As filed with the Securities and Exchange Commission on December 26, 1995
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File Nos. 33-63615-00, 33-63615-01 and 33-63615-02
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 2 to
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CITIZENS UTILITIES CITIZENS UTILITIES CITIZENS UTILITIES
COMPANY CAPITAL L.P. TRUST
(Exact name of registrant (Exact name of registrant (Exact name of registrant
as specified in charter) as specified in as specified in
certificate of limited certificate of trust)
partnership)
DELAWARE DELAWARE DELAWARE
(State or other (State or other (State or other
jurisdiction of jurisdiction of jurisdiction of
incorporation or incorporation or incorporation or
organization) organization) organization)
06-0619596 06-1441535 06-6420665
(I.R.S. employer (I.R.S. employer (I.R.S. employer
identification number) identification number) identification number)
High Ridge Park, Bldg. No. 3, Stamford, Connecticut 06905
(203) 329-8800
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
Robert J. DeSantis
Vice President and Treasurer
Citizens Utilities Company
High Ridge Park, Bldg. No. 3
P.O. Box 3801
Stamford, Connecticut 06905
Tel. No. (203) 329-8800
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
Jonathan H. Churchill, Esq. Vincent Pagano, Jr., Esq.
Boulanger, Hicks & Churchill, P.C. Simpson Thacher & Bartlett
135 East 57th Street 425 Lexington Avenue
New York, New York 10022 New York, New York 10017
Tel. No. (212) 838-5600 Tel. No. (212) 455-2000
____________________________________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. []
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box. []
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
____________________________________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities to be registered (5) offering price aggregate registration
registered per unit (6) offering price fee
- ------------------- --------------- ---------------- ---------------- ------------
Convertible Preferred $201,250,000 $____________ $201,250,000 $69,396.55(7)
Securities of Citizens (1)(2)(3)
Utilities Trust
("Trust") (1)(2);
Partnership Preferred
Securities of Citizens
Utilities Capital L.P.
("Citizens
Capital")(1)(3);
Common Stock Series A
and B ($.25 par value)
of Citizens Utilities
Company ("Citizens")
(1)(3); Citizens
Guarantee with respect to
Trust's Convertible
Preferred Securities (3)(4);
Citizens Guarantee with
respect to Citizens
Capital's Partnership
Preferred Securities(3)(4);
Citizens Convertible
Debentures (1)(3) Common
Stock Series A and B
($.25 par value)
of Citizens $40,000,000 $40,000,000 $13,793.10(7)
</TABLE>
(1) There are being registered hereunder an indeterminate number of (a)
Convertible Preferred Securities with an aggregate liquidation value of
up to $201,250,000, (b) Partnership Preferred Securities into which such
Convertible Preferred Securities can be converted, (c) Convertible
Debentures having a principal amount of up to $201,250,000 into which
Partnership Preferred Securities can be converted, (d) shares of Common
Stock Series A of the Company into which such Convertible Debentures can
be converted, and (e) shares of Common Stock Series B of the Company into
which such Series A shares can be converted.
(2) Includes $26,250,000 of Convertible Preferred Securities which may be
sold pursuant to an over-allotment option granted to the Underwriters.
(3) No separate consideration will be received for Citizens' Guarantees,
Convertible Debentures or Common Stock Series A or B, or Citizens
Capital's Partnership Preferred Securities.
(4) In addition, the undertakings of Citizens in the Declaration of Trust,
the Limited Partnership Agreement and the Indenture are also being
registered.
(5) This Registration Statement shall be deemed to cover additional
securities to be issued in connection with or as a result of stock
splits, stock dividends or similar transactions.
(6) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(7) Previously paid.
_____________________
The registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED
PROSPECTUS _____________________, 1996
- ----------
3,500,000
Convertible Preferred Securities
CITIZENS UTILITIES TRUST
____% Citizens Utilities Convertible Preferred Securities
(liquidation preference $50 per security)
Equity Providing Preferred Income
Convertible Securities ("EPPICS") (servicemark)
[COMPANY LOGO HERE]
-----------------------------
The Equity Providing Preferred Income Convertible Securities (servicemark)
("Convertible Preferred Securities") offered hereby represent preferred
undivided beneficial interests in the assets of Citizens Utilities Trust, a
statutory Delaware business trust (the "Trust"). The undivided common
beneficial interests in the Trust owned by Citizens Utilities Company, a
Delaware corporation ("Citizens" or the "Company"), are called the
"Convertible Common Securities" and, together with the Convertible Preferred
Securities, are called the "Trust Securities." The Trust exists for the sole
purpose of issuing the Trust Securities, investing the proceeds as described
below and engaging in those activities necessary thereto.
(continued on next page)
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------
Initial Public Underwriting Proceeds to the
Offering Price Commission(1) Trust(2)(3)
-------------- ------------- ---------------
Per Convertible
Preferred Security $50 (2) $
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Total(4) $175,000,000 (2) $
============================================================================
(1) The Trust and Citizens have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933. See "Underwriting."
(2) Proceeds from the offering will be contributed by the Trust to Citizens
Capital and will be used by Citizens Capital to purchase the Convertible
Debentures of Citizens. Therefore, the Underwriting Agreement provides
that Citizens, as borrower with respect to the Convertible Debentures,
will pay to the Underwriters, as compensation ("Underwriters'
Compensation"), $____ per Convertible Preferred Security (or $_________
in the aggregate). See "Underwriting."
(3) Expenses of the offering, which are payable by Citizens, are estimated
to be $ 492,000.
(4) Does not include the $40,000,000 of shares of Common Stock of
Citizens included in the Registration Statement which may be received
and either sold by Citizens Capital or distributed as quarterly
distributions to holders of Convertible Preferred Securities.
Such shares represent approximately the first three and one half years
of such distributions. The Trust, Citizens Capital and Citizens have
granted the Underwriters an option for 30 days to purchase up to an
additional 525,000 Convertible Preferred Securities at the initial
public offering price per Convertible Preferred Security solely to cover
over-allotments. Citizens will pay to the Underwriters, as Underwriters'
Compensation, $___ per Convertible Preferred Security purchased pursuant
to this option. If such option is exercised in full, the total initial
public offering price, underwriting commission and proceeds to the Trust
will be $___________, $__________ and $_____________, respectively.
See "Underwriting."
-----------------
The Convertible Preferred Securities offered hereby are offered severally
by the Underwriters, as specified herein, subject to receipt and acceptance
by them and subject to their right to reject any order in whole or in part.
It is expected that delivery of the Convertible Preferred Securities will be
made only in book-entry form through the facilities of The Depository Trust
Company ("DTC") on or about ________________, 1996.
---------------------------------
See "Risk Factors" for a discussion of certain material risks to be
considered in connection with an investment in the Convertible Preferred
Securities, including certain federal income tax consequences. See page 12.
---------------------------------
Merrill Lynch & Co. Lehman Brothers
The date of this Prospectus is ___________, 1996
(service mark)EPPICS and Equity Providing Preferred Income Convertible
Securities are servicemarks which have been applied for by Citizens
Utilities Company.
(continued from previous page)
The proceeds from the offering of the Convertible Preferred Securities and
the sale of the Convertible Common Securities will be contributed by the
Trust to Citizens Utilities Capital L.P., a Delaware limited partnership
("Citizens Capital" or the "Partnership"), which will issue to the Trust
limited partnership interests (the "Partnership Preferred Securities") in
Citizens Capital. The undivided beneficial general partnership interest in
the Partnership will be owned, directly or indirectly, by Citizens, which
general partnership interest, together with the Partnership Preferred
Securities, are called the "Partnership Securities." Such proceeds will be
used by the Partnership to purchase from Citizens its __% Convertible
Subordinated Debentures due 2036 (the "Convertible Debentures") having the
terms described herein. In the event of default under the Declaration (as
defined herein), the Convertible Preferred Securities will have a preference
with respect to quarterly distributions and amounts payable on liquidation
and redemption over the Convertible Common Securities.
Holders of the Convertible Preferred Securities will be entitled to receive
cumulative distributions from the Trust, at an annual rate of __% of the
liquidation preference of $50 per Convertible Preferred Security (the
"Rate"), accruing from the date of original issuance and payable quarterly
in arrears on January 31, April 30, July 31, and October 31, (each, a
"Distribution Payment Date"), commencing _________________, 199_.
Distributions are payable in shares of Citizens Common Stock Series A
("Common Stock" or "Common Stock Series A") or, at the option of either
Citizens or the holder, in cash. See "Convertible Preferred Securities -
Distributions." The Distribution Payment Dates correspond to the dates
scheduled for the payment of interest on the Convertible Debentures, so such
dates are also sometimes referred to as "Interest Payment Dates."
Interest payment periods on the Convertible Debentures are quarterly. So
long as no Indenture Event of Default (as defined herein) has occurred and
is continuing, Citizens has the right, at any time and from time
to time, to elect to defer the date on which one or more of the quarterly
interest payments on the Convertible Debentures would otherwise become due and
payable, in which event quarterly distribution payments on the Partnership
Preferred Securities and on the Convertible Preferred Securities would be
deferred (but would be compounded quarterly at the Rate and continue to
accrue and accumulate). No such deferral may exceed 20 consecutive quarters
nor extend the stated maturity date of the Convertible Debentures. It is an
event of default under the Indenture (as defined herein) if, at the end of
such deferral of interest payments, Citizens does not pay all accrued or
deferred and unpaid interest. Upon such payment at the end of a deferral, the
Trust must pay all accrued or deferred and unpaid distributions on the
Convertible Preferred Securities. See "Convertible Preferred Securities -
Distributions" and "Convertible Debentures - Option to Defer Interest Payments."
Each Convertible Preferred Security is convertible in the manner described
herein at the option of the holder, unless previously redeemed, into shares
of Common Stock Series A of Citizens, at a conversion price of $____ per
share of Common Stock Series A (equivalent to a conversion rate of ____
shares of Common Stock Series A for each $50 of liquidation preference of
Convertible Preferred Securities), subject to adjustment. See "Convertible
Preferred Securities - Conversion Rights." The Common Stock Series A is
listed under the symbol "CZNA" on the New York Stock Exchange ("NYSE"). The
last reported sale price per share of Common Stock Series A on the NYSE on
December 20, 1995 was $13 1/8. See "Common Stock Price Range."
The Convertible Debentures are redeemable by Citizens, at its option, in
whole or in part, from time to time, on or after _________________, 1999, at
100% of the principal amount being redeemed, together with all accrued or
deferred and unpaid interest (including any compound interest resulting from
the deferral of interest payments). For purposes hereof, wherever this
Prospectus speaks to "interest" or "distributions" payable on or with respect
to any security offered hereunder, such terms include compound interest
arising from any deferral of interest or distributions on such securities.
If Citizens' Convertible Debentures are redeemed, the Trust must redeem
Convertible Preferred Securities and Convertible Common Securities, on a pro
rata basis, having an aggregate liquidation amount equal to the aggregate
principal amount of the Convertible Debentures so redeemed at $50 per Trust
Security payable in cash plus accrued or deferred and unpaid distributions
thereon in cash or Common Stock. See "Convertible Preferred Securities -
Optional Redemption" and "Convertible Debentures - Optional Redemption."
See also "Convertible Preferred Securities - Redemption on Maturity or Upon
Acceleration" and "Convertible Debentures - Indenture Events of Default."
Upon the occurrence of certain events (subject to the conditions described
elsewhere herein) the Trust and/or the Partnership may be liquidated and the
holders of the Convertible Preferred Securities could receive either
Partnership Preferred Securities or Convertible Debentures in lieu of any
liquidating cash distribution. See "Convertible Preferred Securities - Special
Events Distribution."
ii
(continued from previous page)
In the event of the liquidation, dissolution or winding up of the Trust,
investors will be entitled to receive for each Convertible Preferred
Security held a liquidation preference of $50 payable in cash, plus accrued
or deferred and unpaid distributions payable in either cash or Common Stock,
to the date of payment. See "Convertible Preferred Securities - Liquidation
Rights."
Under the Convertible Debentures, Citizens' payment obligation is absolute
and unconditional. In addition, Citizens has payment obligations under the
Partnership Guarantee (as hereafter defined) and the Trust Guarantees (as
hereafter defined) (collectively, the "Guarantees"). Citizens will
irrevocably guarantee, on a subordinated basis and to the extent set forth
therein, with respect to each of the Trust Securities and the Partnership
Preferred Securities, the payment of distributions, the redemption price,
including all accrued or deferred and unpaid distributions, and payments on
liquidation, but only to the extent of Common Stock and/or cash on hand.
Each of the Guarantees will be unsecured and each will be subordinate to all
Senior Indebtedness of Citizens (as defined below). The Guarantees, when
taken together with Citizens obligations under the Convertible Debentures,
the Indenture, the Declaration and the Limited Partnership Agreement (as
defined herein), including its obligations to pay costs, expenses and
certain indemnities of the Trust, constitute a full and unconditional
guarantee of amounts due under the Convertible Preferred Securities. See
"Guarantees."
The Convertible Debentures are subordinated in right of payment to all of
Citizens' Senior Indebtedness. See "Convertible Debentures - Subordination".
Application will be made to list the Convertible Preferred Securities on
the NYSE under the symbol "___."
The Convertible Preferred Securities will be represented by a global
certificate or certificates registered in the name of DTC or its nominee.
Beneficial interests in the Convertible Preferred Securities will be shown
on, and transfers thereof will be effected only through, records maintained
by the participants in DTC. Except as described herein, Convertible
Preferred Securities in certificated form will not be issued in exchange for
the global certificate or certificates. See "Convertible Preferred
Securities - Book-Entry-Only Issuance - The Depository Trust Company."
