company's failure at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right; the waiver of any such right with
respect to particular facts and circumstances shall not be deemed a waiver with
respect to any other facts or circumstances; and each such right shall be deemed
an ongoing right which may be asserted at any time and from time to time. Any
determination by the Company concerning the events described above will be final
and binding on all parties.
COMMISSIONS AND FEES
Tendering shareholders will not be obligated to pay brokerage commissions,
solicitation fees, or, subject to Instruction 7 of the Letter of Transmittal,
stock transfer taxes on the acquisition of Common Shares by the Company in
connection with the Exchange Offer. The Company will pay reasonable and
customary compensation to, and all reasonable charges and expenses of, The Bank
of New York, as Exchange Agent, and Morrow & Co, Inc., as Information Agent, in
connection with the Exchange Offer and each may be indemnified against certain
liabilities and expenses in connection therewith. The Company will not pay any
commission or other remuneration to any broker, dealer, salesman or other person
for soliciting tenders of Common Shares in connection with the Exchange Offer,
except as discussed under "Dealer Manager." Officers and regular employees of
the Company and its affiliates may solicit tenders of Common Shares in
connection with the Exchange Offer by telecopier, telephone or in person. No
additional compensation will be paid to any such officers and employees who
engage in soliciting tenders.
STATUS OF COMMON SHARES ACQUIRED PURSUANT TO THE EXCHANGE OFFER
Any Common Shares acquired by the Company pursuant to the Exchange Offer will
return to the status of authorized but unissued shares. Subject to the receipt
of necessary regulatory approvals, such shares would be available for use by the
Company, without,
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in most cases, the need for further shareholder authorization, for general or
other corporate purposes, including conversion of RECONS, stock splits or
dividends, acquisitions, employee incentive, savings and compensation plans,
sales to a third party or parties, or issuance of rights or warrants to
purchase Common Shares. Except for use in employee benefit plans and
conversion of RECONS, the Company has no present plan to issue any authorized
but unissued Common Shares.
EXCHANGE AGENT
The Bank of New York is the Exchange Agent for the Exchange Offer. All Letters
of Transmittal and other documents required in connection with tenders of Common
Shares pursuant to the Exchange Offer should be transmitted to the Exchange
Agent in the manner specified under "--Procedure for Tender" above and in the
Letter of Transmittal to its address set forth below:
BY MAIL: BY HAND OR OVERNIGHT DELIVERY:
The Bank of New York The Bank of New York
P.O. Box 11248 Tender & Exchange Department
Church Street Station 101 Barclay Street
New York, New York 10286-1248 Receive and Deliver Window
New York, New York 10286
INFORMATION AGENT
Morrow & Co., Inc. is the Information Agent for the Exchange Offer. The
Information Agent may contact holders of Common Shares by mail, telephone,
facsimile transmission and personal interviews and may request brokers, dealers
and other nominee shareholders to forward materials relating to the Exchange
Offer to beneficial owners. Questions and requests for assistance or for
additional copies of this Prospectus and the Letter of Transmittal and Notice of
Guaranteed Delivery may be directed to the Information Agent at the following
address and telephone number:
Morrow & Co., Inc.
445 Park Avenue, 5th Floor
New York, NY 10022
Toll Free 1-800-566-9061
Banks and Brokerage Firms please call:
1-800-662-5200
You may also contact your broker, dealer, commercial bank or trust company or
other nominee for assistance concerning the Exchange Offer.
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DESCRIPTION OF RECONS
Each RECONS constitutes a one-tenth (1/10) ownership interest in one share of a
New Preferred Stock deposited under the Deposit Agreement dated as of
___________, 1998 (the "Deposit Agreement"), between the Company and The Bank of
New York, as depositary (the "Preferred Stock Depositary). Subject to the terms
of the Deposit Agreement, each owner of a RECONS is entitled, proportionately,
to all the rights, preferences and privileges of the New Preferred Stock
(including dividend, voting and liquidation rights), and subject,
proportionately, to all of the limitations of the New Preferred Stock, all as
set forth in the Articles of Amendment to the Company's Restated Articles of
Incorporation, as amended, summarized under "Description of Capital Stock."
The RECONS are evidenced by depositary receipts issued pursuant to the Deposit
Agreement (the "Depositary Receipts"). The following summary of the terms and
provisions of the RECONS does not purport to be complete and is subject to, and
qualified in its entirety by, the Deposit Agreement (which contains the form of
Depositary Receipt). Copies of the Deposit Agreement are available for
inspection at the corporate office of the Preferred Stock Depositary located at
The Bank of New York, 101 Barclay Street, New York, New York 10286.
ISSUANCE OF DEPOSITARY RECEIPTS
Upon issuance of the New Preferred Stock by the Company, the Company will
deposit the New Preferred Stock with the Preferred Stock Depositary, which will
execute and deliver the Depositary Receipts to the Company. The Company will,
in turn, deliver the Depositary Receipts to the Exchange Agent which will
deliver the Depositary Receipts to the owners of RECONS evidenced thereby.
Depositary Receipts will only be issued evidencing whole RECONS.
WITHDRAWAL OF NEW PREFERRED STOCK
Upon surrender of Depositary Receipts at the principal office of the Preferred
Stock Depositary, upon payment of a sum sufficient for the payment of any tax or
other governmental charge with respect thereto, and subject to the terms of the
Deposit Agreement, the owner of the RECONS evidenced thereby is entitled to
delivery of the number of whole shares of New Preferred Stock represented by
such RECONS. Fractional shares of New Preferred Stock will not be issued. If
the Depositary Receipts delivered by the holder evidence a number of RECONS in
excess of the number of RECONS representing the number of whole shares of New
Preferred Stock to be withdrawn, the Preferred Stock Depositary will deliver to
such holder at the same time a new Depositary Receipt evidencing such excess
number of RECONS. Holders of New Preferred Stock thus withdrawn will not
thereafter be entitled to deposit such shares under the Deposit Agreement or to
receive Depositary Receipts evidencing RECONS therefor. There is currently no
market for New Preferred Stock and it is not expected that an active trading
market for New Preferred Stock will develop. All trading is expected to be in
RECONS.
CONVERSION OF RECONS
As described under "Description of Capital Stock--Mandatory Conversion" and
- --"Optional Conversion," the New Preferred Stock is subject (i) to conversion on
the Mandatory Conversion Date (or in connection with certain mergers,
consolidations or other extraordinary transactions of the Company), and (ii) to
the right of the Company, at its option, to convert the New Preferred Stock at
any time prior to the Mandatory Conversion Date. The RECONS are subject to
conversion into Common Shares upon the same terms and conditions (including as
to notice to the owners of RECONS and as to selection of RECONS to be converted
if fewer than all the outstanding RECONS are to be converted) as the New
Preferred Stock, except that the number of Common Shares received upon
conversion of each RECONS will be equal to one-tenth of the number of Common
Shares received upon conversion of each share of New Preferred Stock. To the
extent that RECONS are converted into Common Shares and all of such Common
Shares cannot be distributed to the record holders of Depositary Receipts
without creating fractional interests in such shares, the Preferred Stock
Depositary may, with the consent of the Company, adopt such method as it deems
equitable and practicable for the
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purpose of effecting such distribution, including the public or private sale of
such shares representing in the aggregate such fractional interests at such
places and upon such terms as it may deem proper, and the net proceeds of any
such sale shall be distributed or made available for distribution to such record
holders that would otherwise have received fractional interests in such shares.
The amount distributed in the foregoing cases will be reduced by any amounts
required to be withheld by the Company or the Preferred Stock Depositary on
account of taxes or otherwise required pursuant to law, regulation or court
process.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Company, on behalf of the Preferred Stock Depositary (or if the Company
determines otherwise, the Preferred Stock Depositary), will distribute all cash
dividends or other cash distributions in respect of the New Preferred Stock
represented by the RECONS to the record holders of Depositary Receipts in
proportion to the number of RECONS owned by such holders on the relevant record
date, which will be the same date as the relevant record date fixed by the
Company for the New Preferred Stock and the Common Stock. In each case where a
holder of RECONS would otherwise be entitled to receive a fraction of a cent,
the Company, on behalf of the Preferred Stock Depositary (or if the Company
determines otherwise, the Preferred Stock Depositary), will round the amount of
the distribution up to the next whole cent.
In the event of a distribution other than in cash, the Company, on behalf of the
Preferred Stock Depositary (or if the Company determines otherwise, the
Preferred Stock Depositary), will distribute property to the record holders of
Depositary Receipts entitled thereto, in proportion, as nearly as may be
practicable, to the number of RECONS owned by such holders on the relevant
record date, unless the Company determines that it is not feasible to make such
distribution, in which case the Company, on behalf of the Preferred Stock
Depositary (or if the Company determines otherwise, the Preferred Stock
Depositary), may adopt any other method for such distribution as it deems
appropriate, including the sale of such property and distribution of the net
proceeds from such sale to such holders.
The amount distributed in any of the foregoing cases will be reduced by any
amount required to be withheld by the Company or the Preferred Stock Depositary
on account of taxes.
RECORD DATE
Whenever (i) any cash dividend or other cash distribution shall become payable,
any distribution other than cash shall be made, or any rights, preferences or
privileges shall be offered with respect to the New Preferred Stock, or (ii) the
Depositary shall receive notice of any meeting at which holders of New Preferred
Stock are entitled to vote or of which holders of New Preferred Stock are
entitled to notice, the Preferred Stock Depositary shall in each such instance
fix a record date (which shall be the same date as the record date for the New
Preferred Stock) for the determination of the holders of Depositary Receipts (x)
who shall be entitled to receive such dividend, distribution, rights,
preferences or privileges or the net proceeds of the sale thereof or (y) who
shall be entitled to give instructions for the exercise of voting rights at any
such meeting or to receive notice of such meeting, subject to the provisions of
the Deposit Agreement.
PROCEDURES FOR VOTING
Promptly upon receipt of notice of any meeting at which the holders of New
Preferred Stock are entitled to vote, the Preferred Stock Depositary (unless
another arrangement for allowing holders of RECONS to exercise the voting
rights associated with the RECONS is agreed to by the Company and the
Preferred Stock Depositary) will cause the information contained in such
notice of meeting to be mailed to the record holders of Depositary Receipts
as of the record date for such meeting. Each such record holder of
Depositary Receipts will be entitled to instruct the Preferred Stock
Depositary as to the exercise of voting rights with respect to the number of
shares of New Preferred Stock represented by such holder's RECONS. The
Preferred Stock Depositary, as registered holder of such shares of New
Preferred Stock, will endeavor, insofar as practicable, to vote with respect
to the number of shares of New Preferred Stock represented by such RECONS in
accordance with such instructions, and the Company intends to take all action
which may be deemed necessary by the Preferred Stock Depositary
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in order to enable the Preferred Stock Depositary to do so. The Preferred Stock
Depository will abstain from voting with respect to the New Preferred Stock to
the extent that it does not receive specific written instructions from the
holders of Depositary Receipts.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the RECONS and any provision of the
Deposit Agreement may at any time and from time to time be amended by agreement
between the Company and the Preferred Stock Depositary. However, any amendment
which imposes or increases any fees, taxes or charges upon holders of RECONS
(other than taxes and other governmental charges, fees and other expenses
payable by such holders as provided for in the Deposit Agreement or Depositary
Receipt and as stated under "--Charges of Preferred Stock Depositary"), or which
otherwise prejudices any substantial existing right of holders of RECONS, will
not take effect as to outstanding RECONS until the expiration of ___ days after
notice of such amendment has been mailed to the record holders of outstanding
RECONS. Every holder of an outstanding RECONS at the time any such amendment
becomes effective will be deemed, by continuing to hold such RECONS, to consent
and agree to such amendment and to be bound by the Deposit Agreement as amended
thereby. No such amendment may impair the right, subject to the terms of the
Deposit Agreement, of any owner of any RECONS to surrender the Depositary
Receipt evidencing such RECONS with instructions to the Preferred Stock
Depositary to deliver to the holder the New Preferred Stock represented thereby,
except in order to comply with mandatory provisions of applicable law.
