<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-67525
SUBJECT TO COMPLETION. DATED DECEMBER 7, 1998.
Prospectus Supplement to Prospectus dated December 3, 1998.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED.
<PAGE>
$250,000,000
CENTRAL POWER AND LIGHT COMPANY
% Puttable Reset Securities PURS-SM- due , 20
Central Power and Light Company will pay interest on the Securities
semi-annually on June 1 and December 1 in each year, commencing June 1, 1999.
Until , 20 , the annual interest rate on the Securities will be
%.
On , 20 , one of two things will happen. Either (1)
(the "Callholder") will exercise its right to purchase all of the Securities
from the holders at a price equal to 100% of the principal amount of the
Securities; or (2) we will purchase the Securities at a price equal to 100% of
the principal amount of the Securities purchased, except for Securities which
holders of at least 10% of the outstanding Securities have elected to continue
to hold by giving proper notice to the Trustee. If either the Callholder has
exercised its right to purchase the Securities or holders of at least 10% of the
outstanding Securities have elected to hold such Securities, then the interest
rate will be reset by the Calculation Agent on the basis of certain bids the
Calculation Agent will request from various dealers, as described in this
prospectus supplement.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE COMMISSION OR
OTHER REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
Per Security Total
------------ -----------
<S> <C> <C>
Initial public offering price........................................ % $
Underwriting discount................................................ % $
Proceeds, before expenses, to Central Power and Light Company........ % $
</TABLE>
The initial public offering price set forth above does not include any
accrued interest. Interest on the Securities will accrue from , 1998
and must be paid by the purchaser if the Securities are delivered after
, 1998. The proceeds to Central Power and Light Company set forth
above include a payment by the Callholder for the call option it will have with
respect to the Securities.
- ------------------------
PURS-SM- is a service mark of Goldman, Sachs & Co.
------------------------
The underwriters expect to deliver the Securities in book-entry form only
through the facilities of The Depository Trust Company against payment in New
York, New York on , 1998.
GOLDMAN, SACHS & CO. NATIONSBANC MONTGOMERY SECURITIES LLC
MORGAN STANLEY DEAN WITTER
WARBURG DILLON READ LLC
------------------
Prospectus Supplement dated , 1998.
<PAGE>
THE COMPANY
We are a public utility company engaged in the production, purchase,
transmission, distribution and sale of electricity in south Texas. At December
31, 1997, we supplied electricity to approximately 627,900 retail customers in a
44,000 square mile area with an estimated population of 1,778,000. The largest
cities in our service territory are Corpus Christi, Laredo and McAllen. The
economy of our service area is based on manufacturing, mining, agriculture,
transportation and public utilities. We provide electricity to large industrial
customers in the oil and gas extraction, food processing, apparel, metal
refining, chemical and petroleum refining, and plastics and machinery equipment
industries.
Central and South West Corporation ("CSW"), a Dallas-based registered public
utility holding company under the Public Utility Holding Company Act of 1935, as
amended, owns all of our outstanding common stock. On December 22, 1997, CSW and
American Electric Power Company, Inc. ("AEP") announced that their boards of
directors had approved a definitive merger agreement.
Our principal executive offices are located at 539 N. Carancahua Street,
Corpus Christi, Texas 78401-2802, and our telephone number is (512) 881-5300.
Additional information about us, including financial statements and other
information, is available in the documents incorporated by reference in this
prospectus supplement.
RECENT DEVELOPMENTS
RESULTS OF OPERATIONS
Net income for common stock increased $19.2 million to $99.1 million during
the third quarter of 1998, from $79.9 million in the third quarter of 1997. This
increase was due primarily to increased non-fuel revenues as well as the absence
of the impact of the provision for the Final Order (as defined below). The
increase in net income for common stock was partially offset by a reduction in
base rates associated with the Final Order.
Net income for common stock increased $45.4 million to $157.4 million during
the first nine months of 1998 from $112.0 million in the first nine months of
1997. This increase was due primarily to increased non-fuel revenues and the
absence in 1998 of the 1997 provision for the Final Order. The increase in net
income for common stock was partially offset by a reduction in base rates
associated with the Final Order.
Our ratio of earnings to fixed charges for the twelve months ended September
30, 1998 was 3.14. For a comparison with the ratio of earnings to fixed charges
for each year during the five year period ended December 31, 1997, please see
page 6 of the Prospectus.
MERGER UPDATE
On November 19, 1998, AEP and CSW announced a proposed stipulated settlement
agreement (the "Settlement") with the Texas Office of Public Utility Counsel
("OPUC") and the Steering Committee of the cities of McAllen, Corpus Christi,
Victoria, Abilene, Big Lake, Vernon and Paducah (the "Cities"), which is subject
to ratification by each of the Cities' city councils and approval by the Public
Utility Commission of Texas (the "Texas Commission"). The Settlement and
supporting testimony were filed with the Texas Commission on November 25, 1998.
Under the terms of the Settlement, if the Texas Commission approves the
Settlement and the merger is completed as planned, (i) we will withdraw a part
of our appeal of the Final Order discussed below, (ii) our customers will
benefit from rate reductions totaling approximately $114 million over a six-year
period, (iii) we will agree not to seek an increase in base rates prior to
January 1, 2003, and (iv) OPUC and the Cities will not initiate rate reviews
prior to January 1, 2001.
S-2
<PAGE>
The Settlement also provides for a sharing of off-system sales margins on the
wholesale electricity market after the effective date of the merger, and
includes affiliate transaction standards and provides for the maintenance of
service quality for Texas customers. Hearings to consider the merger, including
the Settlement, are scheduled to begin on April 27, 1999. We cannot predict
whether the Cities will ratify the Settlement or whether the Texas Commission
will ultimately approve the merger or the Settlement.
CPL RATE REVIEW
Although we filed in 1995 a request with the Texas Commission to increase
our annual retail base rates by $71 million, pursuant to the CPL 1997 Final
Order (the "Final Order"), entered on October 16, 1997, our annual retail base
rates were reduced by $13.5 million as of May 1, 1998, and will be reduced by a
further $13.5 million in May 1999. In addition, the Final Order lowered our
annual retail base rates by approximately $19 million (or 2.5% from our May 1996
rate level). We have appealed the Final Order to the State District Court of
Travis County. Our motion for a temporary injunction to prevent the
implementation of the May 1998 base rate reduction was denied. Hearings on the
appeal were held during the third quarter of 1998 and focused on the following
issues: (i) the classification of $800 million of our investment in the South
Texas nuclear project, of which we are a part-owner, as excess cost over market
("ECOM"), which was also assigned a lower return on equity than non-ECOM
property, (ii) the methodology used to reduce our annual retail base rates by
$13.5 million as of May 1998 and May 1999, and (iii) the $18 million of
disallowed transactions with our affiliate, Central and South West Services,
Inc. The court has not yet issued its decision. We are unable to predict how
these issues will finally be resolved, nor how such resolution will ultimately
affect our results of operations and financial condition.