$40,000,000 of Citizens Utilities Company Common Stock
This Prospectus may be used by the Trust in connection with the elections
by the holders of Convertible Preferred Securities to receive their
distribution in Common Stock Series A. These elections may be made at the time
of this offering and annually during the Election Period. See "Convertible
Preferred Securities - Distributions."This Prospectus may also be used by
Citizens Capital, which may receive the Common Stock Series A covered by
this Prospectus in connection with Citizens' interest payments on the
Convertible Debentures and which may sell such stock in the open market.
See "Convertible Preferred Securities - Distributions." Such sales of Common
Stock Series A may be made from time to time in one or more transactions
(which may involve crosses or block transactions) on the NYSE or otherwise,
pursuant to and in accordance with the rules of the NYSE, in the
over-the-counter market, in negotiated transactions, or a combination
of such methods of sale, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices.
Citizens Capital will effect such transactions by selling shares of Common
Stock Series A to or through broker-dealers. Such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or
commissions from Citizens Capital and/or purchasers of shares of Common
Stock Series A for whom they may act (which compensation may be in excess of
customary commissions). Citizens Capital and broker-dealers that
participate with Citizens Capital in the distributions of shares of Common
Stock Series A may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933 (the "1933 Act"), and any
commissions received by them and any profit on the resale of shares of Common
Stock Series A may be deemed to be underwriting compensation.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CONVERTIBLE
PREFERRED SECURITIES OFFERED HEREBY AND COMMON STOCK AT LEVELS ABOVE THOSE
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
iii
<PAGE>
Table of Contents Page
- ----------------- ----
AVAILABLE INFORMATION 2
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE 3
PROPOSED TAX LEGISLATION 3
RATINGS OF COMPANY SECURITIES 3
PROSPECTUS SUMMARY 4
Citizens Utilities Company 4
Citizens Utilities Capital L.P. 4
Citizens Utilities Trust 4
Structural Overview 5
Consolidated Summary Financial
Information 6
The Offering 7
Use Of Proceeds 11
RISK FACTORS 12
Subordinate Obligations Under
Guarantees and Convertible
Debentures 12
Dependence on Convertible
Debenture Payments 12
Enforcement of Certain Rights
by Holders of Convertible
Preferred Securities 13
Option to Defer Payment of
Distributions 13
Certain Tax Consequences of
Deferral of Interest Payments
on Convertible Debentures 14
Tax and Market Consequences of
Redemption or Special Events
Distribution 14
Enactment of December 1995
Tax Proposals 15
Limited Voting Rights 15
Trustee Conflicts of Interest 15
Trading Price and Taxes 16
No Prior Market for the
Convertible Preferred
Securities; Market Risk on
Distributions in Common Stock 16
CITIZENS UTILITIES COMPANY 17
USE OF PROCEEDS 18
CAPITAL REQUIREMENTS AND
FINANCING 18
DESCRIPTION OF COMMON STOCK
SERIES A AND SERIES B 19
DIVIDENDS ON COMMON STOCK
SERIES A AND SERIES B 20
COMMON STOCK TRANSFER AGENT 20
COMMON STOCK PRICE RANGE 20
FINANCIAL INFORMATION 21
CITIZENS UTILITIES CAPITAL L.P. 28
CITIZENS UTILITIES TRUST 29
DESCRIPTION OF THE SECURITIES 30
CONVERTIBLE PREFERRED SECURITIES 30
General 31
Distributions 31
How Distributions are Computed 31
Holders Can Elect Distributions
in Common Stock or Cash 32
Distributions Flow From Citizens
to Holders 32
How Distributions are Made 33
Record Dates 33
Other 34
Deferrals 34
Additional Interest 35
Conversion Rights 36
General 36
Conversion Price Adjustments
- General 36
Conversion Price Adjustments
- Merger, Consolidation or Sale
of Assets of Citizens 37
Special Events Distribution 38
Ministerial Action 40
Optional Redemption 41
Redemption on Maturity or Upon
Acceleration 41
Redemption Procedures;
Generally 42
Liquidation Rights 43
Amendment to the Declaration 43
Merger, Consolidation or Sale
of Assets of the Trust 44
Declaration Events of Default 44
Voting Rights 45
Book-Entry-Only Issuance
- The Depository Trust Company 46
Information Concerning the
Property Trustee 48
Transfer Agent, Paying Agent,
Registrar and Conversion Agent 49
PARTNERSHIP PREFERRED SECURITIES 49
General 49
Distributions 50
Conversion Rights 50
Special Events Distribution 50
Optional Redemption 50
(iv)
PARTNERSHIP PREFERRED SECURITIES (continued)
Redemption on Maturity or Upon
Acceleration 51
Redemption Procedures;
Generally 51
Liquidation Rights 51
Merger, Consolidation or Sale
of Assets of Citizens Capital 51
Limited Partnership Agreement
Event of Default 52
Voting Rights 52
Amendment to the Limited
Partnership Agreement 54
Transfer Agent, Paying Agent,
Registrar and Conversion
Agent 54
GUARANTEES 54
General 55
Certain Covenants of Citizens 56
Subordination 57
Amendments and Assignment 57
Termination 57
Events of Default 58
CONVERTIBLE DEBENTURES 58
General 59
Optional Redemption 59
Special Events Distribution 59
Interest 60
Option to Defer Interest
Payments 60
Additional Interest 60
Subordination 60
Certain Covenants of Citizens 63
Conversion of the Convertible
Debentures 64
Indenture Events of Default 65
Modification of the Indenture 67
Governing Law 67
Information Concerning the
Debenture Trustee 67
Miscellaneous 68
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS 68
General 68
Proposals Would Not Affect
Tax Treatment 69
Classification of the
Convertible Debentures 69
Classification of Citizens
Capital 69
Classification of the Trust 69
Potential Deferral of Interest
Payments and Original Issue
Discount 69
Holders Making a Stock
Distribution Election 70
Receipt of Partnership
Preferred Securities,
Convertible Debentures or
Cash Upon Liquidation of
Citizens Capital and the
Trust 71
Disposition of Convertible
Preferred Securities 72
Exchange of Convertible
Preferred Securities for
Common Stock 73
Adjustment of Conversion Price 73
United States Alien Holders 74
Information Reporting and
Backup Withholding 74
UNDERWRITING 75
LEGAL OPINIONS 77
EXPERTS 78
INDEX OF DEFINED TERMS 79
(v)
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 ("1934 Act") and in accordance therewith files reports,
proxy statements and other information (collectively, "1934 Act Reports")
with the Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its regional offices at Northwestern Atrium
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and Suite
1300, 7 World Trade Center, New York, New York 10048. Copies of such
material can also be obtained from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Certain
securities of the Company are listed on the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, and reports, proxy material and other
information concerning the Company may be inspected at the office of that
Exchange. The Company hereby undertakes to provide, without charge, to (i)
each person to whom a copy of this Prospectus is delivered, and (ii) any
owner of Convertible Preferred Securities, upon written or oral request of
such person, a copy of any of the Company's 1934 Act Reports. Requests for
such copies should be directed to Office of the Secretary, Citizens Utilities
Company, High Ridge Park, Bldg. No. 3, Stamford, Connecticut 06905
(telephone 203-329-8800).
Citizens, the Trust and the Partnership have filed with the SEC a
registration statement on Form S-3 (herein, together with all amendments and
exhibits, referred to as the "Registration Statement") under the 1933 Act.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. For further information, reference is
hereby made to the Registration Statement.
No separate financial statements of either the Partnership or the Trust
have been included herein. Citizens, the Trust and the Partnership do not
consider that such financial statements would be material to holders of
Convertible Preferred Securities because the Trust and the Partnership are
newly organized special purpose entities, have no operating history and no
independent operations and are not engaged in, and do not propose to engage
in, any activity other than as described under "Citizens Utilities Trust" and
"Citizens Utilities Capital L.P." Further, Citizens believes that financial
statements of the Trust and the Partnership are not material to the holders
of the Convertible Preferred Securities since Citizens will guarantee the
Convertible Preferred Securities and the Partnership Preferred Securities
such that the holders of the Convertible Preferred Securities, with respect
to the payment of distributions and amounts upon liquidation, dissolution and
winding-up, are at least in the same position vis-a-vis the assets of
Citizens as a preferred stockholder of Citizens. Citizens beneficially owns
directly or indirectly all of Citizens Capital's partnership interests
(other than the Partnership Preferred Securities, which are held by the
Property Trustee (as defined herein) for the benefit of the holders of
Convertible Preferred Securities) and beneficially owns directly or indirectly
all of the undivided beneficial interests in the assets of the Trust (other
than the beneficial interests represented by the Convertible Preferred
Securities). See "Citizens Utilities Trust," "Citizens Utilities Capital
L.P.," "Convertible Preferred Securities," "Guarantees" and "Convertible
Debentures." In future filings under the 1934 Act, an audited footnote to the
Company's annual financial statements will state that the Trust and the
Partnership are wholly-owned by the Company, that the sole assets of the
Trust are the Partnership Preferred Securities having a specified aggregate
liquidation value, that the sole assets of the Partnership are the
Convertible Debentures of the Company having a specified aggregate principal
amount, and, considered together, the back-up undertakings, including the
Guarantees, constitute a full and unconditional guarantee by the Company of
the Trust's obligation under the Convertible Preferred Securities issued by
the Trust.
2
----------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC pursuant to the
1934 Act are incorporated into this Prospectus by reference:
The Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
The Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995 and on Forms 10-Q and 10-QA for the quarter ended June 30, 1995, and on
Form 10-Q for the quarter ended September 30, 1995.
The Company's Current Reports on Form 8-K relating to the acquisitions of
certain telecommunications properties filed on July 5, August 9, and December
7, 1994, and June 1, 1995.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act prior to the termination of the offering
of the Convertible Preferred Securities shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of
filing of such documents.
The Company hereby undertakes to provide, without charge, to each person
to whom a copy of this Prospectus is delivered, upon written or oral request
of such person, a copy of any or all of the documents referred to above which
have been or may be incorporated by reference in this Prospectus, other than
exhibits to such documents not specifically incorporated by reference herein.
Requests for such copies should be directed to Office of the Treasurer,
Citizens Utilities Company, High Ridge Park, Bldg. No. 3, Stamford,
Connecticut 06905 (telephone 203-329-8800).
PROPOSED TAX LEGISLATION
On December 7, 1995, the Treasury Department announced proposals as part of
President Clinton's Seven-Year Balanced Budget Proposal (the "Proposals")
which, if enacted, would no longer permit issuers issuing certain debt
securities that are not reflected as debt on the issuer's consolidated
balance sheet, such as the Convertible Debentures, to claim an interest
deduction for United States federal income tax purposes for interest payable
on such securities. On December 19, 1995, the Treasury Department announced
proposals regarding transitional relief from the Proposals, stating that
instruments will not be subject to the Proposals if issued pursuant to a
registration statement filed with the SEC on or before December 7, 1995, to
the extent of the aggregate amount of such instruments described in the
registration statement. As the registration statement of which the
Prospectus is a part was filed before December 7, 1995, such transitional
relief would exempt this offering from the Proposals.
RATINGS OF COMPANY SECURITIES
Standard & Poor's Ratings Group, a division of McGraw-Hill ("Standard &
Poor's"), and Fitch Investors Services, Inc. ("Fitch") have rated the
Convertible Preferred Securities "AA" and Moody's Investors Service, Inc.
("Moody's") has rated the Convertible Preferred Securities "Aa3". Each of these
is the next highest rating of such rating agency.
Standard & Poor's has also rated the Company's outstanding publicly held
Debentures and Industrial Development Revenue Bonds "AA+"; its commerical
paper "A-1+"; and has ranked the Company's Common Stock "A+". Fitch has also
rated the Company's outstanding publicly held Debentures and Industrial
Development Revenue Bonds "AA+", its commercial paper "F-1+". Moody's has
assigned ratings of "Aa3" to the Company's outstanding publicly held Debentures
and "P-1" to the Company's commerical paper. Moody's and Fitch do not rank or
rate Common Stock. Each of the commerical paper ratings and the Common Stock
ranking is the highest rating of such rating agency.
An explanation of the significances of ratings may be obtained from the rating
agencies. Generally, rating agencies base their ratings on such material and
information, and such of their own investigations, studies and assumptions, as
they deem appropriate. A credit rating of a security is not a recommendation
to buy, sell or hold securities. There is no assurance that any rating will
apply for any given period of time or that a rating may not be adjusted or
withdrawn.
3<PAGE>
PROSPECTUS SUMMARY
Citizens Utilities Company
("Citizens" or the "Company")
Citizens Utilities Company is a diversified operating public utility which
provides, either directly or through subsidiaries, telecommunications,
natural gas transmission and distribution, electric distribution, water or
wastewater services to customers in areas of nineteen states. Citizens holds
a significant investment interest in Centennial Cellular Corp., a cellular
telephone company, and also owns Electric Lightwave, Inc., an alternative
telecommunications service provider operating in five western states.
Beginning with 1945, the Company has increased its revenues, net income and
earnings per share (adjusted for subsequent stock dividends and stock splits)
every year without interruption.
As a result of its diversification, the Company is not dependent upon any
single geographic area or any one type of utility service for its revenues.
Because of this diversity, no single regulatory body regulated or will
regulate a utility service of the Company accounting for more than 12% of its
revenues for the twelve months ended September 30, 1995, pro forma for the
acquisitions of certain telecommunications properties described hereafter.