The Deposit Agreement may be terminated by the Company or the Preferred Stock
Depositary only if (i) all outstanding RECONS have been redeemed or (ii) there
has been a final distribution in respect of the New Preferred Stock in
connection with any liquidation, dissolution or winding up of the Company and
such distribution has been made to all the holders of RECONS. In the event the
Deposit Agreement is terminated, the Company will use its best efforts to list
the New Preferred Stock on the NYSE or any other national securities exchange on
which the Common Shares are listed.
CHARGES OF PREFERRED STOCK DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Preferred Stock Depositary in connection with the
initial deposit of the New Preferred Stock and the initial issuance of the
RECONS, any conversion of the New Preferred Stock and all withdrawals of the New
Preferred Stock by owners of RECONS. Holders of Depositary Receipts will pay
transfer, income and other taxes and governmental charges and charges incurred
by the Preferred Stock Depositary at the election of a holder, as provided in
the Deposit Agreement. In certain circumstances, the Preferred Stock Depositary
and the Company may refuse to transfer RECONS, may withhold dividends and
distributions and may sell the RECONS evidenced by such Depositary Receipt if
such charges are not paid.
MISCELLANEOUS
Application will be made to list the RECONS on the NYSE upon official notice of
issuance and subject to adequacy of distribution and other listing requirements.
If these conditions are not met, it is expected that the RECONS will trade in
the over-the-counter market.
The Company will deliver to the Preferred Stock Depositary all reports to
shareholders and other communications which the Company is required to furnish
to the holders of New Preferred Stock by law, by the rules of the NYSE or any
other stock exchange or trading market on which the RECONS are listed or by the
Restated Articles of Incorporation of the Company. The Preferred Stock
Depositary will forward to the holders of RECONS and will make available for
inspection by holders of such RECONS at the principal office of the Preferred
Stock Depositary and at such other places as it may from time to time deem
advisable, any such report and communications received from the Company.
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Neither the Preferred Stock Depositary nor the Company will be subject to any
liability under the Deposit Agreement to holders of Depositary Receipts other
than for its negligence, bad faith or willful misconduct. Neither the Preferred
Stock Depositary nor the Company will be liable if it is prevented or delayed by
law or any circumstance beyond its control in performing its obligations under
the Deposit Agreement. The obligations of the Company and the Preferred Stock
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder, and they will not be obligated to prosecute or
defend any legal proceeding in respect of any RECONS or shares of New Preferred
Stock unless satisfactory indemnity is furnished. The Company and the Preferred
Stock Depositary may rely on written advice of counsel or accountants, on
information provided by holders of RECONS or other persons believed in good
faith to be competent to give such information and on documents believed to be
genuine and to have been signed or presented by the proper party or parties.
RESIGNATION AND REMOVAL OF PREFERRED STOCK DEPOSITARY
The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so. The Company may at any time, by
notice, remove the Preferred Stock Depositary or may terminate the engagement of
the Preferred Stock Depositary with respect to any or all of its duties and
obligations under the Deposit Agreement. Any such resignation, removal or
termination will take effect upon the appointment of a successor Preferred Stock
Depositary and such successor's acceptance of such appointment with respect to
all the predecessor's duties and obligations so terminated. Such successor
Preferred Stock Depositary must be appointed within 45 days after delivery of
the notice for resignation, removal or termination and, if the predecessor is to
acquire title to New Preferred Stock, must be a bank or trust company having its
principal office in the United States of America and having a combined capital
and surplus of at least $50,000,000.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 10,000,000 shares of
Preferred Stock, cumulative, without par value (the "Preferred Stock"), and
200,000,000 shares of Common Stock without par value (the "Common Stock").
Shares of the Common Stock are sometimes herein called "Common Shares." For a
detailed description of the terms and characteristics of the capital stock of
the Company, reference is made to the Company's Restated Articles of
Incorporation (the "Restated Articles"), the form of the proposed Articles of
Amendment (the "Articles of Amendment") and the Company's Bylaws, as amended
(the "Bylaws"), copies of which are exhibits to the Registration Statement, and
to the laws of the State of Washington. Following is a brief summary of such
terms and characteristics, which does not purport to be complete and is
qualified in its entirety by the foregoing references.
The Restated Articles provide that Preferred Stock may be divided into and
issued from time to time in one or more series. All shares of Preferred Stock
constitute one and the same class of stock, are of equal rank and will otherwise
be identical except as to the designation thereof, the date or dates from which
dividends on shares thereof will be cumulative, and except that each series may
vary as to (a) the rate or rates of dividend, if any, which may be expressed in
terms of a formula or other method by which such rate or rates will be
calculated from time to time, and the date or dates on which dividends may be
payable, (b) whether shares may be redeemed and, if so, the redemption price and
terms and conditions of redemption, (c) the amount payable on voluntary and
involuntary liquidation, (d) sinking fund provisions, if any, for the redemption
or purchase of shares, and (e) the terms and conditions, if any, on which shares
may be converted. When Preferred Stock is initially issued, the number of
shares constituting such series, its distinguishing serial designation and its
particular characteristics (insofar as there may be variations between series)
may be fixed by resolution of the Board of Directors.
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DIVIDEND RIGHTS
The New Preferred Stock will be entitled, on a parity with each other series of
Preferred Stock and in preference to the Common Stock, to receive, but only when
and as declared by the Board of Directors, dividends at the rate of $12.40 per
share per annum; provided, however, that the dividend payable on December 15,
1998 will be $3.10 per share. Such dividends will be cumulative from the date
of issuance of the New Preferred Stock and will be payable on the fifteenth day
of March, June, September and December in each year, commencing December 15,
1998.
After full provision for all Preferred Stock dividends declared or in arrears,
the holders of Common Stock of the Company are entitled to receive such
dividends as may be lawfully declared from time to time by the Board of
Directors of the Company.
LIQUIDATION RIGHTS
The New Preferred Stock will be entitled, upon dissolution or liquidation, on a
parity with each other series of Preferred Stock and in preference to the Common
Stock, to a liquidation preference per share plus an amount equivalent to
accrued and unpaid dividends thereon, if any, to the date of such event. The
liquidation preference will be an amount equal to the average of the high and
low sale prices of the Common Shares on the trading date next preceding the date
of issuance of the New Preferred Stock, as reported in the consolidated
reporting system.
In the event of any dissolution or liquidation of the Company, after
satisfaction of the preferential liquidation rights of the Preferred Stock, the
holders of the Common Stock would be entitled to share ratably in all assets of
the Company available for distribution to shareholders.
CONVERSION
MANDATORY CONVERSION
On the Mandatory Conversion Date (I.E., November 1, 2001), each outstanding
share of New Preferred Stock will be mandatorily converted into (i) a number of
Common Shares determined at the Common Equivalent Rate and (ii) the right to
receive a cash amount equal to all accrued and unpaid dividends on such share of
New Preferred Stock.
The "Common Equivalent Rate" initially will be ten Common Shares for each share
of New Preferred Stock, subject to adjustment in the event that the Company
shall (i) pay a dividend or make a distribution with respect to its Common Stock
in shares of Common Stock, (ii) subdivide, reclassify or split its outstanding
shares of Common Stock into a greater number of shares, (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller number of
shares, (iv) issue by reclassification of its Common Stock any shares of Common
Stock other than in an Extraordinary Transaction (as defined below), (v) issue
certain rights or warrants to all holders of its Common Stock, (vi) pay a
dividend or make a distribution to all holders of its Common Stock of evidences
of its indebtedness or other assets (including shares of capital stock of the
Company (other than Common Stock) but excluding any distributions and dividends
referred to in clause (i) above or any cash dividends) or issue to all holders
of its Common Stock rights or warrants to subscribe for or purchase any of its
securities other than those described in clause (v) above, (vii) make a
distribution consisting of cash, excluding any quarterly cash dividend on the
Common Stock to the extent that the aggregate cash dividend per Common Share in
any quarter does not exceed $0.16 (as adjusted to reflect any events described
in clauses (ii) and (iii)), and excluding any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company or
(viii) cause the Rights (as defined below under "--Preferred Share Purchase
Rights") to be separated from the Common Shares in accordance with the
provisions of the Rights Agreement (as defined below) such that holders of New
Preferred Stock would not be entitled to receive any such Rights in respect of
the Common Shares issuable upon conversion of such New Preferred Stock. The
Company will also be entitled to make additional upward adjustments in the
Common Equivalent Rate, as it in its discretion shall determine to be advisable,
so that any stock dividends, subdivision of shares, distribution of rights to
purchase stock or securities, or distribution of securities convertible into or
exchangeable for stock (or any transaction which could be treated as
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any of the foregoing transactions pursuant to Section 305 of the Internal
Revenue Code of 1986, as amended) hereafter made by the Company to its
shareholders will not be taxable. See "--Preferred Share Purchase Rights" for
additional information on the Rights.
Upon the effectiveness at any time of a merger, consolidation or similar
extraordinary transaction involving the Company that results in the conversion
or exchange of the Common Shares into, or results in the holders of Common
Shares having the right to receive, other securities or other property (an
"Extraordinary Transaction"), each share of New Preferred Stock will be
automatically converted into, or into the right to receive, as the case may be,
securities and other property (including cash) of the same character and in the
same respective amounts as the holder of such share would have received if such
share had been converted pursuant to the optional conversion provisions
described below under "--Optional Conversion" immediately prior to the
effectiveness of such Extraordinary Transaction.
The term "Current Market Price" on any date of determination means the average
closing price of a Common Share on the NYSE for the five consecutive trading
days ending on and including such date of determination; provided, however, that
if the closing price of the Common Shares on the NYSE on the trading day next
following such five-day period (the "next-day closing price") is less than 95%
of such average closing price, then the Current Market Price per Common Share on
such date of determination will be the next-day closing price; and provided,
further, that, with respect to any conversion of the New Preferred Stock, if any
adjustment of the Common Equivalent Rate becomes effective during the period
beginning on the first day of such five-day period and ending on the applicable
conversion date, the Current Market Price as determined pursuant to the
foregoing will be appropriately adjusted to reflect such adjustment.