INDUSTRY RESTRUCTURING; LEGISLATION
We, along with the electric utility industry in general, are being affected
by competitive forces. Current legislative and regulatory initiatives are likely
to result in even greater competition in both the wholesale and retail markets
in the future. As competition in the industry increases, we will have the
opportunity to seek new customers and at the same time be at risk of losing
customers to other competitors. In addition, we will continue to compete with
suppliers of alternative forms of energy, such as natural gas, fuel oil and
coal, some of which may be cheaper than electricity. As a whole, we believe that
our prices for electricity and the quality and reliability of our service
currently place us in a position to compete effectively in the marketplace.
During the 1997 legislative session, a bill was proposed providing for
retail competition in the electric utility industry in Texas by December 31,
2001. Although the legislation failed to pass the 1997 session, Texas Lieutenant
Governor Bob Bullock formed a Senate Interim Committee on Electric Utility
Restructuring (the "Committee") composed of seven state senators, and charged
them with the responsibility of studying and determining any needed statutory
changes to create a competitive Texas electric market that is open to all
classes of retail customers. In that regard, the Lieutenant Governor charged the
Committee with studying a wide variety of issues, including an appropriate date
for opening the market, stranded costs, market structure, customer protection
standards, reliability and service quality standards, environmental and
renewable power issues, the role of regulation in a competitive electric market,
and other related markets. The Committee was also asked to make recommendations
for required legislative and regulatory action.
The Committee held a number of hearings throughout the state in 1998. The
Committee's final report, which may include legislative recommendations, has not
yet been placed before the Texas legislature which will not be in session until
January, 1999. Legislation will be considered in the 1999 legislative session
regarding the restructuring of the electric utility industry and providing for
retail competition.
S-3
<PAGE>
USE OF PROCEEDS
We will use the net proceeds from the sale of the Securities and the sale to
the Callholder of the Call Option with respect to the Securities, estimated to
be approximately $ , principally to repay outstanding short-term
debt owing to affiliates, which had a blended interest rate of 5.85% as of
September 30, 1998. Any remaining proceeds will be used for general corporate
purposes, including repayment of the Company's 7 1/2% First Mortgage Bonds which
mature May 1, 1999. Any net proceeds not immediately used for these purposes
will be temporarily invested in short-term interest-bearing obligations.
CAPITALIZATION
<TABLE>
<CAPTION>
CAPITALIZATION AT SEPTEMBER 30, 1998
----------------------------------------------------
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
ACTUAL % AS ADJUSTED(2) %
------------- --------- --------------- ---------
<S> <C> <C> <C> <C>
Long-Term Debt(1)................................................ $ 1,170,325 41 $ 1,420,325 45
CPL-Obligated Mandatorily
Redeemable Preferred Securities
of Subsidiary Trust Holding Solely
Junior Subordinated Debentures of CPL.......................... 150,000 5 150,000 5
Preferred Stock.................................................. 163,204 6 163,204 5
Common Equity.................................................... 1,392,580 48 1,392,580 45
------------- --- --------------- ---
Total...................................................... $ 2,876,109 100 $ 3,126,109 100
------------- --- --------------- ---
------------- --- --------------- ---
Short-Term Debt.................................................. $ 127,781(3) -- $ 0 --
Long-Term Debt Currently Maturing................................ $ 100,000 -- $ 100,000 --
</TABLE>
- ------------------------
(1) Our long-term debt consists primarily of $1,026,700 of outstanding First
Mortgage Bonds which are secured by a mortgage on substantially all of our
properties.
(2) Adjusted to give effect to the consummation of the offering of the
Securities and the application of a portion of the estimated net proceeds
therefrom to repay short-term debt.
(3) Our short-term debt is expected to exceed $200,000 by January 1999.
DESCRIPTION OF THE SECURITIES
The % Puttable Reset Securities PURS-SM- due , 20 (the
"Securities") are a separate series of the Senior Notes described in the
accompanying prospectus. Investors should read the prospectus for a detailed
summary of additional provisions of the Securities and of the indenture under
which the Securities are issued (as supplemented and amended, the "Indenture").
The description of the Securities below supplements the description of the
Senior Notes contained in the prospectus. If the descriptions are inconsistent,
this prospectus supplement controls. Capitalized terms used but not defined in
this prospectus supplement have the meanings given to them in the prospectus.
GENERAL
The Securities will constitute a series of Senior Notes of the Company, and
are to be issued under the Indenture. The aggregate principal amount of the
Securities is limited to $250,000,000, but the Indenture does not limit the
amount of other Senior Notes that may be issued by the Company. The Securities
are unsecured obligations of the Company and rank equally with all other
unsecured and unsubordinated indebtedness of the Company. The Securities will
mature on , 20 (the "Final Maturity"), but the Company may be
required to purchase them
S-4
<PAGE>
earlier, as described in "--Put Option" below. The Securities may be redeemed at
the option of the Company after the Reset Date (as defined below) as described
below under "--Optional Redemption." The Securities are not entitled to the
benefit of any sinking fund. The Indenture permits the defeasance of the
Securities upon satisfaction of the conditions described under "Description of
the Senior Notes--Defeasance" in the accompanying prospectus.
The Company has agreed with the Callholder, as holder of the Call Option (as
defined below), that, notwithstanding any provision to the contrary set forth in
the Indenture, from , 1998 until the Final Dealer (as defined below)
notifies the Company that the remarketing of the Securities is complete (or
until the termination of the Call Option, if earlier), the Company will not
cause or permit the terms or provisions of the Securities (or of the Indenture,
as it relates to the Securities) to be modified in any way that (i) materially
changes the nature of the Securities, the interest rate reset provisions of the
Securities or the payment and settlement provisions of the Securities or (ii)
changes any of the terms of the Call Option, and may not make open market or
other purchases of the Securities except pursuant to the Put Option, without, in
each case, the prior written consent of the Callholder.
The Company will issue the Securities in fully registered form in
denominations of $1,000 and in $1,000 increments above $1,000. The Bank of New
York (the "Trustee") will register transfers and exchanges of the Securities.