The Company is not aware of any other utility company as fully diversified
in both geographic areas served and variety of services provided. The
Company's operations are conducted principally in small and medium-sized
communities. No material part of the Company's business is dependent upon
a single customer or a small group of customers. The loss of any single
customer or a small group of customers would not have a materially adverse
effect upon the Company. The Company's consumer connections have increased
from 26,150 in 1945, to 225,389 in 1965, to 610,585 in 1985, and to
over 1,500,000 as of September 30, 1995.
The Company continually considers and is carrying out expansion through
acquisitions and joint ventures in the rapidly evolving telecommunications
and cable television industries and in traditional public utility and related
businesses.
Citizens Utilities Capital L.P.
("Citizens Capital" or the "Partnership")
Citizens Utilities Capital L.P. is a special purpose limited partnership
formed under the laws of the State of Delaware. All of its partnership
interests (other than the Partnership Preferred Securities and the interests
of any Special Representative, as defined herein) will be beneficially owned
directly or indirectly by Citizens (the "General Partnership Security" and,
together with the Partnership Preferred Securities, the "Partnership
Securities"). Citizens or one of its wholly owned subsidiaries will be the
sole general partner of Citizens Capital and will contribute capital to the
extent required to establish and maintain a General Partnership Security
equal to at least 3% of the total capital of the Partnership. Citizens
Capital exists for the sole purposes of (i) raising capital through the
one-time issuance of its Partnership Securities, (ii) loaning such capital to
Citizens in exchange for Convertible Debentures, (iii) collecting
quarterly interest payments on the Convertible Debentures, placing orders
with brokers to sell shares of Common Stock received as such interest
payments and paying the required quarterly distributions on its
Partnership Securities, (iv) effecting the conversion of the Partnership
Preferred Securities into Common Stock Series A and (v) engaging in only
those other activities necessary or incidental thereto. The Partnership will
hold title to the Convertible Debentures and will have the power to exercise
all rights, powers and privileges under the Indenture (as defined herein) as
the holder of the Convertible Debentures.
Citizens Utilities Trust
(the "Trust")
Citizens Utilities Trust, the issuer of the Convertible Preferred
Securities, is a statutory business trust formed under the Delaware Business
Trust Act (the "Trust Act") pursuant to a declaration of trust, dated as
of October 13, 1995, executed by Citizens, as sponsor, and the trustees
specified therein. The declaration of trust will be qualified as an
indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act").
4
Citizens owns and will own, directly or indirectly, all of the Convertible
Common Securities of the Trust, which will amount to at least 3% of the
total capital of the Trust. The Trust exists for the sole purposes of
(i) issuing its Trust Securities, (ii) contributing the proceeds thereof to
the Partnership to acquire the Partnership Preferred Securities and
(iii) engaging in only those other activities necessary or incidental
thereto.
Structural Overview
(Diagram)
Diagram represents a structural overview of the component elements of the
transactions which are the subject of this Prospectus.
5
<PAGE>
Consolidated Summary Financial Information
(In millions, except percentages, ratios and per share amounts)
Twelve Months Ended
September 30, 1995 Years Ended December 31,
---------------------- ------------------------
STATEMENT OF INCOME DATA Pro Forma(1) Actual 1994 1993 1992
------------- ------ ---- ---- ----
Revenues $1,152 $1,038 $910 $619 $580
Operating Expenses 859 784 682 458 429
------------- ------ ---- ---- ----
Income from Operations 293 254 228 161 151
Other Income 51 57 53 54 47
Interest Expense 80 89 73 37 39
------------- ------ ---- ---- ----
Income before Income Taxes 264 222 208 178 159
Income Taxes 84 66 64 52 44
Income before Dividends ------------- ------ ---- ---- ----
on Convertible Preferred
Securities 180 156 144 126 115
Dividends on Convertible
Preferred Securities (2) 5 - - - -
------------- ------ ---- ---- ----
Net Income $ 175 $156 $144 $126 $115
============= ====== ==== ==== ====
Earnings Per Share (3) $.80(4) $.74(4) $.73 $.64 $.60
Ratio of Earnings to
Fixed Charges (5) 4.1 3.4 3.7 5.3 4.8
Ratio of Earnings to
Combined Fixed
Charges and Dividends on
Convertible Preferred
Securities (6) 3.8 3.4 3.7 5.3 4.8
At September 30, 1995
------------------------------------------
CAPITALIZATION DATA Pro Forma(7) Actual
---------------------- ---------------
Long-Term Debt $ 1,145 40% $ 1,072 41%
Equity(8) 1,726 60% 1,551 59%
------- ----- ------- -----
Total Capitalization $ 2,871 100% $ 2,623 100%
======= ===== ======= =====
- -----------------------------
(1) The Pro Forma Statement of Income Data reflects the combined results of
operations of Citizens and certain Telecommunications Properties (see "Pro
Forma Financial Statements") acquired subsequent to September 30, 1994 and
properties to be acquired (as of September 30, 1995) as if such properties
had been acquired on October 1, 1994. This information should be read in
conjunction with the Pro Forma Condensed Statements of Income beginning on
page 24 of this Prospectus. The Pro Forma Statement of Income Data is not
necessarily indicative of what the actual financial results would have been
for the period had the transactions occurred on the date indicated and does
not purport to indicate the financial results of future periods.
(2) Presented net of Income Taxes.
(3) Common Stock Series A and Series B per-share amounts have been adjusted
retroactively for subsequent stock dividends and stock splits through
September 30, 1995. No adjustment has been made for the 1.6% 1995 fourth
quarter dividend as this adjustment is immaterial.
(4) Reflects the discontinuance of subsidy contract revenues received through
the end of 1994 from Pacific Bell. For the twelve months ended September 30,
1995 on both an Actual and Pro Forma basis this discontinuance had the effect
of reducing Income before Income Taxes by $28.5 million and Earnings Per
Share by $.09 as compared to prior periods.
(5) "Earnings" consist of income before income taxes plus fixed charges.
"Fixed Charges" consist of interest charges and an amount representing the
interest factor included in rentals.
(6) The Company intends to pay the dividends on the Convertible Preferred
Securities in the form of Common Stock as opposed to cash. Accordingly, the
difference between the Ratio of Earnings to Fixed Charges and the Ratio of
Earnings to Combined Fixed Charges and Dividends on Preferred Securities is
attributable to the non-cash dividend.
(7) The Pro Forma Capitalization Data reflects the permanent financings of
the Telecommunications Properties as if such financings were in place on
September 30, 1995. This information should be read in conjunction with the
Pro Forma Condensed Balance Sheet beginning on page 22 of this Prospectus. The
Pro Forma Capitalization Data is not necessarily indicative of what the
actual capitalization would have been for the period had the transactions
occurred on the date indicated and does not purport to indicate the
capitalization of future periods.
(8) Includes Common Equity and Convertible Preferred Securities.
6<PAGE>
The Offering
Issuer
Citizens Utilities Trust, a statutory Delaware business trust.
Securities Offered
3,500,000 Convertible Preferred Securities representing preferred
undivided beneficial interests in the assets of the Trust, with a liquidation
preference of $50 per security (for a total of $175,000,000). Additionally,
the Trust, the Partnership and Citizens have granted the Underwriters an option
for 30 days to purchase up to an additional 525,000 Convertible Preferred
Securities at the initial public offering price solely to cover over-
allotments, if any.
Distributions
Distributions on the Convertible Preferred Securities will be cumulative from
the date of original issuance of the Convertible Preferred Securities at the
Rate. Distributions will be paid quarterly in arrears on the Distribution
Payment Dates (which are January 31, April 30, July 31 and October 31 of each
year) commencing ______________, 199_. Distributions on the Convertible
Preferred Securities may not be made unless the Trust receives corresponding
distributions on the Partnership Preferred Securities from the Partnership,
which in turn may not make such distributions unless it receives
corresponding interest payments on the Convertible Debentures from Citizens.
Holders of Convertible Preferred Securities may make an annual election to
receive their distributions in either Common Stock Series A or cash (a
"Distribution Election"). While Citizens intends to elect to pay interest
on the Convertible Debentures in Common Stock Series A, Citizens may also
elect to pay interest on the Convertible Debentures in cash. At Citizens'
election, interest payments may be deferred as described below under
"Interest and Distribution Deferral Provisions." The coordination of these
election opportunities require that the elections be made within specific
time periods. The following summary describes this time-table. So that the
summary may be read without frequent cross-referencing of terms defined
elsewhere in this Prospectus, some terms which may be defined elsewhere in
this Prospectus are re-defined herein for convenience.
- - Concurrent with the offering, initial holders of Convertible Preferred
Securities can make a Distribution Election:
* To receive stock (a "Stock Distribution Election"), or
* To receive cash (a "Cash Distribution Election").
* If no Distribution Election is made, the initial holder is deemed to
have made a Cash Distribution Election.
- - Holders other than initial holders are not entitled to make a Distribution
Election until an Election Period (as defined below). Such holders, before
such Election Period, will be deemed to have made a Cash Distribution
Election.
- - The "Distribution Declaration Date" will occur on or before December 9,
March 13, June 13 and September 12 of each year (which date will be at
least ten calendar days prior to the scheduled Record Date). On or prior
to such date, Citizens must declare by written notice (the "Distribution
Declaration Notice") whether it will:
* Make the next interest payment, or
* Defer the next interest payment.
7
* If the scheduled Distribution Declaration Date falls on a day which is
not a Business Day, the Distribution Declaration Date shall be the next
preceding day that is a Business Day.
- - If the Distribution Declaration Notice states that interest will be paid
and not deferred on the next Distribution Payment Date:
* Since Citizens intends to pay interest on the Convertible Debentures
in the form of Common Stock Series A, such notice will ordinarily
state that payment will be made in Common Stock Series A (a
"Stock Payment Election") having an Equivalent Value (as defined
hereafter) to the interest payment which has accrued for the period at
the Rate; however
* Such notice can alternatively state that Citizens will pay interest
in cash (a "Cash Payment Election"). In such case, a holder who
makes a timely Stock Distribution Election will instead receive
cash.
* Such notice will also state the Record Date and the Share Transfer
and Valuation Date (as defined hereafter). Such notice, if it
relates to the January 31 Distribution Payment Date, will
additionally inform holders of the Election Period procedures.
- - The Record Date will occur on or before December 19, March 23, June 23 and
September 22 of each year (which will be at least 10 calendar days after
the Distribution Declaration Date). As of this date, the official list
of holders entitled to payment will be generated from information supplied
by brokerage houses and nominees and others holding accounts for investors
and DTC.
- - During an "Election Period" (which, starting in 1996, will be the ten
Business Days in each year commencing at least two Business Days after the
scheduled Record Date relating to the January 31 Distribution Payment
Date), a holder can change his Distribution Election by submitting an
election form to the broker, nominee or other entity which holds such
holder's account. Elections will continue in effect until another
election is timely made in a subsequent annual Election Period. Late
Distribution Elections will not be effective.
* Election forms will be sent on or about the first day of the Election
Period to beneficial holders of Convertible Preferred Securities by
the brokers, nominees or other entities which hold such holders'
account.
- - If Citizens makes a Stock Payment Election, the Share Transfer and
Valuation Date will occur on or before January 18, April 17, July 18 and
October 18 of each year (which date will be at least 9 Business Days
before the Distribution Payment Date).
* On each Share Transfer and Valuation Date, the Equivalent Value per
share will be determined, and
* Shares of Common Stock Series A with an Equivalent Value will be
delivered by Citizens to the Partnership.
- - In the period from the Share Transfer and Valuation Date to the
Distribution Payment Date:
* The Partnership will sell Common Stock Series A in amounts sufficient
to pay cash to holders who have made a Cash Distribution Election.
* To the extent cash proceeds from the sale of Common Stock Series A are
insufficient to satisfy Cash Distribution Elections, Citizens
will provide the additional cash requirement to the Partnership.
* Citizens may purchase from the Partnership some or all of the Common
Stock Series A transferred to the Partnership as an interest payment.
If all such Common Stock Series A is purchased, holders making timely
Stock Distribution Elections will receive their distributions in cash.
- - The Distribution Payment Dates will be January 31, April 30, July 31 and
October 31 of each year.
8
* If Citizens has made a Stock Payment Election, on the Distribution
Payment Date the Partnership will transfer to the Trust the appropriate
number of shares of Common Stock Series A and appropriate amount of
cash to satisfy the Stock and Cash Distribution Elections of the
holders of the Convertible Preferred Securities.
* If Citizens has made a Cash Payment Election, Citizens will transfer
cash to the Partnership in payment of interest, at the Rate, and the
Partnership will transfer such cash to the Trust, all on the
Distribution Payment Date.
* If the scheduled Distribution Payment Date falls on a day which is not
a Business Day, the Distribution Payment Date shall be the next day that
is a Business Day.
If the Trust should be dissolved or liquidated by reason of the occurrence
of a Trust Event (as hereinafter defined) and the Partnership Preferred
Securities are distributed to the public investors, the time-table described
above will remain applicable with the substitution of Partnership Preferred
Securities for the Convertible Preferred Securities, and such other changes
resulting from the elimination of the Trust. However, in the event that the
Partnership is dissolved or liquidated by reason of the occurrence of a
Partnership Event (as hereinafter defined), the right of (i) a holder to make
Distribution Elections and (ii) Citizens to make Stock Payment Elections will
terminate. In such event, interest payments and distributions will be made
only in cash. See "Convertible Preferred Securities - Special Events
Distribution."