OPTIONAL CONVERSION
The shares of New Preferred Stock may be converted, at the option of the
Company, at any time on or after December 15, 1998 and prior to the Mandatory
Conversion Date, in whole or in part from time to time, into, for each share so
converted (1) a number of Common Shares equal to the Optional Conversion Price
(as defined below) then in effect plus (2) the right to receive an amount, in
cash, equal to the accrued and unpaid dividends thereon to the conversion date
plus (3) the right to receive the Optional Conversion Premium (as hereinafter
defined).
The "Optional Conversion Price" means, for each share of New Preferred Stock
converted at the option of the Company, a number of shares of Common Stock equal
to the lesser of (a) the amount of $__________ divided by the Current Market
Price as of the close of business on the second trading day immediately
preceding the day on which the Company gives notice of optional conversion and
(b) the number of shares of Common Stock determined by reference to the Common
Equivalent Rate as discussed under "--Mandatory Conversion."
The "Optional Conversion Premium" means, for each share of New Preferred Stock
converted at the option of the Company, an amount, in cash, initially equal to
$20.90, declining by $0.02111 for each day following December 15, 1998 to the
optional conversion date (computed on the basis of a 360-day year consisting of
twelve 30-day months) and equal to zero on and after September 15, 2001;
provided, however, that in lieu of delivering such amount in cash, the Company
may, at its option, deliver a number of Common Shares equal to the quotient of
such amount divided by the Current Market Price on the second trading day
immediately preceding the day in which the Company gives notice of such
conversion.
The initial Optional Conversion Premium of $20.90 represents the difference
between the annual dividend of $12.40 on each share of New Preferred Stock and
an assumed annual dividend of $4.80 for ten Common Shares for the period after
December 15, 1998 through September 15, 2001 (i.e. $1.90 per quarter for eleven
quarters). The premium declines to zero on September 15, 2001; no premium will
be paid on or after September 15, 2001. Dividends will accrue on the Preferred
Stock through the conversion date.
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PROCEDURES FOR CONVERSION
Notice of any conversion will be sent to the holders of the shares of New
Preferred Stock to be converted not less than 15 days nor more than 60 days
prior to the conversion date; provided, however, that (1) the failure to mail
any such notice of optional conversion or any defect therein or in the mailing
thereof will not impair the validity of the conversion proceedings with respect
to shares as to which there shall have been no such failure or defect and (2)
the failure to mail any such notice of mandatory conversion or any defect
therein or in the mailing thereof will not prevent the occurrence of such
mandatory conversion or impair the validity thereof.
Shares of New Preferred Stock to be converted will, on the date fixed for
conversion, be deemed to have been converted (if, in the case of an optional
conversion, notice was given as aforesaid); from and after such conversion date
dividends will cease to accrue on such shares; and all rights of the holders of
such shares (except only rights as holders of securities into which such shares
have been converted and the right to receive certificates representing such
securities and the right to receive an amount, in cash, equal to dividends
accrued on such shares to the date fixed for such conversion plus any Optional
Conversion Premium not otherwise paid in Common Shares) will terminate.
If less than all of the outstanding shares of New Preferred Stock are to be
converted at the option of the Company, the conversion shall be made either pro
rata or by lot in such manner as the Board of Directors shall determine.
Because the price of the Common Shares is subject to market fluctuations, the
value of the Common Shares received by a holder of shares of New Preferred Stock
upon conversion thereof on the Mandatory Conversion Date or upon an
Extraordinary Transaction of the Company may be more or less than the value of
the Common Shares tendered in exchange therefor. The shares of New Preferred
Stock are not convertible into Common Shares or cash at the option of the
holders thereof.
VOTING RIGHTS
Except for those purposes for which the right to vote is expressly conferred by
law or the Restated Articles, the holders of New Preferred Stock have no power
to vote. The holders of the Common Stock have sole voting power, except as
indicated below or as otherwise provided by law, and each holder of Common Stock
is entitled to vote cumulatively for the election of directors.
Under the Restated Articles, whenever and as often as dividends payable on
shares of Preferred Stock (including the New Preferred Stock) shall be in
arrears in an amount equal to the aggregate amount of dividends accumulated on
such shares over the eighteen (18) month period ended on such date, the holders
of Preferred Stock, voting separately and as a single class, shall be entitled
to elect a majority of the Board of Directors, and the holders of the Common
Stock, voting separately and as a single class, shall be entitled to elect the
remaining directors of the Company until such time as all defaults in the
payment of dividends on the Preferred Stock of any and all series shall have
been cured.
In addition, under the Restated Articles the affirmative vote of the holders of
at least a majority of the shares of the Preferred Stock is required:
(a) for the adoption of any amendment of the Restated Articles which would: (i)
create or authorize any new class of stock ranking prior to or on a parity with
the Preferred Stock as to dividends or upon dissolution, liquidation or winding
up; (ii) increase the authorized number of shares of the Preferred Stock; or
(iii) change any of the rights or preferences of the Preferred Stock at the time
outstanding, provided that if any such change would affect the holders of less
than the Preferred Stock of all series then outstanding, only the affirmative
vote of the holders of at least a majority of the shares of all series so
affected is required; and
(b) for the issuance of Preferred Stock, or of any other class of stock
ranking prior to or on a parity with such Preferred Stock as to dividends or
upon dissolution, liquidation or winding up, unless the net income of the
Company available for the payment of dividends for a period of 12 consecutive
calendar months within the 15 calendar months immediately preceding the
issuance of such shares is at least equal to one and one-half times the
annual dividend requirements on shares of Preferred Stock and on all shares
of all other classes of stock ranking prior to or on a parity with the
Preferred Stock as to dividends or upon dissolution, liquidation or winding
up, which will be outstanding immediately after the issuance of such shares,
including the shares proposed to be issued;
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PROVIDED, HOWEVER, that if the shares of Preferred Stock or any such prior or
parity stock shall have a variable dividend rate, the annual dividend
requirement of such shares shall be determined by reference to the weighted
average dividend rate on such shares during the 12 month period for which the
net income of the Company available for the payment of dividends shall have
been determined; and provided, further, that if the shares of the series to
be issued are to have a variable dividend rate, the annual dividend
requirement on such shares shall be determined by reference to the initial
dividend rate upon the issuance of such shares.
Under Washington law a vote of the holders of a majority of the outstanding
shares of Preferred Stock is required in connection with certain changes in the
capital structure of the Company or in certain rights and preferences of the
Preferred Stock, including certain of the changes described in (a) above. In
addition, Washington law requires the approval of certain mergers, share
exchanges and other major corporate transactions by the holders of two-thirds of
the outstanding Preferred Stock.
For those purposes for which the Preferred Stock has the right to vote, the
holders are entitled to one vote for each share held. In such a situation, each
RECONS would receive one-tenth of the vote allotted to one share of Preferred
Stock. Votes may be cumulated in electing directors.
CLASSIFIED BOARD OF DIRECTORS
Both the Restated Articles and the Bylaws provide for a Board of Directors
divided into three classes, each of which will generally serve for a term of
three years, with only one class of directors being elected in each year. The
Restated Articles and Bylaws also provide that directors may be removed only for
cause and only by the affirmative vote of the holders of a least a majority of
the Common Stock. The Restated Articles and Bylaws further require an
affirmative vote of the holders of at least 80% of the Common Stock to alter,
amend or repeal the provisions relating to the classification of the Board of
Directors and the removal of members from, and the filling of vacancies on, the
Board of Directors.
CHANGE IN CONTROL
The Restated Articles contain a "fair price" provision which requires the
affirmative vote of the holders of at least 80% of the Common Stock for the
consummation of certain business combinations, including mergers,
consolidations, recapitalizations, certain dispositions of assets, certain
issuances of securities, liquidations and dissolutions involving the Company and
a person or entity who is or, under certain circumstances, was, a beneficial
owner of 10% or more of the outstanding shares of Common Stock (an "Interested
Shareholder"), unless (a) such business combination shall have been approved by
a majority of the directors unaffiliated with the Interested Shareholder or (b)
certain minimum price and procedural requirements are met. The Restated
Articles provide that the "fair price" provision may be altered, amended or
repealed only by the affirmative vote of the holders of at least 80% of the
Common Stock.
PREFERRED SHARE PURCHASE RIGHTS
Reference is made to the Rights Agreement, dated as of February 16, 1990 (the
"Rights Agreement"), between the Company and First Chicago Trust Company of New
York, as Right Agent, filed with the SEC. The following statements are
qualified in their entirety by such reference.
The Company has adopted a shareholder rights plan pursuant to which holders of
Common Stock outstanding on March 2, 1990 or issued thereafter have been granted
one preferred share purchase right ("Right") on each outstanding share of Common
Stock. The description and terms of the Rights are set forth in the Rights
Agreement. Certain of the capitalized terms used in the following description
have the meanings set forth in the Rights Agreement.
Each Right, initially evidenced by and traded with the shares of Common Stock,
entitles the registered holder to purchase one one-hundredth of a share of
Preferred Stock of the Company, without par value (the "Preferred Shares"), at
an exercise price of $80,
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subject to certain adjustments, regulatory approval and other specified
conditions. The Rights will be exercisable only if a person or group
acquires 10% or more of the outstanding Common Stock or announces a tender
offer, the consummation of which would result in the beneficial ownership by
a person or group of 10% or more of the Common Stock.
If any person or group acquires 10% or more of the outstanding Common Stock,
each Right will entitle its holder (other than such person or members of such
group), subject to regulatory approval and other specified conditions, to
purchase that number of shares of Common Stock or Preferred Shares having a
market value of twice the Right's exercise price. In addition, in the event
that any person or group has acquired 10% or more of the outstanding Common
Stock or the Company consolidates or merges with or into, or sells 50% or more
of its assets or earning power to, any person or group, or engages in certain
"self-dealing" transactions with any person or group owning 10% or more of the
outstanding Common Stock, proper provision will be made so that each Right would
thereafter entitle its holder to purchase that number of the acquiring company's
common shares having a market value at that time of twice the Right's exercise
price.
At any time after a person or group acquires more than 10% but less than 50% of
the outstanding Common Stock, the Board of Directors of the Company may, subject
to any necessary regulatory approval, require each outstanding Right to be
exchanged for one share of Common Stock or cash, securities or other assets
having a value equal to the market value of one share of Common Stock.
The Rights may be redeemed, at a redemption price of $.01 per Right, by the
Board of Directors of the Company at any time until any person or group has
acquired 10% or more of the Common Stock. Under certain circumstances, the
decision to redeem the Rights will require the concurrence of a majority of the
Continuing Directors. The Rights will expire on February 16, 2000.
The Rights have certain anti-takeover effects. The Rights may cause substantial
dilution to a person or group that attempts to acquire the Company on terms not
approved by the Company's Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors of the Company prior to the time that a person or group has
acquired beneficial ownership of 10% or more of the Common Stock since until
such time the Rights may be redeemed as described above.