Principal on the Securities will be payable at the Trustee's corporate trust
office at 101 Barclay Street, New York, New York 10286. The Company will
initially issue the Securities in global form. See "--Global Securities."
If any principal, interest or other payment to be made in respect of the
Securities (including any payment pursuant to the Call Option or the Put Option)
would be due on a day that is not a Business Day (as defined below), payment may
be made on the next day that is a Business Day, with the same effect as if
payment were made on the due date. "Business Day" means any day other than a
Saturday, a Sunday, or a day on which banking institutions in New York City are
authorized or obligated by law to close.
LIMITATION ON LIENS
The supplemental indenture to the Indenture that establishes the Securities
as a series of Senior Notes provides that the covenant summarized in the
accompanying prospectus under "Description of the Senior Notes--Limitation on
Liens" is applicable to the Securities.
INTEREST
Each Security will accrue interest at the applicable rate as described
below, from (and including) , 1998 to (but excluding) the date on which
the principal amount is paid in full. Interest will be payable in arrears on
June 1 and December 1 in each year, in each case to the holder of record of the
Securities on the May 15 or November 15 next preceding the interest payment date
(each an "Interest Payment Record Date"). The Interest Payment Record Date will
differ from the record date for the provision of a Hold Notice or for receipt of
payment upon exercise of the Call Option or the Put Option, as described below.
From (and including) , 1998 to (but excluding) ,
20 (the "Reset Date"), interest will accrue at an annual rate equal to % (the
"Initial Interest Rate").
On the Reset Date, the interest rate on the Securities will be reset so as
to equal the Adjusted Rate (as defined below). Notwithstanding the foregoing,
the interest rate on the Securities will not be reset on the Reset Date if the
Company is obligated to purchase the entire principal amount of the Securities
on such date. A reset scheduled to occur on the Reset Date also may not occur if
a Market Disruption Event and/or a Failed Remarketing occurs. See "--Reset of
Interest Rate" below.
S-5
<PAGE>
CALL OPTION
The Callholder (or any successor firm) may purchase all, but not less than
all, of the outstanding Securities from the holders on the Reset Date (this
right is referred to as the "Call Option") at a price equal to 100% of the
principal amount of such Securities (the "Face Value"). In order to exercise the
Call Option, the Callholder must give notice (a "Call Notice") of its intention
to purchase the outstanding Securities as described below. The Company will
remain obligated to pay all accrued and unpaid interest on the Securities to,
but not including, the Final Maturity, except to the extent of any optional
redemption of the Securities. See "--Optional Redemption". The Company must pay
accrued and unpaid interest on the Reset Date to the holders of record on the
Interest Payment Record Date, as provided in the Securities and the Indenture.
The Callholder may not assign or otherwise transfer the Call Option to any
person other than an affiliate without the prior written consent of the Company.
To exercise the Call Option, the Callholder must give a Call Notice to the
holders of outstanding Securities no later than ten Market Days (as defined
below) before the Reset Date, in the manner described under "--Certain Notices"
below. If the Callholder gives the Call Notice, each holder will be obligated to
sell to the Callholder, and the Callholder will be obligated to purchase from
each holder, at the Face Value on the Reset Date, the Securities held of record
by the holder on the Reset Date. This purchase and sale will be effected through
the facilities of the Depository Trust Company ("DTC"). Each holder will be
deemed to have automatically tendered its Securities for sale to the Callholder
on the Reset Date in accordance with applicable DTC procedures, provided the
holder receives payment of the Face Value of the Securities from the Callholder
on the Reset Date. Until purchased or paid for by the Company, the Securities
will remain outstanding notwithstanding any exercise of the Call Option by the
Callholder. See "--Settlement on Exercise of Put and Call Options." "Market
Day," means a Business Day other than a day on which dealings are generally not
conducted in the U.S. Treasury market.
If the Callholder duly exercises the Call Option, all the Securities
outstanding on the Reset Date will be subject to purchase by the Callholder as
described above. The obligation to sell the Securities to the Callholder upon
the Callholder's exercise of the Call Option applies to every holder (and every
beneficial owner) of Securities (or any portion thereof) outstanding on the
Reset Date, including those who acquire an interest in the Securities (or any
portion thereof) after the Call Notice is given or who are otherwise unaware
that the Call Notice has been given.
On or prior to the Reset Date, if an Event of Default (as defined in the
Indenture) occurs, or if certain events occur which, with the giving of notice
or passage of time or both, would constitute Events of Default and such events
are not cured by the Company within a specified time period, or if the Company
modifies the terms or provisions of the Securities in a manner contrary to its
agreement with the Callholder (as described under "--General"), the Callholder
can demand that the Company settle the Call Option. If the Call Option is
settled, the holders will be deemed on the Reset Date to have exercised their
Put Option.
PUT OPTION
If the Callholder does not duly exercise the Call Option, each holder of
outstanding Securities may require the Company to purchase all of such holder's
Securities (in whole and not in part) on the Reset Date (such right is referred
to as the holder's "Put Option") at the Face Value of the Securities purchased,
in the manner described in the next paragraph. The Company will remain obligated
to pay all accrued and unpaid interest on the purchased Securities that becomes
payable on the Reset Date to the holders of record on the corresponding Interest
Payment Record Date, as provided in the Securities and the Indenture. If for any
reason the Company does not pay the Face Value on the Reset Date to the holders
on the Reset Date, the Company must pay the interest that accrues at the Initial
Interest Rate from the Reset Date to the date payment is actually made by the
Company to the holders on the Reset Date.
S-6
<PAGE>
On the Reset Date, each holder will be deemed to have exercised its Put
Option automatically in respect of the full principal amount of the Securities
held of record by it on the Reset Date unless either (x) the Callholder has duly
given a Call Notice or (y), if the Callholder does not exercise the Call Option,
(i) the holder of record on the seventh Market Day prior to the Reset Date gives
notice to the Trustee no later than 10:00 A.M. (New York City time) on such
Market Day that the holder elects not to sell any of its Securities to the
Company on the Reset Date (a "Hold Notice") and (ii) the Hold Notice is an
Effective Hold Notice (as defined below). A Hold Notice must be given in the
manner described under "--Certain Notices." With respect to each holder, if the
Callholder does not duly exercise the Call Option and such holder does not give
an Effective Hold Notice, the Company will be obligated to purchase from such
holder, and such holder will be obligated to sell to the Company, at Face Value
on the Reset Date, the Securities held of record by such holder on the Reset
Date. Such sale and purchase will be effected through the facilities of DTC,
with each holder who has not given an Effective Hold Notice being deemed to have
automatically tendered its Securities for sale to the Company on the Reset Date
in accordance with applicable DTC procedures. If the Company is obligated to
purchase any Securities pursuant to the Put Option, the Securities subject to
purchase will remain outstanding until the Company pays the Face Value (with
accrued interest at the Initial Interest Rate). See "--Settlement on Exercise of
Put and Call Options."