Interest and Distribution Deferral Provisions
Citizens has the right, at any time and from time to time, to elect to defer
the date on which one or more of the quarterly interest payments on the
Convertible Debentures would otherwise become due and payable by the giving of
notice of deferral; provided that no such deferral, including extensions,
if any, may exceed 20 consecutive quarters nor extend beyond the stated
maturity date of the Convertible Debentures. As a consequence, quarterly
distributions on the Partnership Preferred Securities and on the Convertible
Preferred Securities would be deferred during any such deferral of interest
payments. At the end of any such deferrals, Citizens shall make all interest
payments then accrued or deferred and unpaid (including any compounded
interest). Upon the payment of all accrued or deferred and unpaid interest
payments on the Convertible Debentures, the Partnership will pay in full all
accrued or deferred and unpaid distributions to holders of the Partnership
Preferred Securities, i.e., the Trust, and the Trust will pay in full all
accrued or deferred and unpaid distributions to holders of the Convertible
Preferred Securities. Citizens shall give the Regular Trustees (as defined
herein) written notice of its selection of a deferred interest payment on or
before the date the Regular Trustees are required to give notice of the
record or payment date of any distribution payable on the Convertible
Preferred Securities to the NYSE, the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system or other applicable self-
regulatory organization, or to the holders of the Convertible Preferred
Securities. See the discussion of the Distribution Declaration Notice and
Distribution Declaration Date immediately above under "- Distributions."
Citizens shall also give written notice of any deferred interest payment to
the holders of the Convertible Preferred Securities. See "Risk Factors -
Option to Defer Payment of Distributions," "Convertible Preferred Securities
- - Distributions," "Convertible Debentures - Option to Defer Interest
Payments." Should a deferral of interest payments occur, the holders of the
Partnership Preferred Securities and the holders of the Convertible Preferred
Securities would continue to accrue income for United States federal income
tax purposes even though no interest payments or distributions would in fact
be paid. Citizens may not elect to defer interest payments while an
Indenture Event of Default has occurred and is continuing. See "Risk Factors
- Certain Tax Consequences of Deferral of Interest Payments on Convertible
Debentures," "Certain Federal Income Tax Considerations - Potential Deferral
of Interest Payments and Original Issue Discount," and "Convertible Preferred
Securities - Deferrals."
Liquidation Preference
$50 per Convertible Preferred Security in cash, plus an amount equal to any
accrued or deferred and unpaid distributions in cash or Common Stock.
9
Conversion into Citizens Common Stock Series A
Each Convertible Preferred Security is convertible in the manner described
below at the option of the holder (unless previously redeemed) into shares
of Common Stock Series A of Citizens, at a conversion price of $______ per
share of Common Stock Series A (equivalent to a conversion rate of _____
shares of Common Stock Series A for each $50 of liquidation preference of
Convertible Preferred Securities), subject to adjustment, as specified below.
A holder of Convertible Preferred Securities wishing to exercise its
conversion right as to all or a portion of such Convertible Preferred
Securities shall, in effect, surrender such Convertible Preferred Securities,
or portion thereof, by submitting an irrevocable conversion notice to
Chemical Bank who will, among other things, serve as the conversion agent
(the "Conversion Agent"). See "Convertible Preferred Securities - Conversion
Rights."
Commencing in 1990, Citizens has followed the policy of paying quarterly
dividends on both Series of its common stock in shares of common stock. The
conversion price of the Convertible Preferred Securities will be adjusted
downward to reflect the declaration of each future quarterly stock dividend.
The conversion price is also subject to adjustment in other circumstances.
See "Convertible Preferred Securities - Conversion Rights."
Optional Redemption
The Convertible Debentures are redeemable by Citizens, in cash, at its
option, in whole or in part, from time to time, on or after
_________________, 1999, at 100% of the principal amount being redeemed,
together with accrued or deferred but unpaid interest, or at any time in
certain circumstances, as specified below. If Citizens redeems Convertible
Debentures, the Trust must redeem Convertible Preferred Securities and
Convertible Common Securities having an aggregate liquidation amount equal
to the aggregate principal amount of the Convertible Debentures so redeemed
at $50 per Trust Security in cash, plus accrued or deferred and unpaid
distributions thereon in either cash or Common Stock. See "Convertible
Preferred Securities - Optional Redemption" and "Convertible Debentures -
Optional Redemption."
Special Events Distribution
Upon the occurrence of certain events (and subject to certain conditions),
the Trust will be liquidated and the holders of the Convertible Preferred
Securities will receive Partnership Preferred Securities in lieu of any cash
distribution. Also upon the occurrence of certain events (and subject to
certain conditions), both the Partnership and the Trust may be liquidated and
the holders of the Convertible Preferred Securities may receive Convertible
Debentures in lieu of any cash distribution. See "Convertible Preferred
Securities - Special Events Distribution."
Redemptions Terminate Convertibility
If Convertible Preferred Securities are called for redemption, whether
through the exercise by Citizens of its option after ________, 1999, or upon
maturity or acceleration upon default, the conversion rights of holders with
regard to the Convertible Preferred Securities will terminate five (5)
Business Days prior to the redemption date.
Redemption on Maturity or Upon Acceleration
In addition, unless previously redeemed, Convertible Preferred Securities
will be redeemed at maturity (on _____________, 2036) or as a result of
acceleration upon default of the Convertible Debentures. See "Convertible
Preferred Securities - Redemption on Maturity or Upon Acceleration" and
"Convertible Debentures - Events of Default."
Guarantees
Under the Convertible Debentures, Citizens' payment obligation is absolute
and unconditional. In addition, Citizens has payment obligations under the
Partnership Guarantees and the Trust Guarantees. Pursuant to the Convertible
Preferred Securities Guarantee Agreement (the "Convertible Preferred
Securities Guarantee") and the Partnership Preferred Securities Guarantee
Agreement (the "Partnership Guarantee"), Citizens will irrevocably agree, on
a subordinated basis, to pay in full (a) the distributions by the Trust on
the Convertible Preferred Securities and by
10
the Partnership on the Partnership Preferred Securities, (b) the redemption
price (including all accrued or deferred and unpaid distributions) of the
Convertible Preferred Securities and the Partnership Preferred Securities
and (c) payments on liquidation with respect to the Convertible Preferred
Securities and the Partnership Preferred Securities, in each case, only to
the extent Common Stock and/or cash are on hand and available (and, in the
case of Partnership Preferred Securities, legally available) therefor. A
holder of Convertible Preferred Securities may enforce Citizens' obligations
under the Guarantees directly against Citizens. See "Guarantees - General."
The Guarantees will be unsecured and each will be subordinated to all Senior
Indebtedness of Citizens. The Guarantees, when taken together with Citizen's
obligations under the Convertible Debentures, the Indenture, the Declaration
and the Limited Partnership Agreement, including its obligation to pay costs,
expenses and certain indemnities of the Trust, constitute a full and
unconditional guarantee of amounts due under the Convertible Preferred
Securities. In the event of the bankruptcy, liquidation or winding-up of
Citizens, its obligations under the Guarantees will rank junior to all
Senior Indebtedness and, therefore, funds may not be available for payment
under the Guarantees. See "Risk Factors - Subordinate Obligations Under
Guarantees and Convertible Debentures," "Risk Factors - Dependence on
Convertible Debenture Payments" and "Guarantees."
Voting Rights
Holders of the Convertible Preferred Securities will have limited voting
rights. See "Convertible Preferred Securities - Voting Rights."
Convertible Debentures
The Convertible Debentures issued to the Partnership will have a maturity of
40 years and will bear interest at the Rate payable quarterly in arrears,
payable in either an Equivalent Value of shares of Common Stock Series A or
cash, at the option of Citizens. Citizens has the right to, and may, defer
the payment of each quarterly interest payment (See "Interest and
Distribution Deferral Provisions" above); Citizens will have the right to
make payment of some, but need not make all, of such deferred quarterly
interest payments during a deferral of interest payments. The absence of
interest payments during a deferral of interest payments would not
constitute a default or an event of default under the Indenture or any other
of Citizens' currently outstanding indebtedness. Unless previously
redeemed, the Convertible Debentures are convertible into shares of Common
Stock Series A at the option of the holders thereof.
The Convertible Debentures are redeemable at the option of Citizens, in whole
or in part, from time to time on or after _________, 1999. See "Convertible
Debentures - Optional Redemption."
The payment of the principal and interest in cash on the Convertible
Debentures will be subordinated in right of payment to all Senior
Indebtedness of Citizens, which is hereafter defined to generally include all
indebtedness except trade accounts payable and liabilities incurred in the
ordinary course of business. See "Risk Factors - Subordinate Obligations
Under Guarantees and Convertible Debentures," and "Risk Factors - Dependence
on Convertible Debenture Payments."
Use Of Proceeds
The proceeds to be received by the Trust from the sale of the Convertible
Preferred Securities and the Convertible Common Securities will be
contributed by the Trust to the Partnership to be invested thereby in the
Convertible Debentures of Citizens, which, after paying the expenses
associated with this offering, will use such funds to repay outstanding
commercial paper issued to temporarily and partially fund the purchase price
of certain acquired telecommunications properties described herein and to
permanently fund a portion of the to-be-acquired telecommunications properties
described herein. See "Use of Proceeds."
See "Risk Factors" for a discussion of certain material risks to be
considered in connection with an investment in the Convertible Preferred
Securities.
11
RISK FACTORS
Prospective purchasers of Convertible Preferred Securities should carefully
review the information contained elsewhere in this Prospectus and should
particularly consider the following matters:
Subordinate Obligations Under Guarantees and Convertible Debentures
Citizens' obligations under the Convertible Debentures and its obligations
under the Guarantees are subordinate and junior in right of payment to all
Senior Indebtedness of Citizens. As of September 30, 1995, there was
$1,229,596,000 of Senior Indebtedness outstanding (not including certain
other obligations, see "Convertible Debentures-Subordination"). The
Convertible Debentures are also effectively subordinate to all existing and
future liabilities, including trade payables, to Citizens' subsidiaries and
affiliates. There are no terms in the Convertible Preferred Securities, the
Partnership Preferred Securities, the Convertible Debentures or the Guarantees
that limit Citizens' ability to incur additional indebtedness, including
indebtedness that ranks senior to the Convertible Debentures and the
Guarantees, or the ability of its subsidiaries to incur additional
indebtedness. The Convertible Preferred Securities Guarantee guarantees
payment to the holders of the Convertible Preferred Securities of accrued
and unpaid quarterly distributions, amounts payable on redemption, and
amounts payable on liquidation of the Trust. However, such amounts are
guaranteed only to the extent that the Trust has cash and/or Common Stock on
hand available therefor and the payments thereof do not otherwise violate
applicable law. The Guarantees, when taken together with Citizen's obligations
under the Convertible Debentures, the Indenture, the Declaration and the
Limited Partnership Agreement, including its obligation to pay costs, expenses
and certain indemnities of the Trust, constitute a full and unconditional
guarantee of amounts due under the Convertible Preferred Securities. If
Citizens were to default on its obligation to pay interest or amounts
payable on redemption or maturity of the Convertible Debentures, the Trust
would lack available cash and/or Common Stock for the payment of
distributions or amounts payable on redemption of the Convertible Preferred
Securities. In such event, holders of the Convertible Preferred Securities
would not be able to rely upon the Convertible Preferred Securities Guarantee
for payment of such amounts. On the bankruptcy, liquidation or winding-up of
Citizens, its obligations under the Convertible Preferred Securities Guarantee
will rank junior to all Senior Indebtedness and, therefore, funds may not be
available for payment under the Convertible Preferred Securities Guarantee.
See "Guarantees" and "Convertible Debentures - Subordination."
Dependence on Convertible Debenture Payments
The Trust's ability to pay amounts due on the Convertible Preferred
Securities is solely dependent upon Citizens Capital's ability to pay amounts
due on the Partnership Preferred Securities, which is in turn solely
dependent upon Citizens' ability to make payments on the Convertible
Debentures as and when required. Since Citizens is also the guarantor of the
Convertible Preferred Securities, in the event that Citizens is unable to
make payments on the
12
Convertible Debentures, or the Trust is unable to make payments on the
Convertible Preferred Securities as and when required, there is a substantial
likelihood that Citizens will be unable to make payments on the Convertible
Preferred Securities Guarantee as and when required. See "Convertible
Preferred Securities - Distributions" and "Guarantees - General."
Enforcement of Certain Rights by Holders of Convertible Preferred Securities
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Convertible Preferred Securities would rely
on the enforcement by the Property Trustee (as defined herein) of its rights
as a limited partner of Citizens Capital (the holder of the Convertible
Debentures) against Citizens. In addition, the holders of a majority in
aggregate liquidation amount of the Convertible Preferred Securities will
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Property Trustee or to direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration (as defined herein), including the right to direct the Property
Trustee to exercise the remedies available to it as a limited partner of
Citizens Capital. If the Property Trustee fails to enforce its right, a
holder of Convertible Preferred Securities may institute a legal proceeding
directly against Citizens to enforce the Property Trustee's rights as a
limited partner of Citizens Capital, without first instituting any legal
proceeding against the Property Trustee, Citizens Capital or any other
person or entity. See "Convertible Preferred Securities - Declaration
Events of Default," and "- Voting Rights."