PRE-EMPTIVE RIGHTS
No holder of any stock of the Company has any pre-emptive rights.
MISCELLANEOUS
There is no specific restriction on the repurchase by the Company of the New
Preferred Stock or Common Stock while there is any arrearage in the payment of
dividends on the New Preferred Stock.
Upon issuance and exchange pursuant to the Exchange Offer as herein described,
the New Preferred Stock will be validly issued, fully paid and nonassessable,
and the holders thereof will not be subject to liability for further calls or
assessment by the Company.
The presently outstanding shares of Common Stock of the Company are fully paid
and nonassessable, and the shares of Common Stock to be issued upon conversion
of the Preferred Stock, as herein described, will be fully paid and
nonassessable.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes certain United States federal income tax
consequences that may be expected to result from (i) an exchange of Common
Shares pursuant to the Exchange Offer, and (ii) the ownership and disposition of
RECONS and New Preferred Stock. The discussion contained in this summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
and proposed Treasury Regulations, judicial decisions and administrative
pronouncements, all of which are subject to change. Any such changes may be
applied retroactively in a manner that could cause the tax consequences to vary
substantially from the consequences described below, with possible adverse
effects.
This summary discusses only Common Shares, RECONS and New Preferred Stock held
by United States Holders (as defined below) as capital assets within the meaning
of Section 1212 of the Code. The tax treatment of a holder may vary depending
on such holder's particular situation. This summary does not deal with all tax
consequences that may be relevant to all categories of holders such as banks,
thrift institutions, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or commodities, tax-exempt
investors, certain U.S. expatriates, holders whose "functional currency" is not
the U.S. dollar, or persons who hold Common Shares, RECONS or New Preferred
Stock as a position in a straddle, as part of a synthetic security or hedge, as
part of a conversion transaction or other integrated investment, or as other
than a capital asset, or holders who are not United States Holders (as defined
below). Moreover, the summary may not be applicable to holders who received
their Common Shares pursuant to the exercise of employee stock options or
otherwise as compensation or to Common Shares held by the Company's employee
benefit plans. Further, the summary does not include any description of any
alternative minimum tax consequences or any state, local or foreign tax
consequences that may be applicable.
The following discussion is based upon the views of Thelen Reid & Priest LLP.
No statutory, administrative or judicial authority directly addresses the tax
treatment of RECONS or New Preferred Stock. As a result, significant aspects of
the United States federal income tax consequences of an investment in the RECONS
are not certain. No ruling is being requested from the Internal Revenue Service
("IRS") with respect to the RECONS, and no assurance can be given that the
Internal Revenue Service will agree with the tax consequences described herein.
HOLDERS OF COMMON SHARES ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE EXCHANGE OFFER AND THE OWNERSHIP AND
DISPOSITION OF THE RECONS OR NEW PREFERRED STOCK IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS, AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR
OTHER TAX LAWS.
As used herein, a "United States Holder" means a beneficial owner of Common
Shares, RECONS or New Preferred Stock, as the case may be, that is (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
State thereof or the District of Columbia, (iii) an estate the income of which
is subject to United States federal income taxation regardless of its source, or
(iv) a trust the administration of which is subject to the primary supervision
of a court within the United States and for which one or more U.S. persons have
the authority to control all substantial decisions. An individual may, subject
to certain exceptions, be deemed to be a resident (as opposed to a non-resident
alien) of the United States by virtue of being present in the United States on
at least 31 days in the calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year (counting for
such purposes all of the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present in
the second preceding year).
CHARACTERIZATION OF THE EXCHANGE OFFER
The Company has received an opinion of Thelen Reid & Priest LLP, as tax counsel,
that the exchange of Common Shares for RECONS or New Preferred Stock should be
treated as a "recapitalization" pursuant to section 368(a)(1)(E) of the Code.
In that event, the transaction will have the tax consequences to shareholders
set forth below.
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EXCHANGE OF COMMON SHARES PURSUANT TO THE EXCHANGE OFFER
EXCHANGE OF COMMON SHARES FOR RECONS
Based upon the view that the New Preferred Stock is not classified as
"nonqualified preferred stock" within the meaning of Code section 351(g)(2), as
described below, no gain or loss will be recognized by an exchanging shareholder
on the exchange. A United States Holder's tax basis in the RECONS received in
the exchange will be equal to such holder's tax basis in the Common Shares
exchanged therefor, and the holding period of such RECONS will include the
holding period of such Common Shares.
CLASSIFICATION OF NEW PREFERRED STOCK AS "NONQUALIFIED PREFERRED STOCK"
The nonrecognition rule described in the preceding paragraph will not apply, and
gain or loss will be recognized upon the exchange of Common Shares for New
Preferred Shares, if the New Preferred Shares are classified as "nonqualified
preferred stock" within the meaning of Code section 351(g)(2). For these
purposes, the term "nonqualified preferred stock" means preferred stock if (i)
the holder of such stock has the right to require the issuer or a related person
to redeem or purchase the stock, (ii) the issuer or a related person is required
to redeem or purchase such stock, (iii) the issuer or a related person has the
right to redeem or purchase the stock and, as of the issue date, it is more
likely than not that such right will be exercised, or (iv) the dividend rate on
such stock varies in whole or in part (directly or indirectly) with reference to
interest rates, commodity prices, or other similar indices.
Code section 351(g)(2) was added to the Code pursuant to the Taxpayer Relief Act
of 1997 and, to date, little authority has been issued regarding the scope of
this provision. It is unclear whether the New Preferred Stock will be treated
as preferred stock for purposes of Code section 351(g). For this purpose,
"preferred stock" is defined as stock which is limited and preferred as to
dividends and does not participate in corporate growth to any significant
extent. The New Preferred Stock will participate in future appreciation in the
value of Common Shares up to $[ ] per share. Assuming that the New Preferred
Stock is treated as preferred stock for those purposes, certain terms of the New
Preferred Shares raise the concern that such shares would fall within the
definition of "nonqualified preferred stock." However, the legislative history
underlying the enactment of this provision indicates that the nonrecognition
reorganization provisions of the Code are not to apply where a common
shareholder exchanges that stock for a more secure equity investment in the
issuer. Since, inter alia, the holders of the New Preferred Stock will not be
protected from any decrease in the trading price of the Common Shares into which
the New Preferred Stock is convertible, the New Preferred Stock should not be
classified as "nonqualified preferred stock" within the meaning of Code section
351(g)(2).
OWNERSHIP AND DISPOSITION OF RECONS AND NEW PREFERRED STOCK
RECONS
The tax treatment of United States Holders of RECONS will be the same as the tax
treatment of United States Holders of New Preferred Stock as described below.
In addition, a United States Holder will recognize no gain or loss on the
withdrawal of New Preferred Stock in exchange for RECONS pursuant to the Deposit
Agreement; the United States Holder's tax basis in the withdrawn New Preferred
Stock will be the same as such Holder's tax basis in the RECONS surrendered
therefor; and the United States Holder's holding period for the withdrawn New
Preferred Stock will include the period during which such Holder held the
surrendered RECONS.
DIVIDENDS
Dividends paid on the New Preferred Stock out of the Company's current or
accumulated earnings and profits will be taxable as ordinary income and will
qualify for the 70% intercorporate dividends-received deduction, subject to
the minimum holding period requirement (generally at least 46 days) and other
applicable requirements. The dividends-received deduction will not be
allowed for purposes of calculating a corporate United States Holder's
adjusted current earnings under the alternative minimum tax rules. To the
extent, if any, that the amount of any dividend paid on the New Preferred
Stock exceeds the Company's current and accumulated earnings and profits, it
will be treated first as a return of the United States Holder's tax basis in
the New Preferred Stock and thereafter as a capital gain.
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Under certain circumstances, a corporation that receives an "extraordinary
dividend," as defined in Section 1059(c) of the Code, is required to reduce the
tax basis of its stock by the non-taxed portion of such dividend. A corporate
United States Holder must consider its holding period for, its tax basis in, and
the fair market value of, the New Preferred Stock in determining whether
dividends paid on the New Preferred Stock will constitute "extraordinary
dividends." In addition, under Section 1059(f) of the Code, any dividend with
respect to "disqualified preferred stock" is treated as an "extraordinary
dividend." While the issue is not free from doubt due to the lack of authority
directly on point, the New Preferred Stock should not constitute "disqualified
preferred stock."
CONSTRUCTIVE DISTRIBUTION RISKS
Under certain circumstances, Section 305(c) of the Code requires that any excess
of the redemption price of preferred stock over its issue price be includible in
income, prior to receipt, as a constructive dividend. However, while the issue
is not free from doubt due to the lack of authority directly on point, since,
inter alia, the New Preferred Stock bears risk with respect to a decline in the
value of Common Shares, and therefore its redemption price is not truly fixed,
Section 305(c) should not currently apply to stock with terms such as those of
the New Preferred Stock.
Certain adjustments to the conversion rate for the New Preferred Stock to
reflect the Company's issuance of stock or warrants to holders of Common Shares
(or similar transactions) may result in constructive distributions taxable as
dividends to the United States Holders of the New Preferred Stock. The
antidilution formula for the New Preferred Stock is intended to adjust the
conversion ratio to reflect these types of distributions in a manner to qualify
under Code section 305(c) and should not result in constructive distributions to
holders of New Preferred Stock.
A constructive distribution may result where preferred stock with dividends in
arrears is exchanged for other stock and, as a result, a holder of the preferred
stock increases his proportionate interest in the assets or earnings and profits
of the corporation. This provision is designed to prevent the capitalization of
dividends into stock on a tax free basis. Since cash will be paid with respect
to accrued unpaid dividends upon a conversion of the New Preferred Stock, this
provision should not apply.
Any constructive dividend may constitute, and may cause other dividends to
constitute, "extraordinary dividends" to corporate United States Holders. See
"Dividends" above.
CONVERSION OF NEW PREFERRED STOCK INTO COMMON SHARES AND CASH
Gain or loss generally will not be recognized by a United States Holder upon the
conversion of the New Preferred Stock solely into Common Shares. Gain realized
by a United States Holder upon the conversion of the New Preferred Stock into
Common Shares and cash will be recognized to the extent of the cash received
(including any Option Conversion Premium which is paid in cash and any cash
received in payment of accrued unpaid and undeclared dividends, but excluding
any cash received in lieu of a fractional share). Such taxable gain will be
treated either as capital gain or as a dividend, depending on such Holder's
particular circumstances, as described in the following paragraphs. No loss
will be recognized upon the conversion of the New Preferred Stock into Common
Shares and cash.