Notwithstanding the foregoing, each holder shall be deemed to have exercised
its Put Option and may not continue to hold any portion of the Securities by
giving a Hold Notice if (i) the Company is required to pay the Callholder the
Call Option Termination Amount, (ii) the Company is obligated to purchase the
Securities in connection with the failure of the Callholder to pay the Face
Value of the Securities on the Reset Date, or (iii) the Callholder determines
that a Market Disruption Event and/or a Failed Remarketing, as described below,
has occurred or is continuing on consecutive Market Days starting on the
Calculation Date and ending on (and including) the third Market Date prior to
the Reset Date. Notwithstanding any exercise of the Put Option with respect to
the Securities, the Securities shall remain outstanding until the Face Value
(and accrued interest thereon, if any, at the Initial Interest Rate) in respect
thereof has been paid.
An "Effective Hold Notice" is a Hold Notice, provided Hold Notices are duly
given by the holders of record of at least 10% of the aggregate principal amount
of the Securities outstanding on the tenth Market Day prior to the Reset Date
(the "10% Requirement"). If any holder gives a Hold Notice to the Trustee and
the 10% Requirement is not satisfied, the Trustee will give written notice that
such holder's notice is not an Effective Hold Notice (a "10% Requirement
Notice") to the holder and the Company no later than the close of business on
the seventh Market Day before the Reset Date, in the manner described under
"--Certain Notices" below.
RESET OF INTEREST RATE ON THE SECURITIES
The interest rate on the outstanding Securities will be reset on the Reset
Date if either (x) the Callholder duly exercises its Call Option or (y) if the
Callholder does not duly exercise its Call Option, but an Effective Hold Notice
is given by holders under the 10% Requirement. Notwithstanding the foregoing,
however, the interest rate will not be reset if a Market Disruption Event and/or
a Failed Remarketing occurs, as (and to the extent) described below.
The Company has initially appointed the Callholder as its agent for the
purpose of resetting the interest rate (such agent or any successor agent, the
"Calculation Agent"). If the interest rate is to be reset on the Reset Date, the
Calculation Agent will reset the interest rate as follows:
Between the tenth Market Day prior to the Reset Date and 11:00 A.M., New
York City time, on the Calculation Date (as defined below), the Calculation
Agent will select at least three financial institutions (one of which will be
the Callholder if it so requests) that deal in the Company's debt
S-7
<PAGE>
securities and have agreed to participate as reference dealers on the terms
described below (the "Reference Dealers"). The Callholder may require that each
Reference Dealer commit in writing that, if it is selected as the Final Dealer
(as defined below), it will purchase all the Securities that the Callholder
purchases pursuant to the Call Option and tenders to the Final Dealer for resale
on the Reset Date. The Final Dealer must make this purchase on the Calculation
Date (as defined below) or, if applicable, on a subsequent day, as described
below, for settlement on the Reset Date. The Final Dealer must purchase the
Securities at the Final Offer Price (as defined below).
On a Market Day chosen by the Calculation Agent, which will fall into the
period beginning with and including the sixth Market Day and ending with and
including the fourth Market Day before the Reset Date (this Market Day is
referred to as the "Calculation Date"), the Calculation Agent will undertake the
following actions to calculate the Adjusted Rate at which interest will accrue
on the Securities from and including the Reset Date to but excluding the Final
Maturity (such period, the "Reset Period").
At approximately 12:00 P.M. New York City time, the Calculation Agent will:
(1) obtain from the Callholder the approximate 10-year U.S. Treasury
bond yield at or about such time, which will be expressed as a percentage
(the "Designated Treasury Yield") and will be based on the then-current,
10-year U.S. Treasury bond (the "Designated Treasury Bond");
(2) calculate and provide to the Reference Dealers, a preliminary,
hypothetical price at which the Securities might be offered for sale to a
Reference Dealer on the Reset Date (the "Offer Price"). The Offer Price will
be expressed as a percentage of the principal amount of the Securities and
will equal 100% plus the Margin (as defined below), if the Treasury Rate
Difference (as defined below) is positive, or 100% minus the Margin, if the
Treasury Rate Difference is negative. The "Margin" will be expressed as a
percentage of the principal amount of the Securities and will equal the
present value of the absolute value of the Treasury Rate Difference applied
to 20 semi-annual periods (i.e., 10 years), discounted at the Designated
Treasury Yield divided by two. The "Treasury Rate Difference" means the
percentage (which may be positive or negative) equal to (a) % (the
"Initial Treasury Yield") minus (b) the Designated Treasury Yield; and
(3) request that each Reference Dealer provide to the Calculation Agent,
when the Calculation Agent notifies each Reference Dealer of the Final Offer
Price as described below, a firm bid, expressed as a percentage representing
an interest rate spread (the "Spread") over the Designated Treasury Yield at
which such Reference Dealer would be willing to purchase on the Calculation
Date for settlement on the Reset Date, at the Final Offer Price, all of the
Securities then outstanding. Each such firm bid is to be given on an
"all-in" basis and is to remain open for at least 30 minutes after it is
given.