Option to Defer Payment of Distributions
Citizens has the right, at any time and from time to time during the term
of the Convertible Debentures, to elect to defer the date on which one or
more of the quarterly interest payments would otherwise become due and
payable by the giving of notice of deferral; provided that no deferred
quarterly interest payment, including any extension of deferral, shall
remain unpaid for more than 20 consecutive quarters or be deferred beyond
the maturity of the Convertible Debentures. As a consequence, quarterly
distributions on the Partnership Preferred Securities and on the Convertible
Preferred Securities would be deferred during any such deferral of interest
payments. However, unpaid distributions would be compounded quarterly at
the Rate. In the event that Citizens exercises this right, Citizens shall
not (i) declare or pay any dividend or distribution on any of its capital
stock (other than dividends payable in capital stock), (ii) redeem, purchase,
otherwise acquire or make a liquidation payment with respect to, any of its
capital stock or any Other Subordinated Indebtedness (as defined herein),
except in the form of capital stock, (iii) pay interest, principal or any
premium (if any), on Other Subordinated Indebtedness, except in the form of
capital stock, or (iv) make any guarantee payment with respect to the foregoing
(other than payments under the Guarantees), during any such deferral period
and until all distribution arrearages have been paid in full; provided,
however, that during such deferral periods, Citizens may reacquire from the
Partnership any securities the Partnership has received from Citizens and
continues to hold. See "Convertible Debentures - Option to Defer Interest
Payments" and "- Certain Covenants of Citizens."
13
Certain Tax Consequences of Deferral of Interest Payments on Convertible
Debentures
Should a deferral of interest payments occur, the holders of the
Convertible Preferred Securities would continue to accrue income for United
States federal income tax purposes which will be allocated, but not
distributed, to holders of record of Convertible Preferred Securities. As a
result, each such holder will include such interest in gross income for
United States federal income tax purposes in advance of the receipt of cash
or shares of Common Stock Series A and will not receive the cash or shares
of Common Stock Series A related to such income if such holder disposes of
or converts its Convertible Preferred Securities prior to the record date for
payment of distributions. See "Certain Federal Income Tax Considerations -
Potential Deferral of Interest Payments and Original Issue Discount."
Citizens has no current intention of exercising its right to defer payments
of interest on the Convertible Debentures. However, should Citizens
determine to exercise such right in the future, the market price of the
Convertible Preferred Securities is likely to be affected. A holder that
disposes of or converts its Convertible Preferred Securities during such a
deferral of interest payments, therefore, might not receive the same return
on its investment as a holder that continues to hold its Convertible Preferred
Securities. In addition, as a result of the existence of Citizen's right to
defer interest payments, the market price of the Convertible Preferred
Securities (which represent an undivided beneficial interest in the
Convertible Debentures through the Partnership Preferred Securities) may be
more volatile than other securities on which original issue discount accrues
that do not have such rights. See "Certain Federal Income Tax Considerations
- - Potential Deferral of Interest Payments and Original Issue Discount."
Tax and Market Consequences of Redemption or Special Events Distribution
At any time on or after _________, 1999, the Convertible Debentures are
redeemable, in whole or in part, which would result in the redemption of the
Partnership Securities and the Trust Securities. See "Convertible Debentures
- - Optional Redemption." Once redemption has occurred holders of Convertible
Preferred Securities will lose their conversion rights, which loss of rights
may materially adversely impact the perceived value of such securities. In
addition, upon the occurrence of certain events, the Trust and/or the
Partnership could be liquidated and the holders of the Convertible Preferred
Securities may receive Partnership Preferred Securities or Convertible
Debentures in lieu of any liquidating cash distribution. See "Convertible
Preferred Securities - Special Events Distribution."
Under current United States federal income tax law, a distribution of
Partnership Preferred Securities or Convertible Debentures upon the
liquidation of the Trust or Citizens Capital would not be a taxable event to
holders of the Convertible Preferred Securities. However, upon occurrence of
an event which results in Citizens Capital or the Trust being treated as an
association taxable as a corporation, a liquidation would probably be a taxable
event to such holders. See "Certain Federal Income Tax Considerations -
Receipt of Partnership Preferred Securities, Convertible Debentures or Cash
Upon Liquidation of Citizens Capital and the Trust."
14
There can be no assurance as to the market prices for the Convertible
Preferred Securities, or the Partnership Preferred Securities or the
Convertible Debentures that may be distributed in exchange for the
Convertible Preferred Securities, if a dissolution or liquidation of any kind
were to occur. Accordingly, the Convertible Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Partnership Preferred Securities or Convertible
Debentures that a holder of Convertible Preferred Securities may receive on
some dissolution and liquidation, may trade at a discount to the price that
the investor paid to purchase the Convertible Preferred Securities offered
hereby. Because holders of Convertible Preferred Securities may receive
Partnership Preferred Securities or Convertible Debentures upon the
occurrence of certain events, prospective purchasers of Convertible Preferred
Securities are also making an investment decision with regard to the
Partnership Preferred Securities and Convertible Debentures and should
carefully review all the information regarding the Partnership Preferred
Securities and Convertible Debentures contained herein. See "Convertible
Preferred Securities - Special Events Distribution," "Partnership Preferred
Securities" and "Convertible Debentures."
Enactment of December 1995 Tax Proposals
On December 7, 1995, the Treasury Department announced Proposals which, if
enacted, would no longer permit issuers issuing certain debt securities that
are not reflected as debt on the issuer's consolidated balance sheet, such as
the Convertible Debentures, to claim an interest deduction for United States
federal income tax purposes for interest payable on such securities. On
December 19, 1995, the Treasury Department announced proposals, stating that
instruments will not be subject to the Proposals if issued pursuant to a
registration statement filed with the SEC on or before December 7, 1995, to the
extent of the aggregate amount of such instruments described in the
registration statement, which would exempt the Convertible Debentures from
the Proposals. The Company believes that, based upon the proposals for
transitional relief, enactment of legislation derived from the Proposals
should not affect the tax consequences to the Company or to the holders of
Convertible Preferred Securities. However, there can be no assurance as to
the final form of the Transitional Rules in this regard until such
legislation is enacted.
Limited Voting Rights
Holders of the Convertible Preferred Securities will have limited voting
rights and, except for the right of holders of Convertible Preferred
Securities to enforce rights of the Property Trustee upon the occurrence of
certain events described herein, will not be entitled to vote to appoint,
remove or replace, or to increase or decrease the number of, Trust Trustees,
which voting rights are vested exclusively in the holder of the Convertible
Common Securities. See "Convertible Preferred Securities - Voting Rights."
Trustee Conflicts of Interest
Chemical Bank is the Property Trustee (as hereafter defined) for the Trust,
and is also the trustee under the Indenture governing the Convertible
Debentures. Chemical Bank will be the only trustee of the Trust which will
act as indenture trustee for purposes of compliance with the Trust
Indenture Act. In addition, Chemical Bank is the trustee under certain of the
15
Company's outstanding debentures which qualify as Senior Indebtedness for
purposes of the Convertible Debentures offered hereby. The bank is also a
participant in the Company's current lines of credit, of which no amount is
outstanding as of the date hereof. In certain circumstances, Chemical Bank
is authorized to act on behalf of the holders of the Convertible Debentures
(and so, consequently, the Partnership Preferred Securities and Convertible
Preferred Securities) in enforcing their rights and entitlements as described
in this Prospectus. See "Convertible Preferred Securities - Declaration
Events of Default." Chemical Bank is also authorized to act on behalf of
certain holders of Citizens' Senior Indebtedness, and may be a creditor in
its own right under the Company's bank lines of credit. In the event of a
future default under the Company's Senior Indebtedness, line of credit or the
securities offered hereby, Chemical Bank might have to resign its role as a
trustee under any such Senior Indebtedness, or as the Trustee under the
Convertible Debentures. In such event, a replacement would have to be
appointed. Any such replacement Trustee would succeed to all of the rights,
powers and duties of Chemical Bank vis-a-vis holders of the Convertible
Preferred Securities, Partnership Preferred Securities and Convertible
Debentures offered hereby. See "Convertible Debentures - Information
Concerning the Debenture Trustee."
Trading Price and Taxes
The Convertible Preferred Securities may trade at a price that does not
fully reflect the value of accrued but unpaid interest with respect to the
underlying Convertible Debentures. A holder who disposes of his Convertible
Preferred Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the
Convertible Debentures as a result of the original issue discount ("OID")
requirements of the Internal Revenue Code of 1986, as amended (the "Code")
through the date of disposition in income as ordinary income. The holder
will also be required to add such amount to his adjusted tax basis on his
pro-rata share of the underlying Convertible Debentures deemed disposed of.
To the extent the selling price is less than the holder's adjusted tax basis
(which will include, in the form of OID, all accrued but unpaid interest),
a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes. See "Certain Federal Income Tax
Considerations - Potential Deferral of Interest Payments and Original Issue
Discount" and "- Sales of Convertible Preferred Securities."
No Prior Market for the Convertible Preferred Securities; Market Risk on
Distributions in Common Stock
The Convertible Preferred Securities constitute a new issue of securities
with no established trading market. Application will be made to list the
Convertible Preferred Securities on the NYSE. Listing on the NYSE will be
subject to meeting the requirements of the NYSE. Even if approval for
listing is received, there can be no assurance that an active market for the
Convertible Preferred Securities will develop or be sustained in the future
on the NYSE. Although the Underwriters have indicated to Citizens that they
intend to make a market in the Convertible Preferred Securities, as permitted
by applicable laws and regulations, they are not
16
obligated to do so and may discontinue any such market-making at any time
without notice. Accordingly, no assurance can be given as to the liquidity
of, or trading markets for, the Convertible Preferred Securities.
The shares of Common Stock Series A that a holder of Convertile Preferred
Securities will receive as a result of making a Stock Distribution Election
will have an Equivalent Value (as determined on the Share Transfer and
Valuation Date on which they were deposited with the Partnership) equal to
the cash amount that would be payable to a holder who has made a Cash
Distribution Election. However, the value of such shares will be subject to
market fluctuations and there can be no assurance that the market price of
such shares will not thereafter decline.
CITIZENS UTILITIES COMPANY
Citizens Utilities Company is a diversified operating public utility which
provides, either directly or through subsidiaries, telecommunications,
natural gas transmission and distribution, electric distribution, water or
wastewater services to customers in areas of nineteen states. Operating
divisions of Citizens provide electric distribution and natural gas
transmission and distribution public utility services, purchasing most of
the electric power needed and all gas supplies. Telecommunications,
water and wastewater public utility services are provided either by divisions
of Citizens or by its subsidiaries. Citizens holds a significant investment
interest in Centennial Cellular Corp., a cellular telephone company, and also
owns Electric Lightwave, Inc., an alternative telecommunications service
provider operating in five western states. Beginning with 1945, the Company
has increased its revenues, net income and earnings per share (as adjusted
for subsequent stock dividends and stock splits) every year without
interruption.
The Company, with administrative offices at High Ridge Park, Stamford,
Connecticut 06905 (telephone 203-329-8800), was incorporated in Delaware in
1935 to acquire the assets and business of a predecessor corporation. Since
then, the Company has grown as a result of investment in its own utility
operations and the acquisition of numerous additional utility operations.
As a result of its diversification, the Company is not dependent upon any
single geographic area or any one type of utility service for its revenues.
Because of this diversity, no single regulatory body regulated or will
regulate a utility service of the Company accounting for more than 12% of its
revenues for the twelve months ended September 30, 1995, pro forma for the
acquisition of the telecommunications properties described hereafter. The
Company is not aware of any other utility company as fully diversified in
both geographic areas served and variety of services provided. The Company's
operations are conducted principally in small and medium-sized communities.
No material part of the Company's business is dependent upon a single
customer or a small group of customers. The loss of any single customer or
a small group of customers would not have a materially adverse effect upon
the Company. The Company's consumer connections have increased from 26,150
in 1945, to 225,389 in 1965, to 610,585 in 1985, and to over 1,500,000 as of
September 30, 1995.
17
The Company continually considers and is carrying out expansion through
acquisitions and joint ventures in the rapidly evolving telecommunications
and cable television industries and in traditional public utility and related
businesses.
On November 29, 1994, Citizens and ALLTEL Corporation ("ALLTEL") announced
the signing of definitive agreements pursuant to which Citizens agreed
to acquire from ALLTEL, for a total purchase price of $292 million, certain
telephone properties serving approximately 110,000 local telephone access
lines and certain cable television systems serving approximately 7,000
subscribers. The properties are located in eight states: Arizona,
California, Nevada, New Mexico, Oregon, Tennessee, Utah and West Virginia
("ALLTEL Telecommunications Properties"). On June 30, 1995, 35,662 local
telephone access lines in Oregon and West Virginia were transferred to the
Company. On September 30, 1995, approximately 19,000 local telephone access
lines in Tennessee were transferred to the Company. On October 31, 1995,
approximately 18,000 local telephone access lines in Arizona, New Mexico and
Utah and approximately 7,000 cable television lines in Arizona, New Mexico
and California were transferred to the Company. The remaining ALLTEL
Telecommunications Properties are expected to be transferred to the Company
by early 1996. The purchases require the approval of the regulatory
commissions of the states in which the properties are located.
USE OF PROCEEDS
The proceeds to be received by the Trust from the sale of the Convertible
Preferred Securities and the Convertible Common Securities will be
contributed by the Trust to the Partnership to be invested thereby in the
Convertible Debentures. Citizens, after payment of the Underwriters'
Compensation (as defined under "Underwriting") and other expenses of the
offering, will use the net proceeds from the sale of such Convertible
Debentures to the Partnership of approximately $______________ (approximately
$________ if the Underwriters' overallotment option is exercised in full) to
repay outstanding commercial paper issued to temporarily and partially fund
the purchase price of certain acquired telecommunications properties described
herein and to permanently fund a portion of the to-be-acquired
telecommunications properties described herein.