In testing whether gain recognized upon the conversion of the New Preferred
Stock into Common Shares and cash (other than cash in lieu of fractional
Common Shares) will be treated as capital gain or as a dividend, the United
States Holder will be treated as if such holder received Common Shares with a
value equal to such cash, and then such deemed Common Shares were redeemed by
the Company for such cash. Such gain will be treated as capital gain if,
inter alia, such deemed redemption would be a "substantially
disproportionate" redemption with respect to such Holder or is "not
essentially equivalent to a dividend" with respect to the Holder. An
exchange of Common Shares for cash will be "not essentially equivalent to a
dividend" if it results in a "meaningful reduction" of the United States
Holder's equity interest in the Company. An exchange of Common Shares for
cash that results in a reduction of the proportionate equity interest in the
Company of a United States Holder whose relative equity interest in the
Company is minimal (an interest of less than one percent should satisfy this
requirement) and who exercises no control over the Company's corporate
affairs should be treated as "not essentially equivalent to a dividend." If
the deemed redemption would be treated as a dividend under Code section 302,
then the gain recognized will be taxed as a dividend. However,
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notwithstanding the foregoing, the IRS may take the position that cash paid
with respect to accrued unpaid dividends will be treated as dividends in all
events. United States Holders should consult their own tax advisors about
the application of these rules in their particular circumstances.
Cash received by a United States Holder in lieu of a fractional share will be
treated as if such holder received a fractional Common Share with a value equal
to such cash, and then such deemed fractional Common Share were redeemed by the
Company for such cash. Any resulting gain or loss should be treated as capital
gain or loss.
A United States Holder's tax basis in the Common Shares, including any
fractional share, received on the conversion of the New Preferred Stock will
equal the tax basis of the New Preferred Stock surrendered in exchange therefor,
reduced by the amount of cash received and increased by the amount of income or
gain recognized. The holding period of such Common Shares will include the
holding period of the New Preferred Stock surrendered in exchange therefor.
OTHER DISPOSITIONS OF NEW PREFERRED STOCK
A United States Holder will generally recognize gain or loss on a sale, exchange
or other disposition of New Preferred Stock in an amount equal to the difference
between the amount realized on the sale, exchange or other disposition and such
Holder's tax basis in the New Preferred Stock. Any such gain or loss will be
capital gain or loss and will be long-term capital gain or loss if the holding
period of the New Preferred Stock exceeds one year as of the date of the
disposition.
Under certain circumstances, upon the taxable disposition or taxable redemption
of "section 306 stock," the holder of such stock is required to recognize as
ordinary income, in the case of a disposition, or as dividend income, in the
case of a redemption, all or a portion of the proceeds received by such holder,
without regard to such holder's tax basis in the "section 306 stock," and cannot
recognize any loss. To the extent that a United States Holder that exchanges
Common Shares for New Preferred Stock would have been treated, under the rules
of Section 302 of the Code, as receiving a dividend distribution from the
Company if such Holder had tendered such Common Shares for cash, the New
Preferred Stock owned by such United States Holder may be treated as "section
306 stock." United States Holders should consult their tax advisors concerning
the consequences of the Exchange Offer under Section 306 of the Code.
NON-PARTICIPATION IN THE EXCHANGE OFFER
RETENTION OF COMMON SHARES
Subject to the discussion in the immediately following paragraphs, United States
Holders of Common Stock who do not participate in the Exchange Offer should not
incur any tax liability as a result of the consummation of the Exchange Offer.
CONSTRUCTIVE DISTRIBUTION RISKS
Under section 305(c) of the Code, a recapitalization or a redemption (such as
exchanges pursuant to the Exchange Offer or any future conversion of RECONS
or New Preferred Stock) may, under certain limited circumstances, be deemed
to be a taxable distribution of stock with respect to any other shareholder
whose proportionate interest in the assets or earnings and profits of the
corporation is increased as a result. Exchanges pursuant to the Exchange
Offer and any subsequent conversion of any RECONS or New Preferred Stock may
have the effect of increasing the proportionate interests in the assets or
earnings and profits of the Company of the holders of Common Shares who do
not participate in the Exchange Offer. However, neither an exchange pursuant
to the Exchange Offer nor a subsequent conversion of RECONS or New Preferred
Stock should result in any deemed taxable distribution of stock to the United
States Holders of the Common Shares because such exchange or subsequent
conversion should be treated as an isolated recapitalization and not as part
of a plan periodically to increase the proportionate interest of holders of
Common Shares in the Company's assets or earnings and profits and because
there is no certainty that the interest of the holders of Common Shares would
in fact be increased upon the Exchange Offer or any subsequent conversion of
RECONS.
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Under section 305(b)(2) of the Code, a distribution which has the result of the
receipt of property by some shareholders (such as distributions on the New
Preferred Stock) and an increase in the proportionate interests of other
shareholders in the assets or earnings and profits of the corporation may, under
certain limited circumstances, be deemed to be a taxable distribution of stock
with respect to the other shareholders whose interests in the assets or earnings
and profits of the corporation are increased. It is believed that
distributions on the New Preferred Stock should not have the effect of
increasing the proportionate interests of the holders of the Common Shares in
the assets or earnings and profits of the Company because such distributions
will only result in adjustments to the Optional Conversion Premium which is
designed to deliver a specific value to holders of New Preferred Stock in lieu
of future dividends and such premium (payable in cash or Common Shares, at the
option of the Company) will be payable only if the Company exercises its right
to effect an optional conversion. As such, distributions on the New Preferred
Stock should not result in any deemed taxable distribution of stock to the
holders of the Common Shares pursuant to Code section 305(b)(2).
The failure to adjust fully the conversion rate of the New Preferred Stock to
reflect distributions of stock dividends (or rights to acquire stock) with
respect to the Common Shares (or transactions having the effect of such
distributions) may result in a taxable dividend to the holders of the Common
Shares. The antidilution formula for the New Preferred Stock is intended to
adjust the conversion ratio to reflect distributions of stock dividends or
similar transactions in a manner to qualify under Code section 305(c) and should
not result in constructive distributions to holders of Common Shares.
Any constructive dividend may constitute, and may cause other dividends to
constitute, "extraordinary dividends" to corporate United States Holders. See
"--Dividends" above.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
dividends and the proceeds of sales of the New Preferred Stock made to United
States Holders other than certain exempt recipients (such as corporations). A
31% backup withholding tax will apply to such payments if the United States
Holder (i) fails to provide a taxpayer identification number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) is notified by the IRS that it has failed to
properly report payments of interest and dividends, or (iv) under certain
circumstances, fails to certify, under penalty of perjury, that it has furnished
a correct TIN and has not been notified by the IRS that it is subject to backup
withholding. In the case of dividends paid after December 31, 1999, a United
States Holder generally will be subject to backup withholding at a 31% rate
unless certain IRS certification procedures are complied with directly or
through an intermediary.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or credit against such United States Holder's U.S. federal income tax
liability provided the required information is furnished to the IRS.
THE DESCRIPTION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION PURPOSES ONLY. THE COMPANY DOES NOT INTEND TO SEEK A RULING
FROM THE INTERNAL REVENUE SERVICE WITH RESPECT TO THE FEDERAL INCOME TAX
CONSEQUENCES OF THE EXCHANGE OFFER OR THE OWNERSHIP OR DISPOSITION OF THE NEW
PREFERRED STOCK AND, UPON EXAMINATION OF THE INCOME TAX RETURN OF THE COMPANY OR
A SHAREHOLDER, THE INTERNAL REVENUE SERVICE MAY TAKE POSITIONS CONTRARY TO THOSE
SET FORTH HEREIN. ALL SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE OFFER AND OF THE
OWNERSHIP AND SUBSEQUENT DISPOSITION OF THE NEW PREFERRED STOCK, INCLUDING THE
APPLICABILITY OF STATE, LOCAL AND FOREIGN TAX LAWS.
-37-
<PAGE>
DEALER MANAGER
J.P. Morgan Securities Inc., (the "Dealer Manager"), has agreed to act as a
financial advisor and dealer manager in connection with the transaction. The
Company will pay the Dealer Manager a fee, the amount of which will not be
related to the number of shares exchanged.
The Company has agreed to indemnify the Dealer Manager against certain
liabilities, including liabilities under the federal securities laws, and
contribute to payments that the Dealer Manager may be required to make in
respect thereof.
The Dealer Manager may engage in transactions with, and from time to time may
perform services for, the Company.
MISCELLANEOUS
Except as set forth in Annex A hereto, neither the Company nor, to its
knowledge, any of its subsidiaries, executive officers or directors or any
associate of any such officer or director has engaged in any transactions
involving the Common Shares during the 40 business days preceding the date
hereof. Neither the Company nor, to its knowledge, any of its executive
officers or directors is a party to any contract, arrangement, understanding or
relationship relating directly or indirectly to the Exchange Offer with any
other person with respect to the Common Shares.
LEGAL MATTERS
Paine, Hamblen, Coffin, Brooke & Miller LLP, Spokane, Washington, general
counsel for the Company, will pass upon certain matters of Washington law
including the validity of the New Preferred Stock and the Common Shares to be
issued upon the conversion thereof and other Washington corporate law matters.
Additionally, Paine, Hamblen, Coffin, Brooke & Miller LLP will pass upon certain
matters relating to public utility regulatory approvals under Washington, Idaho,
Montana, Oregon and California law in connection with the authorization of the
New Preferred Stock and such Common Shares. Thelen Reid & Priest LLP, New York,
New York, counsel to the Company, will pass upon certain matters of New York law
including the validity of the Depositary Shares and of federal securities law.
Additionally, Thelen Reid & Priest LLP will pass upon certain United States
federal income tax matters. Davis Polk & Wardwell, New York, New York, will
pass upon the validity of the Depositary Shares for the Dealer Manager. In
giving their opinions, Thelen Reid & Priest LLP and Davis Polk & Wardwell may
assume the conclusions of Washington, California, Idaho, Montana and Oregon law
set forth in the opinion of Paine, Hamblen, Coffin, Brooke & Miller LLP.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ending December 31, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
-38-
<PAGE>
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or
other information filed by us at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at "http://www.sec.gov."
We have filed a Registration Statement (together with any amendments thereto,
the "Registration Statement") on Form S-4 to register with the SEC the RECONS to
be issued to WWP shareholders who tender their shares in the Exchange Offer and
whose Common Shares are accepted for exchange, the New Preferred Stock and the
Common Shares issuable upon conversion of the New Preferred Stock. We will file
a Schedule 13E-4 Issuer Tender Offer Statement with the SEC with respect to the
Exchange Offer (together with any amendments thereto, the "Schedule 13E-4").
This Prospectus is a part of that Registration Statement. As allowed by SEC
rules, this Prospectus does not contain all the information you can find in the
Registration Statement, the Schedule 13E-4 or the exhibits to the Registration
Statement and the Schedule 13E-4.
The SEC allows us to "incorporate by reference" information into this
Prospectus, which means important information may be disclosed to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Prospectus,
except for any information superseded by information in (or incorporated by
reference in) this Prospectus. The Prospectus incorporates by reference the
documents set forth below that have been previously filed with the SEC. These
documents contain important information about WWP, its business and its
finances.
<TABLE>
<CAPTION>
SEC FILINGS (FILE NO. 1-8344) PERIOD
----------------------------- ------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Reports on Form 10-Q Quarters ended March 31, 1998 and June 30, 1998
Current Reports on Form 8-K Dated June 2, 1998 and August 17, 1998
Proxy Statement Dated March 31, 1998
</TABLE>
We are also incorporating by reference additional documents that we may file
with the SEC between the date of this Prospectus and the Expiration Date.