At approximately 12:30 P.M. New York City time, the Calculation Agent will
obtain from the Callholder the Designated Treasury Yield on a final basis, and
will calculate the Offer Price on a final basis (the "Final Offer Price"). The
Calculation Agent will then provide the Final Offer Price to the Reference
Dealers and request that each Reference Dealer submit its bid as described
above. If the Calculation Agent receives at least two bids, the following will
occur:
(1) the Reference Dealer providing the bid representing the lowest
all-in Spread (the "Final Spread") will be the "Final Dealer"; provided that
if more than one Reference Dealer has provided a bid representing the lowest
all-in Spread (each a "Qualifying Reference Dealer"), the Calculation Agent
will so notify each Qualifying Reference Dealer and each Qualifying
Reference Dealer will have the opportunity immediately thereafter to submit
a second firm bid in the manner and on the terms specified above (provided
that the second firm bid of each
S-8
<PAGE>
Qualifying Reference Dealer must represent an all-in Spread that is at least
as low as its first firm bid), and the Qualifying Reference Dealer providing
the bid representing the lowest all-in Spread will be the Final Dealer. If
more than one Qualifying Reference Dealer has provided a second firm bid
representing the lowest all-in Spread, then the Calculation Agent shall
choose the Final Dealer;
(2) if the Callholder has exercised the Call Option, the Final Dealer
will be obligated to purchase from the Callholder at the Final Offer Price,
for settlement on the Reset Date, all the Securities that the Callholder
purchases pursuant to the Call Option and tenders for resale to the Final
Dealer on the Reset Date (assuming that the interest rate on the Securities
will be reset so as to equal the Adjusted Rate during the Reset Period);
(3) the Calculation Agent will calculate and provide to the Company the
"Adjusted Rate," which will be the semi-annual, bond-equivalent, fixed
interest rate on the Securities that is required to produce, during the
Reset Period, a semi-annual, bond-equivalent yield on the Securities that
equals the sum of the Final Spread plus the final Designated Treasury Yield,
assuming that the Securities are purchased on the Reset Date at the Final
Offer Price and will be purchased by the Company at Face Value at Final
Maturity; and
(4) the interest rate on the Securities will be adjusted so as to equal
the Adjusted Rate, effective from and including the Reset Date to but
excluding the Final Maturity. If the Callholder has not exercised the Call
Option and any holder has given an Effective Hold Notice to the Trustee, the
Company will promptly give written notice of the Adjusted Rate to the
holder.
All determinations of the Designated Treasury Yield and the Designated
Treasury Bond as described above will be made by the Callholder even if another
party acts as the Calculation Agent, unless the Callholder has elected not to
exercise the Call Option.
If the Calculation Agent determines that, on the Calculation Date, (1) a
Market Disruption Event (as defined below) has occurred and is continuing and/or
(2) fewer than two Reference Dealers have provided firm bids in a timely manner
pursuant to participation agreements satisfactory to the Callholder
substantially as described above (a "Failed Remarketing"), then the steps
described above will be taken on the next Market Day on which the Calculation
Agent determines that no Market Disruption Event has occurred or is continuing
and on which at least two Reference Dealers have provided qualifying bids.
If the Calculation Agent determines that a Market Disruption Event and/or a
Failed Remarketing has occurred or is continuing for the entire period starting
on the Calculation Date and ending with (and including) the third Market Day
preceding the Reset Date, then the Callholder will be deemed not to have
exercised its Call Option, all the holders will be deemed to have exercised the
Put Option and the Company will then be required to purchase all the Securities
from the holders on the Reset Date at Face Value (and will pay the Callholder an
amount equal to the Margin, if the Treasury Rate Difference is positive). In
these circumstances the holders of Securities may not continue to hold the
Securities by giving an Effective Hold Notice. The Calculation Agent will notify
the Company if it makes such a determination promptly after the close of
business on the third Market Day preceding the Reset Date. The Company will give
notice to the holders that it will purchase the Securities from the holders on
the Reset Date at Face Value, no later than the second Market Day prior to the
Reset Date in the manner described under "--Certain Notices" below. The
Callholder will make the determinations and give the notice to the Company
described in this paragraph and in the preceding paragraph even if it is not
acting as Calculation Agent.
"Market Disruption Event" means any of the following: (1) a suspension or
material limitation in trading in securities generally on the New York Stock
Exchange or the establishment of minimum prices on such exchange; (2) a general
moratorium on commercial banking activities declared by
S-9
<PAGE>
either federal or New York State authorities; (3) an occurrence of a material
adverse change in the existing financial, political or economic conditions in
the United States of America; (4) an outbreak or escalation of hostilities
involving the United States of America or the declaration of a national
emergency or war by the United States of America; or (5) an occurrence of a
material disruption of the U.S. government securities market, U.S. corporate
bond market and/or U.S. federal wire system.
There is no assurance that the Calculation Agent will receive at least two
qualifying bids from Reference Dealers in connection with the Reset Date. The
Callholder in its sole discretion will make all determinations regarding Market
Disruption Events and Failed Remarketings, including whether or not any such
event has occurred or is continuing.
If the Callholder has not duly exercised the Call Option, the Final Dealer
will not be obligated to purchase the Securities from any holder, and no holder
will be obligated to sell Securities to the Final Dealer. Consequently, holders
should bear in mind that at the time they are required to decide whether to give
a Hold Notice they will not know, and therefore should not assume, that any
dealer will be prepared to purchase their Securities at the Final Offer Price or
otherwise.
All of the Calculation Agent's (or the Callholder's, as the case may be)
determinations regarding the matters described above will, absent manifest
error, be final, conclusive and binding on all concerned and will not give rise
to any liability on the part of the Calculation Agent, or the Callholder, the
Trustee or the Company or their respective agents.
SETTLEMENT ON EXERCISE OF THE PUT AND CALL OPTIONS
If the Call Option is exercised, then, on the Reset Date, all beneficial
interests in the Securities will be transferred to a DTC account designated by
the Callholder. The transfers will be made automatically, without any action on
the part of any beneficial owner, by book entry through DTC. The Callholder will
be obligated to make payment of the Face Value of the Securities to DTC or its
nominee by the close of business on the Reset Date, for credit to the accounts
of the DTC participants through which beneficial interests in the Securities are
held. Each transfer will be made against the corresponding payment, and each
payment will be made against the corresponding transfer, in accordance with
applicable DTC procedures.
If the Callholder does not pay the Face Value of the Securities on the Reset
Date, the Call Option will be deemed not to have been exercised, and the Put
Option will be deemed to have been exercised with respect to all of the
outstanding Securities. In these circumstances, the holders of the Securities
may not continue to hold the Securities by giving an Effective Hold Notice, and
the Company will be obligated to pay to the holders on the Reset Date the Face
Value of the Securities (plus accrued interest at the Initial Interest Rate from
the Reset Date to, but excluding, the date payment is made) no later than two
Business Days after the Reset Date, with settlement occurring as described in
the next paragraph. In any event, the Company will remain obligated to pay on
the Reset Date accrued and unpaid interest due on the Securities to the holders
of record on the corresponding Interest Payment Record Date, as provided in the
Securities and in the Indenture. Failure by the Callholder to pay the Face Value
of the Securities on the Reset Date will not constitute an Event of Default
under the Indenture.
If the Put Option is exercised, then, on the Reset Date, all beneficial
interests in the Securities to be purchased will be transferred to a DTC account
designated by the Company. The transfers will occur automatically, without any
action on the part of any holder or beneficial owner, by book entry through DTC.