CAPITAL REQUIREMENTS AND FINANCING
The purchase price for the ALLTEL Telecommunications Properties, net of
property to be transferred to ALLTEL valued at $10 million, is $282 million.
The Company intends to permanently finance the acquisition of the ALLTEL
Telecommunications Properties approximately one-third ($94 million) from the
issuance of equity securities, one-third ($94 million) from the issuance or
assumption of debt securities, and one-third ($94 million) from Company cash
and investments. As of September 30, 1995, approximately $79 million of the
purchase price of other telecommunications properties acquired by the
Company in 1994 remained temporarily financed with commercial paper
classified as short-term debt pending the issuance of equity securities.
The proceeds from the sale of the Convertible Preferred Securities will be
used to satisfy the foregoing $173 million of permanent equity funding
requirements.
18
The purchase price for the ALLTEL Telecommunications Properties transferred
as of September 30, 1995 had been partially and temporarily financed with
$17 million of commercial paper which was classified as long-term debt since
the Company intended to refinance such commercial paper with long-term debt
securities. As of September 30, 1995, the Company had an additional $60
million of outstanding commercial paper classified as long-term debt. The
foregoing $77 million of commercial paper classified as long-term debt was
refinanced with part of the proceeds from the $150 million Debenture issuance
on October 20, 1995 (see "Pro Forma Condensed Balance Sheet" on page 22
herein).
The Company carries out a continuous construction program to maintain
reliable and safe service and to meet future customer service requirements.
The Company estimates that expenditures for construction, extension and
improvement of service relating to existing properties, including the
acquired Telecommunications Properties, will require approximately $262
million in 1995. The Company's construction program is under continuous
review and may be revised depending on business and economic conditions,
regulatory action, governmental mandates, customer demand and other factors.
Capital requirements are being financed from internally generated funds, the
issuance of taxable and tax-exempt long-term debt, short-term borrowings,
customer advances, and contributions in aid of construction.
The Company maintains $600 million of committed bank lines of credit for
general corporate purposes under which there were no amounts outstanding
as of December 20, 1995.
DESCRIPTION OF COMMON STOCK SERIES A AND SERIES B
Citizens' common stock consists of two series: Common Stock Series A and
Common Stock Series B. The Company has authorized 200,000,000 shares of
Common Stock Series A and 300,000,000 shares of Common Stock Series B. As
of December 1, 1995 the Company had outstanding 154,007,968 shares of
Common Stock Series A and 71,300,452 shares of Common Stock Series B. As of
December 1, 1995 there were 25,710 record holders of Common Stock Series
A and 20,752 record holders of Common Stock Series B. The holders of Common
Stock Series A and Common Stock Series B are entitled to one vote for each
share on all matters voted on by stockholders. Pursuant to Citizens'
Restated Certificate of Incorporation, the holders of Common Stock Series A
and the holders of Common Stock Series B vote together as a single class on
all matters to be voted on by stockholders, unless otherwise expressly
required by applicable law. Common Stock Series A is convertible, on a
share-for-share and tax-free basis, into Common Stock Series B at all times.
Common Stock Series B is not convertible into Common Stock Series A. The
Board of Directors of Citizens may, in its sole discretion and at any time,
require all of the holders of Common Stock Series A to exchange all of their
shares of Common Stock Series A for shares of Common Stock Series B on a
share-for-share basis. The holders of Common Stock Series A and Series B
participate ratably in liquidation. The holders of Common Stock Series A and
B have no preemptive rights.
19
DIVIDENDS ON COMMON STOCK SERIES A AND SERIES B
The holders of Common Stock Series A and B are entitled to receive
dividends when and as declared by the Board of Directors of Citizens out of
funds legally available therefor. Dividends have been paid to holders of
common stock every year without interruption beginning in 1939 and, although
there can be no assurances as to the amount of any future dividends, the
Company has increased cash dividends and/or cash value equivalents every year
without interruption beginning in 1946. Beginning in 1956, when the two-
series common stock capitalization of Citizens was initiated, through 1989,
only stock dividends were paid on Common Stock Series A and only cash
dividends were paid on Common Stock Series B. Commencing in 1990, Citizens
has declared and paid quarterly stock dividends at the same rate
on shares of both Common Stock Series A and Common Stock Series B. The stock
dividend rate is based on an underlying cash equivalent. The Company
expects that under present federal tax law, stock dividends on Common Stock
Series A and Common Stock Series B, if paid and received pro-rata and
otherwise in the same manner as they have been since 1990, will be free of
current federal income taxation on receipt. Such stock dividends are
treated as capital transactions when and if sold. Gain or loss is based on
the difference between sales price and adjusted basis per share.
To the extent that stock dividends are declared on the Common Stock Series
B, the same stock dividend must be declared on the Common Stock Series A. To
the extent that cash dividends are paid out of funds that are legally
available on the Common Stock Series B, stock dividends with an equivalent
fair value must be paid during the same calendar year on the Common Stock
Series A, unless cash dividends are declared on the Common Stock Series A at
the same time and in an equal amount as on the Common Stock Series B.
COMMON STOCK TRANSFER AGENT
The transfer agent for the Company's Common Stock Series A and B is
Illinois Stock Transfer Company.
COMMON STOCK PRICE RANGE
Citizens trades on the New York Stock Exchange under the symbols CZNA and
CZNB for Common Stock Series A and Common Stock Series B, respectively. The
table below indicates the high and low prices per share for the periods
shown. The high and low prices per share were taken from the daily
quotations published in The Wall Street Journal during the periods indicated.
Prices have been adjusted retroactively for subsequent stock dividends and
the August 31, 1993 2-for-1 stock split, and the July 24, 1992, 3-for-2 stock
split, rounded to the nearest 1/8th.
20
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter*
----------- ----------- ----------- -----------
High Low High Low High Low High Low
---- --- ---- --- ---- --- ---- ---
1995
- ----
Series A $13.625 $11.750 $12.375 $10.250 $11.500 $10.625 $13.250 $10.625
Series B 13.625 11.750 12.375 10.500 11.500 10.750 13.250 10.625
1994
- ----
Series A 16.125 13.125 14.875 12.500 13.625 12.375 13.000 11.750
Series B 16.250 13.000 14.875 12.500 13.625 12.375 13.000 11.875
1993
- ----
Series A 15.750 12.000 16.500 14.250 16.375 11.875 17.750 14.375
Series B 15.750 12.125 16.500 14.125 16.375 11.875 17.625 14.375
1992
- ----
Series A 11.125 9.375 10.750 9.875 12.125 9.625 13.000 10.750
Series B 10.875 9.375 10.750 9.500 12.250 9.500 13.000 10.750
The reported last sale prices on the New York Stock Exchange on December 20,
1995 were $13 1/8 per share of Common Stock Series A and $13 1/4 per share of
Common Stock Series B.
*Through December 20, 1995.
FINANCIAL INFORMATION
The following financial information, including pro forma financial
information reflecting the acquisition of certain telecommunications
properties, is qualified in its entirety by, and should be read in
conjunction with, the information appearing elsewhere herein and the
documents and financial statements incorporated by reference herein.
Revenues
Twelve Months Ended September 30, 1995
--------------------------------------
(In Thousands)
Business Sector Pro Forma Actual
- ------------------ ----------------------- -------------------------
Telecommunications $ 711,256 61.7% $ 597,053 57.5%
Natural Gas 192,992 16.8% 192,992 18.6%
Electric 172,253 14.9% 172,253 16.6%
Water/Wastewater 76,224 6.6% 76,224 7.3%
----------- --------- ----------- ---------
Total $ 1,152,725 100 % $ 1,038,522 100 %
=========== ========= =========== =========
21<PAGE>
PRO FORMA FINANCIAL STATEMENTS
Citizens Utilities Company and Telecommunications Properties
Pro Forma Condensed Balance Sheet
(In thousands)
The following Pro Forma Condensed Balance Sheet represents the historical
condensed balance sheet of Citizens at September 30, 1995, giving effect to the
acquisitions of the yet to be acquired Telecommunications Properties (as
defined in Note 1 on page 23) following the purchase method of accounting,
as well as the completion of the permanent financings for the acquired
Telecommunications Properties as if such acquisitions and financings were
closed on September 30, 1995. The Pro Forma Condensed Balance Sheet should be
read in conjunction with the historical financial statements and related
notes thereto of Citizens which are incorporated by reference herein. The
Pro Forma Condensed Balance Sheet is not necessarily indicative of what the
actual financial position would have been had the transactions occurred at
the date indicated and does not purport to indicate future financial
position.
As at September 30, 1995
-------------------------------------------
Pro Forma
----------------------------
Citizens Adjustments(1) Adjusted
----------- -------------- ---------
Assets
- ------
Current Assets:
Cash $ 17,873 $309,997 (2) $ 22,145
(305,725)(3)
Accounts Receivable 169,407 169,407
Other 37,467 37,467
----------- ----------
Total Current Assets 224,747 229,019
----------- ----------
Net Property, Plant and
Equipment 2,730,936 152,075 (3) 2,883,011
----------- ----------
Investments 335,525 (66,000)(2) 269,525
Regulatory Assets 179,186 179,186
Deferred Debits and
Other Assets 196,534 196,534
----------- -------------- ----------
$3,666,928 $ 90,347 $3,757,275
=========== ============== ==========
Liabilities and Equity
- ----------------------
Current Liabilities:
Long-Term Debt Due
Within One Year $ 4,003 $ (4,003)(2) $ 0
Short-Term Debt 153,650 (153,650)(3) 0
Other 268,456 268,456
----------- ----------
Total Current Liabilities 426,109 268,456
Regulatory Liabilities 29,294 29,294
Deferred Credits and Other
Liabilities 96,419 96,419
Deferred Income Taxes 273,137 273,137
Customer Advances for
Construction and Contributions
in Aid of Construction 219,200 219,200
Long-Term Debt 1,071,943 150,000 (2)
(77,000)(2) 1,144,943
Company Obligated Mandatorily
Redeemable Convertible
Preferred Securities* 175,000 (2) 175,000
Common Equity 1,550,826 1,550,826
----------- -------------- ----------
$3,666,928 $ 90,347 $3,757,275
=========== ============== ==========
- --------------------
*Represents mandatorily redeemable securities of subsidiaries, the sole
assets of which are convertible debentures of the Company.
See Notes to Pro Forma Condensed Balance Sheet on page 23.
22
PRO FORMA FINANCIAL STATEMENTS (continued)
Citizens Utilities Company and Telecommunications Properties
Notes to Pro Forma Condensed Balance Sheet
(1) In May 1993, Citizens and GTE Corp. ("GTE") signed definitive agreements
pursuant to which Citizens agreed to acquire from GTE, for approximately
$1.1 billion in cash, certain GTE telephone properties ("GTE Telephone
Properties") serving approximately 500,000 local telephone access lines
in eight states. On December 31, 1993, 189,123 local telephone access
lines in Idaho, Tennessee, Utah and West Virginia were transferred to
the Company. On June 30, 1994, 270,883 access lines in New York were
transferred to the Company. On November 30, 1994, 37,802 access lines
in Arizona and Montana were transferred to the Company and on
December 30, 1994, 5,440 local telephone access lines in California
were transferred to the Company.
In November 1994, Citizens and ALLTEL signed definitive agreements
pursuant to which Citizens agreed to acquire from ALLTEL, for $292
million, certain ALLTEL telecommunications properties ("ALLTEL
Telecommunications Properties") serving approximately 110,000 local
telephone access lines and certain cable television systems serving
approximately 7,000 subscribers in eight states. The purchase price
of the ALLTEL Telecommunications Properties (net of 3,600 Citizens
telephone access lines which have been valued at $10 million and are
to be transferred to ALLTEL in a tax free exchange) is $282 million.
On June 30, 1995, 35,662 local telephone access lines in West
Virginia and Oregon were transferred to the Company. On September 30,
1995, approximately 19,000 local telephone access lines in Tennessee
were transferred to the Company. On October 31, 1995, approximately
18,000 local telephone access lines in Arizona, New Mexico and Utah
and approximately 7,000 cable television lines in Arizona, New Mexico
and California were transferred to the Company. The remaining local
telephone access lines are expected to be transferred to the Company by
early 1996. The GTE Telephone Properties and the ALLTEL
Telecommunications Properties are collectively referred to as the
"Telecommunications Properties."
(2) Through September 30, 1995, the purchase price for the Telecommunications
Properties had been permanently financed with approximately $392
million of cash and investments, $281.3 million of equity securities
issued through an underwritten public offering, the Company's Direct
Stock Purchase and Sale Plan and employee benefit plans, and $402
million of debt securities. The remainder of the purchase price of the
Telecommunications Properties transferred as of September 30, 1995 had
been temporarily financed with commercial paper, $153.7 million of which
is classified as Short-Term Debt (to be repaid from cash and investments
and the issuance of equity securities) and $17 million which is
classified as Long-Term Debt (to be refinanced with Long-Term Debt). As
of September 30, 1995, the Company had an additional $60 million in
commercial paper outstanding classified as Long-Term Debt.
When added to the $392 million of cash and investments used, $281.3
million of equity securities issued and the $402 million of debt
securities which have been issued or assumed to permanently finance the
acquisitions of the Telecommunications Properties, these adjustments
reflect the anticipated permanent financing of the $1.381 billion
purchase price (net of the property valued at $10 million to be
transferred to ALLTEL) for the Telecommunications Properties with
approximately equal components of cash and investments ($458 million),
debt securities ($469 million), and equity securities ($454 million).