We may have already sent you some of the documents incorporated by reference,
but you can obtain any of them through the SEC or through us, the Dealer Manager
or the Information Agent, without charge, excluding all exhibits unless we have
specifically incorporated by reference an exhibit in this Prospectus.
Shareholders may obtain documents incorporated by reference in this Prospectus
by requesting in writing or by telephone from the Information Agent or the
Dealer Manager at their respective addresses or from us at the following
address:
The Washington Water Power Company
Post Office Box 3727
Spokane, Washington 99220
Attention: Treasurer
Telephone: (509) 489-0500
If you would like to request documents from us, please do so no later than five
business days before the Expiration Date to receive them in time.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER OR IN THE LETTER OF
TRANSMITTAL. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS
-39-
<PAGE>
DIFFERENT FROM WHAT IS CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS DATED
___________, 1998. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE
MAILING OF THIS PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF RECONS SHALL
CREATE ANY IMPLICATION TO THE CONTRARY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY OF THE RECONS IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. WE ARE NOT
AWARE OF ANY JURISDICTION WHERE THE MAKING OF THE EXCHANGE OFFER OR THE
ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH APPLICABLE LAW. IF WE BECOME
AWARE OF ANY JURISDICTION WHERE THE MAKING OF THE EXCHANGE OFFER OR ACCEPTANCE
THEREOF WOULD NOT BE IN COMPLIANCE WITH ANY VALID APPLICABLE LAW, WE WILL MAKE A
GOOD FAITH EFFORT TO COMPLY WITH SUCH LAW. IF, AFTER SUCH GOOD FAITH EFFORT, WE
CANNOT COMPLY WITH SUCH LAW, THE EXCHANGE OFFER WILL NOT BE MADE TO, NOR WILL
TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES OF COMMON SHARES IN
ANY SUCH JURISDICTION.
-40-
<PAGE>
LIST OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- --------------------------------------------------------------------------------
<S> <C>
Agent's Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Articles of Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Avista . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
business day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Common Equivalent Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Common Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Current Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Dealer Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Deposit Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Depositary Receipts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
DTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Eligible Institution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
ESOP Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Expiration Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Extraordinary Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . .29
Interested Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Mandatory Conversion Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Minimum Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
New Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
next-day closing price . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Optional Conversion Price. . . . . . . . . . . . . . . . . . . . . . . . . . .29
Pentzer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Preferred Stock Depositary . . . . . . . . . . . . . . . . . . . . . . . . . .24
RECONS Optional Conversion Premium . . . . . . . . . . . . . . . . . . . . . . 4
RECONS Optional Conversion Price . . . . . . . . . . . . . . . . . . . . . . . 4
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Restated Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Right. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Schedule 13E-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
TIN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
United States Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
WWP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
-41-
<PAGE>
ANNEX A
-A-1-
<PAGE>
A Letter of Transmittal, certificates for WWP Common Shares and any other
required documents should be sent or delivered by each holder of WWP Common
Shares or his or her broker, dealer, commercial bank, trust company or other
nominee to the Exchange Agent at one of the addresses set forth below.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
BY MAIL: BY HAND OR OVERNIGHT DELIVERY:
The Bank of New York The Bank of New York
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286 New York, New York 10286
Attention: Attention:
BY FACSIMILE:
(Eligible Institutions Only)
(212) 815-6213
CONFIRM BY TELEPHONE:
(800) 507-9357
Any questions or requests for assistance may be directed to the Dealer Manager
or the Information Agent at their respective addresses and telephone numbers set
forth below. Requests for additional copies of this Prospectus, the Letter of
Transmittal, the Notice of Guaranteed Delivery and other Exchange Offer material
may be directed to the Dealer Manager or the Information Agent. Beneficial
owners may also contact their broker, dealer, commercial bank or trust company
for assistance concerning the Exchange Offer.
THE INFORMATION AGENT FOR THE EXCHANGE OFFER IS:
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, New York 10022
Toll Free: (800) 566-9061
BANKS AND BROKERAGE FIRMS, PLEASE CALL:
(800) 662-5200
THE DEALER MANAGER FOR THE EXCHANGE OFFER IS:
J.P. MORGAN & CO.
60 Wall Street
New York, New York 10260
(212) ___-____
Dealer Prospectus Delivery Obligation
Until 40 days after date of this Prospectus, all dealers that effect
transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus.
<PAGE>
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Seventh of the Company's Restated Articles of Incorporation ("Articles")
provides, in part, as follows:
"The Corporation shall, to the full extent permitted by applicable law, as from
time to time in effect, indemnify any person made a party to, or otherwise
involved in, any proceeding by reason of the fact that he or she is or was a
director of the Corporation against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by him or her in connection with any such
proceeding. The Corporation shall pay any reasonable expenses incurred by a
director in connection with any such proceeding in advance of the final
determination thereof upon receipt from such director of such undertakings for
repayment as may be required by applicable law and a written affirmation by such
director that he or she has met the standard of conduct necessary for
indemnification, but without any prior determination, which would otherwise be
required by Washington law, that such standard of conduct has been met. The
Corporation may enter into agreements with each director obligating the
Corporation to make such indemnification and advances of expenses as are
contemplated herein. Notwithstanding the foregoing, the Corporation shall not
make any indemnification or advance which is prohibited by applicable law. The
rights to indemnity and advancement of expenses granted herein shall continue as
to any person who has ceased to be a director and shall inure to the benefit of
the heirs, executors and administrators of such a person."
The Company has entered into indemnification agreements with each director as
contemplated in Article Seventh of the Articles.
Reference is made to Revised Code of Washington 23B.08.510, which sets forth the
extent to which indemnification is permitted under the laws of the State of
Washington.
Article IX of the Company's Bylaws contains an indemnification provision similar
to that contained in the Articles and, in addition, provides in part as follows:
"SECTION 2. LIABILITY INSURANCE. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is, or was a
director, officer, employee, or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, other enterprise, or
employee benefit plan against any liability asserted against him and incurred by
him in any such capacity or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against such liability
under the laws of the State of Washington."
Insurance is maintained on a regular basis (and not specifically in connection
with this offering) against liabilities arising on the part of directors and
officers out of their performance in such capacities or arising on the part of
the Company out of its foregoing indemnification provisions, subject to certain
exclusions and to the policy limits.
ITEM 21. EXHIBITS.
Reference is made to the Exhibit Index on page II-5 hereof.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to Section 13(a) or 15(d)
of the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this registration statement shall be deemed to be a
new
II-1
<PAGE>
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(2) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request;
(3) To supply by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein, that was not the
subject of and included in the registration statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant have been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted against either
of the registrant by such director, officer or controlling person in connection
with the securities being registered, such registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
POWER OF ATTORNEY
The Registrant hereby appoints each Agent for Service named in this Registration
Statement as its attorney-in-fact to sign in his or her name and behalf, and to
file with the Commission any and all amendments, including post-effective
amendments, to this Registration Statement, and each director and/or officer of
the Registrant whose signature appears below hereby appoints each such Agent for
Service as his or her attorney-in-fact with like authority to sign in his or her
name and behalf, in any and all capacities stated below, and to file with the
Commission, any and all such amendments.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Spokane,
State of Washington, on the 14th day of August, 1998.
THE WASHINGTON WATER POWER COMPANY
By/s/ T.M. Matthews
------------------------------------------------
T.M. Matthews
Chairman of the Board and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
Signature Title Date
--------- ----- ----
/s/ T.M. Matthews Principal August 14, 1998
- ---------------------------------- Executive Officer
T.M. Matthews and Director
(Chairman of the Board and Chief
Executive Officer)
/s/ J.E. Eliassen Principal August 14, 1998
- ---------------------------------- Financial and
J.E. Eliassen Accounting Officer
(Senior Vice President, Chief
Financial Officer and Treasurer)
/s/ W. Lester Bryan Director August 14, 1998
- ----------------------------------
W. Lester Bryan
(President and Chief Operating
Officer)
/s/ David A. Clack Director August 14, 1998
- ----------------------------------
David A. Clack
/s/ Sarah M.R. Jewell Director August 14, 1998
- ----------------------------------
Sarah M.R. Jewell
/s/ John F. Kelly Director August 14, 1998
- ----------------------------------
John F. Kelly
/s/ Eugene W. Meyer Director August 14, 1998
- ----------------------------------
Eugene W. Meyer
/s/ Bobby Schmidt Director August 14, 1998
- ----------------------------------
Bobby Schmidt
II-3
<PAGE>
/s/ Larry A. Stanley Director August 14, 1998
- ----------------------------------
Larry A. Stanley
/s/R. John Taylor Director August 14, 1998
- ----------------------------------
R. John Taylor
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
1(a) Form of Dealer Manager Agreement for offering of Preferred Stock.+
4(a)* Restated Articles of Incorporation of the Company as filed August 4,
1994 (filed as Exhibit 4(a) to Form 10-Q for the quarter ended June
30, 1994).
4(b) Form of Articles of Amendment to Restated Articles of Incorporation
of the Company.
4(c)* Bylaws of the Company, as amended, May 14, 1998 (filed as Exhibit
4(a) to Form 10-Q for the quarter ended June 30, 1998).
4(d) Form of Deposit Agreement between the Company and The Bank of New
York, as Depositary and form of depositary receipt (attached as
exhibit).+
4(e) Form of stock certificate for the Preferred Stock+
4(f)* Rights Agreement, dated as of February 16, 1990, between the Company
and The Bank of New York as successor Rights Agent (filed as Exhibit
4(n) to Form 8-K dated February 16, 1990).
5(a) Opinion and Consent of Paine, Hamblen, Coffin, Brooke & Miller LLP.+
5(b) Opinion and Consent of Thelen Reid & Priest LLP.+
8 Opinion and Consent of Thelen Reid & Priest LLP as to tax matters
(contained in Exhibit 5(b)).+
12(a)* Statement re computation of ratio of earnings to fixed charges and
preferred stock dividends (filed as Exhibit 12 to Form 10-Q for the
quarter ended June 30, 1998 in File No. 1-3701).
23(a) Consent of Deloitte & Touche LLP.
23(b) Consents of Paine, Hamblen, Coffin, Brooke & Miller LLP and Thelen
Reid & Priest LLP are contained in Exhibits 5(a) and 5(b)
respectively.+
24 Power of Attorney (included on page II-3 hereof).
99(a) Form of Letter of Transmittal+
99(b) Form of Notice of Guaranteed Delivery+
99(c) Form of Letter from the Dealer Manager to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees+
99(d) Form of Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees+
</TABLE>
___________________
* Incorporated by reference herein.
+ To be filed by amendment.
II-5
<PAGE>
EXHIBIT 4(b)
ARTICLES OF AMENDMENT
TO
RESTATED ARTICLES OF INCORPORATION
OF
THE WASHINGTON WATER POWER COMPANY
Articles of Amendment to the Restated Articles of Incorporation of The
Washington Water Power Company are herein executed by said corporation pursuant
to Section 23B.06.020 of the Washington business corporation act as follows:
FIRST: The name of the corporation is The Washington Water Power
Company (the "Corporation").