The Company will be obligated to make payment of the Face Value of the
Securities to be purchased to DTC or its nominee, for credit to the accounts of
the DTC participants through which beneficial interests in these Securities are
held, by the close of business on the Reset Date (or, if the Put Option is
deemed to have been exercised as contemplated in the previous paragraph, by the
close of business on the second Business Day following the Reset Date). Each
S-10
<PAGE>
transfer will be made against the corresponding payment, and each payment will
be made against the corresponding transfer, in accordance with applicable DTC
procedures. If the Company does not pay the Face Value of the Securities on the
Reset Date, the Company will also pay to the holders on the Reset Date, in
addition to the Face Value, accrued interest at the Initial Interest Rate from
the Reset Date to, but excluding, the date the payment is made. With respect to
all the Securities, whether or not purchased pursuant to the Put Option, the
Company will remain obligated to make payment of accrued and unpaid interest due
on the Securities, with interest payable on the Reset Date being payable to the
holders of record on the corresponding Interest Payment Record Date, as provided
in the Securities and in the Indenture.
The transactions described above will be executed on the Reset Date (or on
the second Business Day thereafter, to the extent specified above) through DTC
in accordance with the procedures of DTC. The accounts of the respective DTC
participants will be debited and credited and beneficial interests in the
Securities will be delivered by book entry as necessary to effect such purchases
and sales thereof. The transactions will settle in immediately available funds
through DTC's Same-Day Funds Settlement System.
The settlement procedures described above, including those for payment for
and delivery of Securities purchased by the Callholder or the Company on the
Reset Date (or on the second Business Day thereafter, to the extent specified
above), may be modified by the Company, despite any contrary terms in the
Indenture, if so required by DTC. In addition, these settlement procedures may
be modified by the Company if the book-entry system is no longer available for
the Securities at the relevant time, to the extent required to accomplish these
transactions with certificated Securities. In addition, the Callholder and the
Company may, notwithstanding any contrary terms of the Indenture, modify the
settlement procedures referred to above in order to facilitate the settlement
process.
Under the terms of the Securities, the Company has agreed that,
notwithstanding any provision to the contrary set forth in the Indenture, at all
times until the Final Dealer notifies the Company that the remarketing of the
Securities is complete, (1) it will use its best efforts to maintain the
Securities in book-entry form with DTC or any successor thereto and to appoint a
successor depositary to the extent necessary to maintain the Securities in
book-entry form and (2) it will not exercise any discretionary right it may have
under the Indenture to cause the Securities to be issued in certificated form.
For further information with respect to payments, transfers and settlement
through DTC, see "--Global Securities" below.
OPTIONAL REDEMPTION
The Securities will not be redeemable on or prior to the Reset Date.
Following the Reset Date, if any, the Securities will be redeemable, in
whole or in part, at the option of the Company at any time, upon not less than
30 nor more than 60 days' notice, at a redemption price equal to the greater of
(i) the Face Value of the Securities to be redeemed or (ii) as determined by an
Independent Investment Banker (as defined below), the sum of the present values
of the remaining scheduled payments of principal and interest thereon (not
including any portion of such payments of interest accrued as of the date of
redemption) discounted to the date of redemption on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate (as defined below) plus 25 basis points, plus accrued interest thereon to
the date of redemption. Unless the Company defaults in payment of the redemption
price, on and after the redemption date, interest will cease to accrue on the
Securities or portions thereof called for redemption on such date.
S-11
<PAGE>
"Treasury Rate" means, with respect to any redemption date, (a) the yield,
under the heading that represents the average for the immediately preceding
week, appearing in the most recently published statistical release designated
"H.15(519)" or any successor publication that is published weekly by the Board
of Governors of the Federal Reserve System and that establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities" for the maturity corresponding
to the Comparable Treasury Issue (if no maturity is within three months before
or after the Final Maturity, yields for the two published maturities most
closely corresponding to the Comparable Treasury Issue shall be determined and
the Treasury Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding to the nearest month) or (b) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such redemption
date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the period of time remaining between the date of redemption of such Securities
and the Final Maturity of the Securities that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the period of time
remaining between the date of redemption of such Securities and the Final
Maturity of the Securities.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations (if any), or (ii) if the Company obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Independent Investment Banker" means the Reference Treasury Dealer
appointed by the Company.
"Reference Treasury Dealer" means each of Goldman, Sachs & Co., NationsBank
Montgomery Securities LLC, Morgan Stanley & Co. Incorporated, Warburg Dillon
Read LLC and Salomon Smith Barney Inc. and their respective successors;
provided, however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Company, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Company by such Reference Treasury Dealer at 5:00 P.M. (New York
City time) on the third Business Day preceding such redemption date.
GLOBAL SECURITIES
When the Securities are initially issued, one or more global securities (the
"Global Securities") will represent the Securities. These Global Securities will
have an aggregate principal amount equal to that of the Securities they
represent. Each Global Security will be deposited with, or on behalf of, DTC, as
depository (the "Depository"), and registered in the name of Cede & Co., a
nominee of the Depository. The Global Securities will bear legends stating the
restrictions on exchanges and registration of transfer referred to below and any
other matters provided for by the Indenture.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a member of the Federal
S-12
<PAGE>
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of section 17A of the Securities Exchange Act of 1934. The Depository
was created to hold securities of its participants and to facilitate the
clearance and settlement of securities transactions among its participants
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (including each
of the underwriters set forth in "Underwriting" below (the "Underwriters")),
banks, trust companies, clearing corporations and certain other organizations,
some of whom (and/or their representatives) own the Depository. Access to the
Depository's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodian
relationship with a participant, either directly or indirectly.
Unless otherwise provided by any provision of the Indenture or the
Securities described in this prospectus, no Global Security may be exchanged in
whole or in part for registered Securities, and no transfer of a Global Security
in whole or in part may be registered in the name of any person other than the
Depository for such Global Security or any nominee of the Depository unless (1)
the Depository has notified the Company that it is unwilling or unable to
continue as Depository for the Global Security or has ceased to be qualified to
act as Depository as required pursuant to the Indenture or (2) there shall have
occurred and be continuing an Event of Default with respect to the Securities
represented by such Global Security. All Securities issued in exchange for a
Global Security or any portion of a Global Security will be registered in such
names as the Depository may direct.
As long as the Depository, or its nominee, is the registered holder of a
Global Security, the Depository or its nominee, as the case may be will be
considered the sole owner and holder of such Global Security and the Securities
represented thereby for all purposes under the Securities and the Indenture.