These adjustments also reflect the use of a portion of the proceeds from
the issuance of $150 million of debentures on October 20, 1995 to repay
the above-described $77 million of commercial paper classified as
Long-Term Debt, refund $4 million of Long-Term Debt Due Within One Year,
permanently fund a portion of the purchase price of the
Telecommunications Properties and for other general corporate purposes.
(3) Reflects the use of permanent financing proceeds to pay the purchase
price of the Telecommunications Properties to be transferred to Citizens
after September 30, 1995 (net of the property valued at $10 million to be
transferred to ALLTEL) and to repay all Short-Term Debt.
23
PRO FORMA FINANCIAL STATEMENTS (continued)
Citizens Utilities Company and Telecommunications Properties
Pro Forma Condensed Statement of Income
(In thousands, except for per-share amounts)
The following Pro Forma Condensed Statement of Income for the twelve months
ended September 30, 1995 combines the historical statements of income of
Citizens and the Telecommunications Properties as if the acquisitions and the
permanent financings had been closed October 1, 1994. The Pro Forma Condensed
Statement of Income should be read in conjunction with the historical
financial statements and related notes thereto of Citizens and those of the
Telecommunications Properties that have been audited and which are
incorporated by reference herein. The Pro Forma Condensed Statement of Income
is not necessarily indicative of what the actual financial results would have
been for the period had the transactions occurred at the date indicated and
does not purport to indicate the financial results of future periods.
Twelve Months Ended September 30, 1995
--------------------------------------
Pro Forma
----------------------
Citizens Acquisitions*(1) Adjustments Combined
-------- ---------------- ----------- --------
Revenues $1,038,522 $114,203 $1,152,725
Expenses:
Operating Expenses 635,814 48,456 684,270
Depreciation and
Amortization 148,650 24,733 $1,600 (3) 174,983
--------- ---------------- ----------- ---------
Total Operating
Expenses 784,464 73,189 1,600 859,253
Income from Operations 254,058 41,014 (1,600) 293,472
Other Income, net 57,147 1,190 (7,500)(4) 50,837
Interest Expense 88,909 5,451 (14,600)(5) 79,760
--------- ---------------- ----------- ---------
Income Before
Income Taxes 222,296 36,753 5,500 264,549
Income Taxes 65,754 13,765 4,700 (6) 84,219
--------- ---------------- ----------- ---------
Income before Dividends
on Convertible Preferred
Securities 156,542 22,988 800 180,330
Dividends on Company
Obligated Convertible
Preferred Securities -- -- 5,100 (7) 5,100
--------- ---------------- ----------- ---------
Net Income $ 156,542 $22,988 $ (4,300) $175,230
========= ================ =========== =========
Earnings Per Share of
Common Stock Series A
and Series B** $.74(8)(9) $.80(8)(9)
Weighted Average Common
Shares** 212,038 219,347(8)
- ---------------------------------
*Represents the financial results from October 1, 1994 to the dates of
acquisition for all the Telecommunications Properties acquired from October 1,
1994 through September 30, 1995 and the financial results for the entire twelve
month period for the yet to be acquired Telecommunications Properties (as of
September 30, 1995) net of the financial results for the property to be
transferred to ALLTEL. Financial results for the Telecommunications
Properties acquired from their dates of acquisition, or from October 1, 1994
if acquired prior thereto, through September 30, 1995 are included in
Citizens' twelve months ended September 30, 1995 financial results.
**No adjustment has been made for the 1.6% 1995 fourth quarter stock dividend
as this adjustment is immaterial.
See Notes to Pro Forma Condensed Statements of Income on page 26.
24
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (continued)
Citizens Utilities Company and Telecommunications Properties
Pro Forma Condensed Statement of Income
(In thousands, except for per-share amounts)
The following Pro Forma Condensed Statement of Income for the year ended
December 31, 1994 combines the historical statements of income of Citizens
and the Telecommunications Properties as if the acquisitions and the
permanent financings had been closed January 1, 1994. The Pro Forma
Condensed Statement of Income should be read in conjunction with the
historical financial statements and related notes thereto of Citizens and
those of the Telecommunications Properties that have been audited and which
are incorporated by reference herein. The Pro Forma Condensed Statement of
Income is not necessarily indicative of what the actual financial results
would have been for the period had the transactions occurred at the date
indicated and does not purport to indicate the financial results of future
periods.
Twelve Months Ended December 31, 1994
-------------------------------------
Pro Forma
----------------------
Citizens Acquisitions*(1) Adjustments Combined
-------- ---------------- ----------- --------
Revenues $ 910,369 $254,815 $1,165,184
Expenses:
Operating Expenses 567,070 123,170 $(4,600)(2) 685,640
Depreciation and
Amortization 115,175 49,095 4,700 (3) 168,970
--------- ---------------- ----------- ---------
Total Operating
Expenses 682,245 172,265 100 854,610
Income from Operations 228,124 82,550 (100) 310,574
Other Income, net 52,940 847 (17,300)(4) 36,487
Interest Expense 72,744 13,172 (11,800)(5) 74,116
--------- ---------------- ----------- ---------
Income Before
Income Taxes 208,320 70,225 (5,600) 272,945
Income Taxes 64,323 24,137 5,800 (6) 94,260
--------- ---------------- ----------- ---------
Income before Dividends
on Convertible Preferred
Securities 143,997 46,088 (11,400) 178,685
Dividends on Company
Obligated Convertible
Preferred Securities -- -- 5,100 (7) 5,100
--------- ---------------- ----------- ---------
Net Income $ 143,997 $46,088 $(16,500) $173,585
========= ================ =========== =========
Earnings Per Share of
Common Stock Series A
and Series B** $.73 $.79(8)
Weighted Average Common
Shares** 197,752 218,445(8)
- ----------------------------
*Represents the financial results from January 1, 1994 to the dates of
acquisition for all the Telecommunications Properties acquired from January
1, through December 31, 1994 and the financial results for the entire twelve
month period for the yet to be acquired Telecommunications Properties (as of
December 31, 1994) net of the financial results for the property to be
transferred to ALLTEL. Financial results for the Telecommunications
Properties acquired from their dates of acquisition through December 31,
1994 are included in Citizens' twelve months ended December 31, 1994
financial results.
**Restated through the third quarter 1995 stock dividend. No adjustment has
been made for the 1.6% 1995 fourth quarter stock dividend as this adjustment
is immaterial.
See Notes to Pro Forma Condensed Statements of Income on page 26.
25
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (continued)
Citizens Utilities Company and Telecommunications Properties
Notes to Pro Forma Condensed Statements of Income
(1) In May 1993, Citizens and GTE Corp. ("GTE") signed definitive agreements
pursuant to which Citizens agreed to acquire from GTE, for approximately
$1.1 billion in cash, certain GTE telephone properties ("GTE Telephone
Properties") serving approximately 500,000 local telephone access lines
in eight states. On December 31, 1993, 189,123 local telephone access
lines in Idaho, Tennessee, Utah and West Virginia were transferred to
the Company. On June 30, 1994, 270,883 access lines in New York were
transferred to the Company. On November 30, 1994, 37,802 access lines in
Arizona and Montana were transferred to the Company and on December 30,
1994, 5,440 local telephone access lines in California were transferred to
the Company.
In November 1994, Citizens and ALLTEL signed definitive agreements
pursuant to which Citizens agreed to acquire from ALLTEL, for $292
million, certain ALLTEL telecommunications properties ("ALLTEL
Telecommunications Properties") serving approximately 110,000 local
telephone access lines and certain cable television systems serving
approximately 7,000 subscribers in eight states. The purchase price
of the ALLTEL Telecommunications Properties (net of 3,600 Citizens
telephone access lines which have been valued at $10 million and
are to be transferred to ALLTEL in a tax free exchange) is $282
million. On June 30, 1995, 35,662 local telephone access lines in West
Virginia and Oregon were transferred to the Company. On September 30,
1995, approximately 19,000 local telephone access lines in Tennessee
were transferred to the Company. On October 31, 1995, approximately
18,000 local telephone access lines in Arizona, New Mexico and Utah
and approximately 7,000 cable television lines in Arizona, New Mexico
and California were transferred to the Company. The remaining local
telephone access lines are expected to be transferred to the Company by
early 1996. The GTE Telephone Properties and the ALLTEL
Telecommunications Properties are collectively referred to as the
"Telecommunications Properties."
(2) Elimination of certain corporate overhead expenses allocated to
certain of the Telecommunications Properties which will not have a
continuing impact on the combined entity.
(3) Represents amortization of $261 million of excess purchase price over
net book value of assets acquired or to be acquired. Pursuant to
Statement of Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation," the remaining $138 million of
excess of purchase price over net book value of assets acquired will be
deferred. The Company intends to seek from the public utilities
commissions maximum recovery of the excess of purchase price over net
book value in future rate proceedings.
(4) Represents an adjustment to reflect the elimination from Other Income
of all tax-exempt investment income associated with the $458 million of
Company cash and investments which have been or are expected to be used
to partially finance the acquisition of the Telecommunications
Properties. The Company used $392 million of cash and investments
from December 31, 1993 through September 30, 1995 to permanently
finance the Telecommunications Properties acquisitions.
(5) Represents an adjustment to reflect the inclusion in Interest Expense
of all the interest expense on $469 million of debt securities
which have been or are expected to be issued or assumed to partially
finance the acquisition of the Telecommunications Properties, net of the
elimination of interest expense on the temporary borrowings used to
finance the acquisitions and on the debt securities which are associated
with the Telecommunications Properties and which were not or will not
be assumed by the Company. Through September 30, 1995, the purchase price
for the Telecommunications Properties had been permanently financed with
approximately $402 million of debt securities.
(6) Adjustment to Income Taxes based on Income Before Income Taxes
using the applicable incremental income tax rate.
26
PRO FORMA FINANCIAL STATEMENTS (continued)
Citizens Utilities Company and Telecommunications Properties
Notes to Pro Forma Condensed Statements of Income
(7) The Dividend on Company Obligated Convertible Preferred Securities net
of income taxes using the applicable incremental income tax rate.
(8) The Pro Forma Earnings Per Share calculation and Pro Forma Weighted
Average Common Shares are based on the weighted average number of common
shares outstanding for the periods indicated including the number of
additional shares issued or assumed to be issued to permanently finance
the Telecommunications Properties, assuming such additional shares were
outstanding for the entire twelve month periods. Through September 30,
1995, the Company financed $281.3 million of the acquisition of the
Telecommunications Properties from the issuance of equity securities
pursuant to the Company's Direct Stock Purchase and Sale Plan, employee
benefit plans and an underwritten public offering. The shares issuable
upon conversion of the Company Obligated Convertible Preferred Securities
to be issued in this offering are not included in Pro Forma Weighted
Average Common Shares since the Company Obligated Convertible Preferred
Securities are not considered to be Common Stock Equivalents for
purposes of the earnings per share calculation. Fully diluted earnings
per share is not presented because the effect is immaterial.
(9) Reflects the discontinuance of subsidy contract revenues received
through the end of 1994 from Pacific Bell. For the twelve months ended
September 30, 1995 on both an Actual and Pro Forma basis this
discontinuance had the effect of reducing Income Before Income Taxes
by $28.5 million and Earnings Per Share by $.09 as compared to prior
periods.
27
<PAGE>
CITIZENS UTILITIES CAPITAL L.P.
Citizens Utilities Capital L.P. is a special purpose limited partnership
formed on October 13, 1995 under the laws of the State of Delaware. All of
its partnership interests (other than the Partnership Preferred Securities
and any interests of any Special Representative) will be beneficially owned
directly or indirectly by Citizens. Citizens or one of its wholly owned
subsidiaries will be the sole general partner in Citizens Capital (in such
capacity, the "General Partner"). CU CapitalCorp., a Delaware corporation
and a wholly-owned subsidiary of Citizens ("CU Capital"), initially will be
sole limited partner in Citizens Capital. Upon issuance of the Partnership
Preferred Securities to the Trust, the Trust will become a limited partner
in Citizens Capital and CU Capital will withdraw as a limited partner. The
General Partner will contribute capital to the extent required to ensure that
its capital contributions are equal to at least 3% of all capital contributed
to Citizens Capital. Citizens Capital exists for the sole purposes of
(i) raising capital through the one-time issuance of its Partnership
Securities, (ii) loaning such capital to Citizens in exchange for Convertible
Debentures, (iii) collecting quarterly interest payments, placing orders with
brokers to sell shares of Common Stock received as such interest payments and
paying the required quarterly distributions on its Partnership Securities
(iv) effecting the conversion of the Partnership Preferred Securities into
Common Stock Series A and (v) engaging in only those other activities
necessary or incidental thereto.
The General Partner will cause Citizens Capital to invest 99% of the total
contributions in Citizens Capital in the Convertible Debentures and the
remaining 1% in Eligible Investments, as defined in and provided for in the
Amended and Restated Agreement of Limited Partnership of Citizens Capital
(the "Limited Partnership Agreement"). To the extent that aggregate interest
payments on the Convertible Debentures to Citizens Capital and on Eligible
Investments exceed aggregate distributions required on the Partnership
Preferred Securities and such distributions have been paid in full, Citizens
Capital may at times have excess funds or securities, which shall be allocated
to and may, in the General Partner's sole discretion, be distributed to the
General Partner.