SECOND: The following amendment to the Restated Articles of
Incorporation of the Corporation, establishing and designating a series of
shares and fixing and determining certain of the relative rights and preferences
thereof, was duly adopted by the Board of Directors of the Corporation at a
meeting held on August __, 1998 and by the _________ Committee of the Board of
Directors at a meeting held on October __, 1998. No approval or consent of
shareholders was required.
THIRD: The Restated Articles of Incorporation are hereby amended by
the addition of a paragraph ___ to be inserted at the end of subdivision (o) of
Article THIRD, which shall be and read as follows:
(_) SERIES L. There is hereby established a twelfth series of
the Preferred Stock of the Corporation which shall have, in addition to the
general terms and characteristics of all of the authorized shares of
Preferred Stock of the Corporation, the following distinctive terms and
characteristics:
(a) The twelfth series of Preferred Stock of the Corporation shall
consist of _____ shares and be designated as "$12.40 Preferred Stock,
Convertible Series L".
(b) Said twelfth series shall have a dividend rate of $12.40 per
share per annum; provided, however, that the amount of the dividend per
share payable on December 15, 1998 shall be $3.10.
(c) The shares of said twelfth series shall not, by their terms, be
redeemable.
(d) The amount payable upon the shares of said twelfth series in
the event of dissolution, liquidation or winding up of the Corporation
shall be $______ per share plus an amount equivalent to accumulated and
unpaid dividends thereon, if any, to the date of such dissolution,
liquidation or winding up.
(e) There shall be no sinking fund for the redemption or purchase
of shares of said twelfth series.
<PAGE>
(f)(i)(A) Each share of said twelfth series shall be mandatorily
converted on November 1, 2001 (the "Mandatory Conversion Date") into (1) a
number of shares of Common Stock determined by reference to the Common
Equivalent Rate (as hereinafter defined) then in effect plus (2) the right
to receive an amount, in cash, equivalent to the accumulated and unpaid
dividends on such share of said twelfth series, if any, to the Mandatory
Conversion Date.
(B) Each share of said twelfth series shall be convertible, at the
option of the Company, at any time on or after December 15, 1998 and prior
to the Mandatory Conversion Date, in whole or in part from time to time,
into (1) a number of shares of Common Stock equal to the Optional
Conversion Price then in effect, (2) the right to receive an amount, in
cash, equivalent to the accumulated and unpaid dividends on the share of
said twelfth series to be converted to the date fixed for conversion plus
(3) the right to receive the Optional Conversion Premium.
(C) Each share of said twelfth series shall be mandatorily
converted, at the time of effectiveness of any Extraordinary Transaction,
into, or into the right to receive, as the case may be, securities and
other property (including cash) of the same character and in the same
respective amounts as the holder of such share would have received if such
share had been converted pursuant to clause (B) above immediately prior to
such time of effectiveness.
(ii)(A) The "Common Equivalent Rate" shall be initially ten shares
of Common Stock for each share of said twelfth series; provided, however,
that the Common Equivalent Rate shall be subject to adjustment from time to
time as provided below. All adjustments to the Common Equivalent Rate
shall be calculated to the nearest 1/100th of a share of Common Stock.
Such rate, as adjusted and in effect at any time, is herein called the
"Common Equivalent Rate."
(B) If the Corporation shall do any of the following (each, an
"Adjustment Event"):
(1) pay a dividend or make a distribution with respect to
Common Stock in shares of Common Stock,
(2) subdivide, reclassify or split its outstanding shares
of Common Stock into a greater number of shares,
(3) combine or reclassify its outstanding shares of Common
Stock into a smaller number of shares, or
(4) issue by reclassification of its shares of Common Stock
any shares of Common Stock other than in an Extraordinary Transaction
(as hereinafter defined),
then the Common Equivalent Rate in effect immediately prior to such
Adjustment Event shall be adjusted so that on the Mandatory Conversion Date
each share of said twelfth series shall be converted into the number of
shares of Common Stock that the holder of such share would have owned or
been entitled to receive after the happening of the Adjustment Event had
such share been mandatorily converted immediately prior to the record date,
if any, for such Adjustment Event or, if there is no record date,
immediately prior to the effectiveness of such Adjustment Event. In case
the Adjustment Event is a dividend or distribution, the adjustment to the
Common Equivalent Rate shall become effective as of the close of business
on the record date for determination of shareholders entitled to receive
such dividend or distribution and any shares of Common Stock issuable in
payment of a
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<PAGE>
dividend shall be deemed to have been issued immediately prior to the
close of business on the record date for such dividend for purposes of
calculating the number of outstanding shares of Common Stock under clauses
(C) and (D) below; and, in case the Adjustment Event is a subdivision,
split, combination or reclassification, the adjustment to the Common
Equivalent Rate shall become effective immediately after the effective date
of such subdivision, split, combination or reclassification. Such
adjustment shall be made successively.
In the event that Rights are separated from the outstanding shares of
the Common Stock in accordance with the provisions of the Rights Agreement
such that holders of shares of said twelfth series would not be entitled to
receive any Rights in respect of the shares of Common Stock issuable upon
conversion of the shares of said twelfth series, the Common Equivalent Rate
shall be adjusted by multiplying the Common Equivalent Rate in effect on
the Distribution Date (as defined in the Rights Agreement) by a fraction
(1) the numerator of which shall be the Current Market Price per share of
the outstanding shares of Common Stock on the Trading Date next preceding
the Distribution Date and (2) the denominator of which shall be such
Current Market Price less the fair market value (as determined by the Board
of Directors of the Company, whose determination shall be conclusive, final
and binding on the Corporation and all shareholders of the Corporation) as
of such Distribution Date of the portion of the Rights allocable to one
share of Common Stock. Such adjustment shall become effective on the
opening of business on the business day next following the Distribution
Date and will remain in effect unless and until (A) the Company (i) amends
the Rights Agreement to provide that upon conversion of the shares of said
twelfth series the holders thereof will receive, in addition to the shares
of Common Stock issuable upon such conversion, the Rights which would have
attached to such shares of Common Stock if the Rights had not become
separated from the Common Stock pursuant to the Rights Agreement and (ii)
converts the Preferred Stock into shares of Common Stock with such Rights
or (B) the Rights expire, terminate or are redeemed, in which case
appropriate adjustments, if any, shall be made to the Common Equivalent
Rate consistent with the provisions of this subparagraph (f)(i).
Notwithstanding the foregoing, in the event the aforesaid fair market value
of the portion of the Rights allocable to one share of Common Stock is
equal to or greater than the Current Market Price per share of Common Stock
on the Trading Date mentioned above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of shares of said
twelfth series shall have the right to receive upon conversion the number
of shares of Common Stock such holder would have received had such holder
converted each such share immediately prior to the Distribution Date.
(C) If the Corporation shall, after the date of the initial
issuance of shares of said twelfth series, issue rights or warrants to all
holders of the Common Stock entitling them (for a period not exceeding 45
days from the date of such issuance) to subscribe for or purchase shares of
Common Stock at a price per share less than the Current Market Price of the
Common Stock (as hereinafter defined), on the record date for the
determination of shareholders entitled to receive such rights or warrants,
then in each case the Common Equivalent Rate shall be adjusted by
multiplying the Common Equivalent Rate in effect immediately prior to the
date of issuance of such rights or warrants by a fraction (1) the numerator
of which shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants, immediately prior to such
issuance, plus the number of additional shares of Common Stock offered for
subscription or purchase pursuant to such rights or warrants and (2) the
denominator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so
offered for subscription or purchase pursuant to such rights or warrants
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<PAGE>
would purchase at such Current Market Price (determined by multiplying
such total number of shares by the exercise price of such rights or
warrants and dividing the product so obtained by such Current Market
Price). Such adjustment shall become effective as of the close of
business on the record date for the determination of shareholders entitled
to exercise such rights or warrants. To the extent that shares of Common
Stock are not delivered after the expiration of such rights or warrants,
the Common Equivalent Rate shall be readjusted to the Common Equivalent
Rate which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of delivery
of only the number of shares of Common Stock actually delivered. Such
adjustment shall be made successively.
(D) If the Corporation shall pay a dividend or make any other
distribution to all holders of its Common Stock of evidences of its
indebtedness or other assets (including shares of capital stock of the
Corporation (other than Common Stock) but excluding any distributions and
dividends referred to in clause (B) above or any cash dividends), or shall
issue to all holders of its Common Stock rights or warrants to subscribe
for or purchase any of its securities (other than those referred to in
clause (C) above), then, in each such case, the Common Equivalent Rate
shall be adjusted by multiplying the Common Equivalent Rate in effect on
the record date for the determination of shareholders entitled to receive
such dividend or distribution mentioned below by a fraction (1) the
numerator of which shall be the Current Market Price of the Common Stock on
such record date and (2) the denominator of which shall be such Current
Market Price per share of Common Stock less the fair market value (as
determined by the Board of Directors of the Corporation, whose
determination shall be conclusive, as final and binding upon the
Corporation and all shareholders of the Corporation) as of such record date
of the portion of the assets or evidences of indebtedness so distributed,
or of such subscription rights or warrants, allocable to one share of
Common Stock. Such adjustment shall become effective on the opening of
business on the business day next following the record date for the
determination of the shareholders entitled to receive such dividend or
distribution. Notwithstanding the foregoing, in the event the portion of
the assets or other evidences of indebtedness so distributed allocable to
one share of Common Stock has a value equal to or greater than the Current
Market Price per share of Common Stock on the record date mentioned above,
in lieu of the foregoing adjustment, adequate provision shall be made so
that each holder of shares of said twelfth series shall have the right to
receive upon conversion assets or other evidences of indebtedness having a
value in the amount such holder would have received had such holder
converted each such share immediately prior to the record date for such
dividend or distribution.
(E) If the Corporation shall pay a dividend or make any other
distribution to all holders of its Common Stock exclusively in cash
(excluding any quarterly cash dividend on Common Stock in any quarter to
the extent it does not exceed $.18 per share (as adjusted to reflect
subdivisions or combinations of Common Stock)) the Common Equivalent Rate
shall be adjusted by multiplying the Common Equivalent Rate in effect on
the record date for the determination of the shareholders entitled to
receive such dividend or distribution by a fraction (1) the numerator of
which shall be such Current Market Price per share of the Common Stock on
such record date and (2) the denominator of which shall be such Current
Market Price less the amount of cash so distributed (and not excluded as
provided above) allocable to one share of Common Stock. Such adjustment
shall become effective immediately prior to the opening of business on the
business day next following record date. Notwithstanding the foregoing, in
the event the portion of the cash so distributed allocable to one share of
Common Stock is equal to or greater than the Current Market Price per share
of Common Stock on the record date mentioned above, in lieu of the
foregoing adjustment, adequate provision shall be made so that each holder
of shares of said twelfth series shall have the right to receive upon
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<PAGE>
conversion the amount of cash such holder would have received had such
holder converted each such share immediately prior to the record date for
such dividend or distribution. If an adjustment is required to be made
pursuant to this clause (E) as a result of a distribution that is a
quarterly dividend, such adjustment shall be based upon the amount by
which such distribution exceeds the amount of the quarterly cash dividend
permitted to be excluded as provided above; and an adjustment is required
to be made pursuant to this clause (E) as a result of a distribution that
is not a quarterly dividend, such adjustment shall be based upon the full
amount of the distribution.