Except in the limited circumstances referred to above, owners of beneficial
interests in a Global Security (1) will not be entitled to have such Global
Security or any Securities represented by the Global Security registered in
their names, (2) will not receive or be entitled to receive physical delivery of
certificated Securities in exchange for the Global Security and (3) will not be
considered to be the owners or holders of such Global Security or any Securities
represented by the Global Security for any purpose under the Securities or the
Indenture. Payments of principal of and interest on a Global Security will be
made to the Depository or its nominee, as the case may be, as the holder
thereof. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. These
laws may impair the ability of holders to transfer beneficial interests in a
Global Security.
Institutions that have accounts with the Depository or its nominee
("participants") and persons that may hold beneficial interests through
participants are the only holders who may own beneficial interests in a Global
Security. In connection with the issuance of any Global Security, the Depository
will credit, on its book-entry registration and transfer system, the respective
principal amounts of Securities represented by the Global Security to the
accounts of its participants. Ownership of beneficial interests in a Global
Security will be shown only on, and the transfer of those ownership interests
will occur only through, records maintained by the Depository (with respect to
participants' interests) or any such participant (with respect to interests of
persons held by such participants on their behalf). Payments, transfers,
exchanges, notices and other matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by the
Depository. None of the Company, the Trustee, the Calculation Agent, the
Callholder, any Paying Agent, or the Security Registrar or any of their
respective agents will have any responsibility or liability (1) for any aspect
of the Depository's or any participant's records relating to, or for any
payments, transfers or other transactions, or any notices or other
communications, among the Depository, any direct or indirect participants
therein and any beneficial owners of a Global Security,
S-13
<PAGE>
or (2) for maintaining, supervising or reviewing any records relating to such
beneficial interests. For all purposes of the Securities and the Indenture, any
payment or notice to be made or given with respect to the Securities by the
Company or the Callholder shall be deemed made or given when made or given to
the Depository or its nominee, in accordance with its procedures.
CERTAIN NOTICES
With respect to any Securities represented by a Global Security, Call
Notices, 10% Requirement Notices and any other notices to be given to the
holders of the Securities will be deemed to have been duly given to the holders
when given to DTC, or its nominee, in accordance with DTC's policies and
procedures. The Company believes that DTC's practice is to inform its
participants of any such notice it receives in accordance with its policies and
procedures. Persons who hold beneficial interests in the Securities through DTC
or its direct or indirect participants may wish to consult with them about how
notices and other communications relating to the Securities may be given and
received through the facilities of DTC. None of the Company, the Calculation
Agent, the Callholder or the Trustee will have any responsibility with respect
to those policies and procedures or for any notices or other communications
among DTC, its direct and indirect participants and the beneficial owners of the
Securities in global form.
With respect to Securities not represented by a Global Security, Call
Notices, 10% Requirement Notices and any other notices to be given to the
holders of the Securities will be deemed to have been duly given to the holders
upon the mailing of such notices to the holders at their respective addresses as
they appear on the Security Register maintained by the Company or its agent as
of the close of business before the day notice is given.
Neither the failure to give any notice nor any defect in any notice given to
a particular holder will affect the sufficiency of any notice given to another
holder.
Hold Notices may be given by a holder of a Security to the Trustee only by
facsimile transmission or by mail and must actually be received by the Trustee
at the following address no later than 10:00 A.M., New York City time, on the
seventh Market Day prior to the Reset Date:
101 Barclay Street,
New York, NY 10286
Attention: Corporate Trust Trustee
Fax No. (212) 815-5915
Hold Notices may be given with respect to a Security only by the registered
holder of the Security. Therefore, in the case of any beneficial interest in a
Security represented by a Global Security, a Hold Notice must be given by DTC or
its agent, and any owner of a beneficial interest that wants a Hold Notice to be
given with respect to such interest will need to make arrangements with DTC
and/or the applicable direct or indirect participants for the notice to be given
in a timely manner.
THE CALCULATION AGENT
The Calculation Agent may resign at any time by giving notice to the Company
(with a copy to the Trustee) of such resignation. The Calculation Agent may at
any time be removed for cause by the Company. The Company shall take such action
as is necessary to ensure that there shall at all relevant times be a qualified
financial institution appointed and acting as the Calculation Agent. Neither the
resignation of the Calculation Agent nor its removal for cause by the Company
will affect the Callholder's ownership of the Call Option.
S-14
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of the
Securities by an initial holder of the Securities who purchases the Securities
on , 1998. This summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury
regulations promulgated thereunder and current administrative rulings and court
decisions currently in effect, all of which are subject to change, possibly with
retroactive effect. The discussion does not deal with all federal tax
considerations applicable to all categories of investors (including insurance
companies, tax-exempt organizations, financial institutions or broker-dealers)
some of which may be subject to special rules. In addition, this summary is
limited to holders who will hold the Securities as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Code.
This summary only addresses the United States federal income tax considerations
relating to the Securities held until the Reset Date.
INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES RELATING TO THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE SECURITIES.
Prospective investors should note that no rulings have been or are expected
to be sought from the Internal Revenue Service (the "Service") with respect to
any of the federal income tax considerations discussed below, and no assurance
can be given that the Service will not take contrary positions.
TREATMENT OF SECURITIES
Although there is no authority on point characterizing instruments such as
the Securities, and the matter is not free from doubt, the Company intends to
treat the Securities as debt instruments that mature on the Reset Date for
United States federal income tax purposes. Based on such treatment, the issue
price of the Securities will be equal to the first price at which a substantial
amount of the Securities are sold for money (excluding sales to bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers) without regard to any amount paid
by the holder of the Call Option as option premium with respect to the Call
Option. So viewed, and provided the principal amount of the Securities does not
exceed their issue price by more than a statutory de minimis amount, the
Securities would not be treated as having original issue discount, and a holder
of Securities would account for interest income from the Securities in
accordance with its regular method of accounting.
Under the foregoing treatment, upon the sale, exchange, redemption or other
disposition by a holder of Securities, the holder generally should recognize
capital gain or loss equal to the difference between the amount realized from
the disposition of the Securities (exclusive of amounts attributable to the
payment of accrued interest not previously included in income, which will be
taxable as ordinary income) and the holder's adjusted tax basis in the
Securities at the time of the sale, exchange, redemption or other disposition.
Assuming the Securities are not treated as having original issue discount, an
initial holder's adjusted tax basis in the Securities generally will equal the
holder's purchase price for such Securities.