(F) Anything herein to the contrary notwithstanding, the
Corporation may, at its option, make such upward adjustment in the Common
Equivalent Rate, in addition to the adjustments specified above, as the
Corporation in its sole discretion may determine to be advisable, in order
that any stock dividends, subdivision of shares, distribution of rights to
purchase stock or securities, or a distribution of securities convertible
into or exchangeable for stock (or any transaction that could be treated as
any of the foregoing transactions pursuant to Section 305 of the Internal
Revenue code of 1986, as amended) hereinafter made by the Corporation to
its shareholders shall not be taxable. Any such adjustment shall be made
effective as of such date as the Board of Directors of the Corporation
shall determine. The determination of the Board of Directors of the
Corporation as to whether or not such an adjustment to the Common
Equivalent Rate should be made and, if so, as to what adjustment should be
made and when, shall be conclusive, final and binding on the Corporation
and all shareholders of the Corporation.
(G) As used herein, the "Current Market Price" of a share of Common
Stock on any date shall be, except as otherwise specifically provided, the
average of the daily Closing Prices (as hereinafter defined) for the five
consecutive Trading Dates (as hereinafter defined) ending on and including
the date of determination of the Current Market Price; provided, however,
that if the Closing Price of the Common Stock on the Trading Date next
following such five-day period (the "next-day closing price") is less than
95% of such average Closing Price, then the Current Market Price per share
of Common Stock on such date of determination will be the next-day closing
price; and provided, further, that with respect to any conversion or
antidilution adjustment, if any event that results in an adjustment of the
Common Equivalent Rate occurs during the period beginning on the first date
of the applicable determination period and ending on the applicable
conversion date, the Current Market Price as determined pursuant to the
foregoing will be appropriately adjusted to reflect the occurrence of such
event.
(H) In any case in which an adjustment as a result of any event is
required to become effective as of the close of business on the record date
for such event and the Mandatory Conversion Date occurs after such record
date but before the occurrence of such event, the Corporation may in its
sole discretion elect to defer the following until after the occurrence of
such event (but shall be under no obligation to do so): (1) issuing to the
holder of any converted shares of said twelfth series the additional shares
of Common Stock issuable upon such conversion as a result of such
adjustment and (2) paying to such holder any amount in cash in lieu of a
fractional share of Common Stock as hereinafter provided.
(iii) Whenever the Common Equivalent Rate is adjusted as herein
provided, the Corporation shall:
(A) forthwith compute the adjusted Common Equivalent Rate in
accordance herewith and prepare a certificate signed by the President, any
Vice President or the Treasurer of the Corporation
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<PAGE>
setting forth the adjusted Common Equivalent Rate, the method of
calculation thereof in reasonable detail and the facts requiring such
adjustment and upon which such adjustment is based, which certificate
shall be conclusive, final and binding evidence of the correctness of the
adjustment, and file such certificate forthwith with the transfer agent or
agents for the shares of said twelfth series and for the Common Stock; and
(B) mail a notice stating that the Common Equivalent Rate has been
adjusted, the facts requiring such adjustment and upon which such
adjustment is based and setting forth the adjusted Common Equivalent Rate
to the holders of record of the outstanding shares of said twelfth series
at or prior to the time the Corporation mails an interim statement to its
shareholders covering the fiscal quarter during which the facts requiring
such adjustment occurred, but in any event within 45 days of the end of
such fiscal quarter.
(iv) No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon the conversion of any shares of said
twelfth series. Instead of any fractional interest in a share of Common
Stock which would otherwise be deliverable upon the conversion of a share
of said twelfth series, the Corporation shall pay to the holder of such
share an amount in cash (computed to the nearest cent) equal to the same
fraction of the Current Market Price of the Common Stock determined as of
the second Trading Date immediately preceding the relevant Notice Date. If
more than one share of any holder shall be converted at the same time, the
number of full shares of Common Stock into which such shares shall be
converted shall be computed on the basis of the aggregate number of shares
so converted.
(v) DEFINITIONS. As used with respect to the shares of said twelfth
series:
(A) the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of
Washington or the State of New York are authorized or obligated by law or
executive order to remain closed or are closed because of a banking
moratorium or otherwise;
(B) the term "Closing Price" on any day shall mean the reported
last sale price regular way (with any relevant due bills attached) on such
day, or in case no such sale takes place on such day, the average of the
reported last bid and asked prices regular way (with any relevant due bills
attached), in each case as reported in the composite quotations for
securities listed on the New York Stock Exchange, or, if the Common Stock
is not listed or admitted to trading on such Exchange, on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading (which shall be the national securities exchange on
which the greatest number of shares of Common Stock has been traded during
the five consecutive Trading Dates ending on and including the date of
determination of the Current Market Price), or, if not listed or admitted
to trading on any national securities exchange, the average of the reported
last bid and asked prices regular way (with any relevant due bills
attached) of the Common Stock on the over-the-counter market on the day in
question as reported by the National Association of Securities Dealers
Automated Quotation System, or a similar generally accepted reporting
service, or if no information of such character shall be available, as
determined in good faith by the Board of Directors on the basis of such
relevant factors as the Board of Directors in good faith considers
appropriate, (such determination to be conclusive, final and binding upon
the Corporation and all shareholders of the Corporation);
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<PAGE>
(C) the term "Extraordinary Transaction" shall mean a merger or
consolidation of the Corporation, a share exchange, division or conversion
of the Corporation's capital stock or an amendment of the Restated
Articles of Incorporation of the Corporation that results in the
conversion or exchange of Common Stock into, or the right of the holders
thereof to receive, in lieu of or in addition to their shares of Common
Stock, other securities or other property (whether of the Corporation or
any other entity);
(D) the term "Notice Date" with respect to any notice given by the
Corporation in connection with a conversion of any of the Shares of said
twelfth series shall be the date of the commencement of the mailing of such
notice to the holders of such shares as specified herein;
(E) the term "Optional Conversion Premium" shall mean, in respect
of each share of said twelfth series converted at the option of the
Company, an amount, in cash, initially equal to $20.90, declining by
$.02111 for each day following December 15, 1998 to and including the
optional conversion date (computed on the basis of a 360-day year
consisting of twelve 30-day months) and equal to $0 on and after September
15, 2001; provided, however, that in lieu of delivering such amount in
cash, the Company may, at its option, deliver a number of shares of Common
Stock equal to the quotient of such amount divided by the Current Market
Price as of the close of business on the second Trading Date immediately
preceding the date on which the Company gives notice of such conversion;
(F) the term "Optional Conversion Price" shall mean, in respect of
each share of said twelfth series converted at the option of the Company, a
number of shares of Common Stock equal to the lesser of (1) the amount of
$________ divided by the Current Market Price as of the close of business
on the second Trading Date immediately preceding the date on which the
Company gives notice of such conversion and (2) the number of shares of
Common Stock determined by reference to the Common Equivalent Rate;
(G) the term "Rights Agreement" shall mean the Rights Agreement,
dated as of February 16, 1990, between the Company and First Chicago Trust
Company of New York, Rights Agent, as amended; and the term "Rights" shall
mean the "Preferred Share Purchase Rights" established under the Rights
Agreement; and
(H) the term "Trading Date" shall mean a date on which the New York
Stock Exchange (or any successor to such Exchange) is open for the
transaction of business.
(vi)(A) Unless otherwise required by applicable law, notice of any
conversion shall be sent to the holders of the shares of said twelfth
series to be converted at the addresses shown on the books of the
Corporation by mailing a copy of such notice not less than fifteen (15)
days nor more than sixty (60) days prior to the conversion date. Each such
notice shall state (1) the conversion date, (2) the total number of shares
of said twelfth series to be converted and, if fewer than all the shares
held by such holder are to be converted, the number of such shares to be
converted, (3) the conversion price, (4) the place or places where
certificates for such shares are to be surrendered in exchange for
certificates and/or cash representing the conversion price and (5) that
dividends on the shares to be converted will cease to accrue on such
conversion date. Notwithstanding the foregoing, (1) the failure so to mail
any such notice of optional conversion or any defect therein or in the
mailing thereof shall not impair the validity of the conversion proceedings
with respect to shares as to which there shall have been no such failure or
defect and (2) the failure so to mail any such notice of mandatory
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<PAGE>
conversion or any defect therein or in the mailing thereof shall not
prevent the occurrence of such mandatory conversion or impair the validity
thereof.
(B) The shares of said twelfth series so to be converted shall, on
the date fixed for conversion, be deemed to have been converted (if, in the
case of an optional conversion, notice shall have been given as aforesaid);
from and after such conversion date dividends shall cease to accrue on such
shares; and all rights of the holders of such shares (except only rights as
holders of securities into which such shares shall have been converted and
the right to receive certificates representing such securities and the
right to receive an amount equal to dividends accrued on such shares to the
date fixed for such conversion) shall terminate.
(C) If less than all of the shares of said twelfth series are to be
converted at the option of the Corporation, the conversion shall be made
either pro rata or by lot in such manner as the Board of Directors shall
determine.
(vii) Upon the surrender by a holder of converted shares of said
twelfth series of certificates representing such shares in accordance with
the notice of conversion on or after the conversion date, the Corporation
shall deliver to or upon the order of such holder:
(A) certificates representing whole units of the securities into
which such shares of said twelfth series have been converted, such
certificates to be registered in such name or names, and to be issued in
such denominations, as such holder shall have specified;
(B) an amount, in cash, in lieu of fractional shares, as
hereinbefore provided;
(C) an amount, in cash, equivalent to accumulated and unpaid
dividends on such shares of Series A Preferred Stock to the conversion
date;
(D) an amount, in cash, securities or other property, representing
any other consideration to be delivered upon such conversion; and
(E) a certificate representing any shares of said twelfth series
which had been represented by the certificate or certificates delivered to
the Corporation in connection with such conversion but which were not
converted.
(viii) The Corporation will pay any and all documentary, stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Common Stock or other securities on the conversion of shares
of said twelfth series; provided, however, that the Corporation shall not
be required to pay any tax which may be payable in respect of any
registration of transfer involved in the issue or delivery of shares of
Common Stock or other securities in a name other than that of the
registered holder of the shares converted, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to
the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
Dated: ___________, 1998 THE WASHINGTON WATER POWER COMPANY
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By_______________________________________
JON E. ELIASSEN, Senior Vice President and
Chief Financial Officer
By________________________________________
TERRY L. SYMS, Vice President and
Corporate Secretary
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Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The Washington Water Power Company on Form S-4 of our report dated January 30,
1998, appearing in the Annual Report on Form 10-K of The Washington Water Power
Company for the year ended December 31, 1997 and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Seattle, Washington
August 17, 1998
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