It is possible that the Service will disagree with, or that a court will not
uphold, the foregoing treatment of the Securities. In particular, the Service
could seek to treat the Securities as maturing on the Final Maturity rather than
the Reset Date, in which case (1) the issue price of the Securities would
include the premium paid by the holder of the Call Option with respect to the
Call Option, and (2) the holder would be treated as selling a Call Option to the
holder of the Call Option for an amount equal to the premium paid by the holder
of the Call Option for the Call Option. The amount deemed received as
consideration for sale of the Call Option would be treated as an option
S-15
<PAGE>
premium paid to such holder (and consequently would not be recognized as income
on the writing of the Call Option). Because of the reset process, if the
Securities were treated as maturing on the Final Maturity, holders would be
subject to certain Treasury Regulations dealing with contingent payment debt
instruments (the "Contingent Debt Regulations"). Under the Contingent Debt
Regulations, each holder would be required (regardless of such holder's usual
method of accounting) to include in gross income original issue discount for
each interest accrual period in an amount equal to the product of the adjusted
issue price of the Securities at the beginning of each interest accrual period
and a projected yield to maturity which would be based on the "comparable yield"
(i.e., the yield at which the Company would issue a fixed rate debt instrument
maturing on the Final Maturity, with terms and conditions otherwise similar to
those of the Securities), which would likely be substantially equivalent to the
stated interest rate on the Securities prior to the Reset Date. In addition, the
character of any gain or loss recognized on the sale, exchange, retirement or
other disposition of the Securities could differ from that set forth in the
preceding paragraph. For example, if the Contingent Debt Regulations applied,
any gain recognized on the sale of the Securities would be treated as interest
income, while any losses would generally be ordinary to the extent of previously
accrued original issue discount, and any excess would be capital loss. The
ability to use capital losses to offset ordinary income in determining taxable
income is generally limited.
FOREIGN HOLDERS OF SECURITIES
Interest paid with respect to the Securities to a holder that is not a
United States person (a "Foreign Holder") generally will not be subject to the
30% withholding tax generally imposed with respect to U.S. source interest paid
to such persons, provided that such holder is not engaged in a trade or business
in the United States in connection with which it holds such Securities, does not
bear certain relationships to the Company and fulfills certain certification
requirements. Under such certification requirements, the holder must certify,
under the penalties of perjury, that it is not a "United States person" and is
the beneficial owner of the Securities, and must provide its name and address.
For this purpose, "United States person" means a citizen or resident of the
United States or any State thereof (including the District of Columbia), a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, an estate the
income of which is includible in gross income for United States federal income
tax purposes, regardless of its source, or, subject to certain exceptions, a
trust subject to the primary supervision of a court within the United States and
the control of one or more U.S. persons with respect to all substantial
decisions.
A Foreign Holder generally will not be subject to United States federal
income tax with respect to any gain recognized upon the disposition of
Securities unless (1) such gain is effectively connected with the conduct by the
Foreign Holder of a trade or business in the United States, (2) in the case of
any individual holder, such Foreign Holder is present in the United States for
183 days or more in the taxable year during which the disposition occurs and
certain other conditions are met or (3) the Securities are treated as subject to
the Contingent Debt Regulations and the holder fails to satisfy the
certification requirements of the preceding paragraph.
BACKUP WITHHOLDING
Payments made on the Securities and proceeds from the sale of Securities
will not be subject to a "backup" withholding tax of 31% unless, in general, the
holder fails to comply with certain reporting procedures and is not an exempt
recipient under applicable provisions of the Code.
S-16
<PAGE>
UNDERWRITING
The Company and the underwriters for the offering (the "Underwriters") named
below have entered into an underwriting agreement and a pricing agreement with
respect to the Securities. Subject to certain conditions, each Underwriter has
severally agreed to purchase the principal amount of Securities indicated in the
following table:
<TABLE>
<CAPTION>
Principal
Amount
Underwriters of Securities
- --------------------------------------------------------------------- -------------
<S> <C>
Goldman, Sachs & Co.................................................. $
NationsBanc Montgomery Securities LLC................................
Morgan Stanley & Co. Incorporated....................................
Warburg Dillon Read LLC..............................................
-------------
Total............................................................ $ 250,000,000
-------------
-------------
</TABLE>
Securities sold by the Underwriters to the public will initially be offered
at the initial public offering price set forth on the cover of this prospectus
supplement. Any Securities sold by the Underwriters to securities dealers may be
sold at a discount from the initial public offering price of up to % of the
principal amount of the Securities. Any such securities dealer may resell any
Securities purchased from the Underwriters to certain other brokers or dealers
at a discount from the initial public offering price of up to % of the
principal amount of the Securities. If all the Securities are not sold at the
initial offering price, the Underwriters may change the offering price and the
other selling terms.
The Securities are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that the Underwriters
intend to make a market in the Securities but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Securities.
In connection with the offering, the Underwriters may purchase and sell
Securities in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater number of
Securities than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the Securities while
the offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased Securities
sold by or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Securities. As a result, the price of the
Securities may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected in the
over-the-counter market or otherwise.
From time to time, certain of the Underwriters or certain of their
affiliates have provided various commercial or investment banking services and
other services to the Company and its affiliates.
The Company estimates that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $300,000.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
S-17
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus supplement or the
prospectus. You must not rely on any unauthorized information or
representations. This prospectus supplement is an offer to sell only the
Securities offered hereby, but only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus
supplement and the prospectus is current only as of their respective dates.
------------------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
-----
<S> <C>
The Company................................ S-2
Recent Developments........................ S-2
Use of Proceeds............................ S-4
Capitalization............................. S-4
Description of the Securities.............. S-4
Certain U.S. Federal Income Tax
Considerations........................... S-15
Underwriting............................... S-17
Prospectus
Where You Can Find More Information........ 2
Documents Incorporated by Reference........ 2
Reports to Holders of Senior Notes......... 3
Forward-Looking Statements................. 3
Prospectus Summary......................... 4
Selected Financial Information............. 5
Central Power and Light Company............ 6
Ratios of Earnings to Fixed Charges........ 6
Use of Proceeds............................ 6
Description of the Senior Notes............ 6
Legal Opinions............................. 13
Experts.................................... 14
Plan of Distribution....................... 14
</TABLE>
$250,000,000
CENTRAL POWER AND LIGHT COMPANY
% Puttable Securities PURS-SM-
due , 20
---------------------
PROSPECTUS SUPPLEMENT
---------------------
GOLDMAN, SACHS & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
MORGAN STANLEY DEAN WITTER
WARBURG DILLON READ LLC
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