Citizens Capital will exist for a maximum term of 45 years, unless earlier
dissolved. The Limited Partnership Agreement provides that the General
Partner will have liability for the debts and obligations of the Partnership,
including taxes imposed on the Partnership but excluding taxes imposed on
holders of Partnership Preferred Securities (in their capacities as holders)
and withholding taxes. Certain obligations of the Partnership to the holders
of the Partnership Preferred Securities are being separately guaranteed
pursuant to the Partnership Guarantee. All of Citizens Capital's business
and affairs will be conducted by the General Partner. Citizens Capital will
hold title to the Convertible Debentures and will have the power to exercise
all rights, powers, and privileges under the Indenture as the holder of the
Convertible Debentures.
The location of the principal executive offices of the General Partner is
c/o Office of the Treasurer, Citizens Utilities Company, High Ridge Park,
Building No. 3, Stamford, Connecticut 06905, telephone number (203) 329-8800.
28
<PAGE>
CITIZENS UTILITIES TRUST
Citizens Utilities Trust is a statutory business trust formed under the
Trust Act pursuant to (i) a declaration of trust, dated as of October 13,
1995, executed by Citizens, as sponsor (the "Sponsor"), and the trustees of
the Trust (the "Trust Trustees") and (ii) the filing of a certificate of
trust with the Secretary of State of the State of Delaware on October 13,
1995. Such declaration will be amended and restated in its entirety (as so
amended and restated, the "Declaration"). Citizens will own, directly or
indirectly, all of the Convertible Common Securities, which will amount to
at least 3% of the total capital of the Trust. The Trust exists for the sole
purposes of (i) issuing its Trust Securities,(ii) contributing the proceeds
thereof to Citizens Capital to acquire the Partnership Preferred Securities
and (iii) engaging in only those other activities necessary or incidental
thereto.
The Trust has a term of approximately 45 years but may terminate earlier,
as provided in the Declaration. The Trust's business and affairs will be
conducted by the Trust Trustees appointed by Citizens as the direct or
indirect holder of all the Convertible Common Securities. The duties and
obligations of the Trust Trustees shall be governed by the Declaration.
Pursuant to the Declaration, the number of Trust Trustees will initially be
four. Two of the Trust Trustees ("Regular Trustees") will be persons who are
employees or officers of or who are affiliated with Citizens. The third
Trust Trustee will be a financial institution that is not affiliated with
Citizens and has a specified minimum amount of aggregate capital and surplus
of at least $50,000,000, which shall act as property trustee under the
Declaration and as indenture trustee for the purposes of the Trust Indenture
Act (the "Property Trustee"). Initially, Chemical Bank, a New York banking
corporation, will be the Property Trustee until removed or replaced by the
holder of the Convertible Common Securities. Chemical Bank will also act as
indenture trustee under each of the Guarantees (the "Guarantee Trustee").
See "Guarantees." In addition, a fourth Trust Trustee will have a principal
place of business or reside in the State of Delaware (the "Delaware
Trustee"). Initially, Chemical Bank Delaware will be the Delaware Trustee.
The Property Trustee will hold title to the Partnership Preferred
Securities for the benefit of the holders of the Trust Securities. The
Property Trustee will have the power to exercise all rights, powers, and
privileges as the holder of the Partnership Preferred Securities. In
addition, the Property Trustee will maintain exclusive control of a
segregated non-interest bearing bank account (the "Property Account") to hold
all payments made in cash or securities in respect of the Partnership
Preferred Securities for the benefit of the holders of the Trust Securities.
The Property Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Convertible
Preferred Securities out of funds from or securities held in the Property
Account. The Guarantee Trustee will hold the Convertible Preferred
Securities Guarantee for the benefit of the holders of the Convertible
Preferred Securities. Citizens, as the direct or indirect holder of all the
Convertible Common Securities, will have the right to vote to appoint, remove
or replace any Trust Trustees, including the Property Trustee, and to increase
or decrease the number of Trust Trustees; provided, that, (i) if the Property
Trustee does not act as Delaware Trustee, the number of Trust Trustees shall
be at least four and (ii) at least two Trust Trustees shall be Regular
Trustees. Citizens will pay all fees and expenses related to the Trust and
the offering of the Convertible Preferred Securities. Citizens will have
liability for debts and obligations, including taxes imposed on the Trust but
29
excluding taxes imposed on the holders of Convertible Preferred Securities
(in their capacities as holders) and withholding taxes. Certain obligations
of the Trust to the holders of the Trust Securities are being separately
guaranteed under the Trust Guarantees.
The Declaration does not permit the issuance by the Trust of any securities
other than the Trust Securities or the incurrence of any indebtedness by the
Trust. The rights of the holders of the Convertible Preferred Securities,
including economic rights and rights to information, are set forth in the
Declaration, the Trust Act and the Trust Indenture Act. See "Convertible
Preferred Securities."
The office of the Delaware Trustee for the Trust is 1201 Market Street,
Wilmington, Delaware 19801. The location of the principal executive offices
of the Trust is c/o Office of the Treasurer, Citizens Utilities Company, High
Ridge Park, Building No. 3, Stamford, Connecticut 06905, telephone number
(203) 329-8800.
DESCRIPTION OF THE SECURITIES
The securities offered hereby are: (i) __% Citizens Utilities Convertible
Preferred Securities, with a liquidation preference of $50 per security; (ii)
the Partnership Preferred Securities into which such Convertible Preferred
Securities can be converted; (iii) the Guarantees (and the back-up
undertakings, as defined herein) pursuant to which Citizens will guarantee,
to the extent described therein, certain payments with respect to the
Convertible Preferred Securities and the Partnership Preferred Securities;
(iv) the Convertible Debentures; (v) the Common Stock Series A into which the
Convertible Preferred Securities may be converted; (vi) the Common Stock
Series A which will be issued in payment of interest on the Convertible
Debentures; and (vii) the Common Stock Series B into which the Common Stock
Series A can be converted.
CONVERTIBLE PREFERRED SECURITIES
The Convertible Preferred Securities will be issued pursuant to the terms
of the Declaration. The Declaration will be qualified as an indenture under
the Trust Indenture Act. The Property Trustee, Chemical Bank, will act as
the indenture trustee for purposes of compliance with the provisions of the
Trust Indenture Act. The terms of the Convertible Preferred Securities will
include those stated in the Declaration and those made part of the
Declaration by the Trust Indenture Act.
The Convertible Common Securities rank pari passu, and payments will be
made thereon on a pro rata basis, with the Convertible Preferred Securities,
except that upon the occurrence of a Declaration Event of Default, the rights
of the holders of the Convertible Common Securities to receive payment of
periodic distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the
Convertible Preferred Securities. Therefore, the following summary of the
principal terms and provisions of the Convertible Preferred Securities also
relates to the principal terms and provisions of the Convertible Common
Securities in the absence of a Declaration Event of Default.
30
General
The Convertible Preferred Securities and Convertible Common Securities
represent undivided beneficial interests in the assets of the Trust. All of
the Convertible Common Securities will be owned, directly or indirectly, by
Citizens. The Declaration does not permit the issuance by the Trust of any
securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. Pursuant to the Declaration, the Property Trustee
will own the Partnership Preferred Securities purchased by the Trust for the
benefit of the holders of the Trust Securities. The payment of distributions
by the Trust, and payments upon redemption of the Convertible Preferred
Securities or liquidation of the Trust, are guaranteed by Citizens to the
extent described under "Guarantees". The Trust Guarantees do not cover
payment of distributions when the Trust does not have sufficient available
cash and/or Common Stock to pay such distributions. In such event, the
remedy of a holder of Convertible Preferred Securities is to vote to direct
the Property Trustee to enforce the Property Trustee's rights as limited
partner of Citizens Capital or to act on his or her own behalf to enforce the
Trust's rights under the Convertible Preferred Securities. See " - Voting
Rights," "Partnership Preferred Securities - Voting Rights" and Guarantees -
Events of Default."
For United States federal income tax purposes, Convertible Preferred
Security holders will recognize interest income as it accrues. So long as
interest periods are not deferred, the distributions will approximately equal
the accruals of such quarterly interest. Capital, income and distributions
on Convertible Preferred Securities are not eligible for the corporate
dividends-received deduction for United States federal income tax purposes.
Holders of Convertible Preferred Securities will not have the right to
remove or replace the Regular Trustees or the Property Trustee. Holders of
the Convertible Preferred Securities will have no preemptive rights.
Distributions
Recipients of this Prospectus are encouraged to also review carefully the
section entitled "Prospectus Summary - Distributions," which section contains
a brief outline in summary form of the subject discussed below.
How Distributions are Computed. Holders of the Convertible Preferred
Securities will be entitled to receive cumulative distributions from the
Trust in the forms of payment described below, accruing at the Rate from the
date of original issuance and payable quarterly in arrears on the scheduled
Distribution Payment Dates. When, as and if available for payment,
distributions will be made by the Property Trustee. The amount of
distributions payable for any period will be computed on the basis of twelve
30-day months and a 360-day year and, for any period shorter than a full
quarter, will be computed on the basis of the actual number of days elapsed
in such period.
31
Holders Can Elect Distributions in Common Stock Series A or Cash. In
anticipation of the continuing use of Citizens' shares of Common Stock
Series A to satisfy the interest requirements on the Convertible Debentures,
each holder of a Convertible Preferred Security may elect annually during a
designated period of ten Business Days how distributions from the Trust will
be paid to him (a "Distribution Election"). If he makes an election to
receive distributions in Common Stock Series A (a "Stock Distribution
Election"), he will receive his distributions in Common Stock Series A,
unless the Trust only has cash available for making distributions.(1) If he
makes an election to receive distributions in cash (a "Cash Distribution
Election"), he will receive his distribution in cash. If a holder makes no
Distribution Election, he will automatically be deemed by the Trust to have
made a Cash Distribution Election. Once made, Distribution Elections will
stand as long as a holder owns his Convertible Preferred Security unless and
until he makes a new Distribution Election by completing an election form and
delivering the same to the broker, nominee or other entity which holds such
holder's account during the annual Election Period (the procedures for which
will be specified in the Distribution Declaration Notice). If a holder does
not deliver a new election form within this period, then such holder's new
election will not be effective. Any election by a holder of Convertible
Preferred Securities will be canceled by a transfer of the Convertible
Preferred Securities and the new holder will be entitled to make an election
in the next Election Period. Prior to such Election Period, such new holder
will be deemed to have made a Cash Distribution Election. In the event that
the Partnership is dissolved or liquidated by reason of the occurrence of a
Partnership Event, the right of (i) a holder to make a Stock Distribution
Election, and (ii) Citizens to make Stock Payment Elections will terminate.
In such event, interest payments and distributions will be made only in cash.
See "Prospectus Summary - Distributions."
Distributions Flow From Citizens to Holders. Currently, Citizens intends
to make interest payments on the Convertible Debentures in shares of Common
Stock Series A with a fair market value on the Share Transfer and Valuation
Date equivalent to the interest payment due on the next scheduled Interest
Payment Date ("Equivalent Value"). The "Share Transfer and Valuation Date"
will be the date specified by Citizens in a written notice (the
"Distribution Declaration Notice") to the Trust, the Partnership and the
holders of the Convertible Preferred Securities, which Share Transfer and
Valuation Date shall also be the date on which shares of Common Stock Series A
are transferred by Citizens to the Partnership (as the holder of the
Convertible Debentures) to satisfy the interest payment obligation on the
Convertible Debentures. Currently, Citizens contemplates that the Share
Transfer and Valuation Date will be at least nine Business Days before the
Distribution Payment Date, but such time-frame may be subject to change to
reflect evolving market practices and settlement procedures. If Citizens
fails to make a timely declaration, Citizens shall be deemed to have elected
to pay interest in the form of shares of Common Stock Series A.
- ----------------------
(1) As noted above, Citizens may make a Cash Payment Election and pay
interest on the Convertible Debentures in cash to the Partnership and,
as General Partner of the Partnership, would then cause such cash to
be distributed by the Partnership to the Trust. In such event, even
though a holder may have made a Stock Distribution Election, he will
receive cash as the Trust will only have cash with which to pay him.
32
How Distributions are Made. If Citizens pays interest on the Convertible
Debentures in shares of its Common Stock Series A and delivers the same to
the Partnership in payment of its interest obligations on the Convertible
Debentures, holders of Trust Securities who have not made a Stock
Distribution Election or who have revoked their Stock Distribution Election
will receive cash at the Rate because the Partnership will sell sufficient
shares of Common Stock Series A on the open market (or otherwise raise cash)
so that the Partnership can pay the Trust (i) such number of shares and
(ii) such amount of cash as will satisfy the Trust's obligation to make
payments in stock and cash to holders in accordance with their elections.
Pursuant to the Indenture, if shares are sold by the Partnership for less
than the Equivalent Value, Citizens will pay any shortfall to insure that
each holder of the Convertible Preferred Securities who has an effective
made Cash Distribution Election receives cash distributions in an amount
equal to the Rate.
Citizens also has the right on the Distribution Declaration Date to elect
to make interest payments on the Convertible Debentures in whole or in part
by check or bank wire in immediately available funds. Also, after a
Distribution Declaration Date on which it had elected to pay interest to the
Partnership in shares of Common Stock Series A for the next succeeding interest
payment, Citizens may exercise its right to thereafter substitute cash for
such payment. In such case, all holders will receive cash distributions at
the Rate. Further, at any time after the Share Transfer and Valuation Date,
Citizens will also have the right to purchase some or all of the shares of
Common Stock Series A deposited with Citizens Capital for cash at a price
equal to the Equivalent Value. In such case, holders who have made a Stock
Distribution Election may receive their distributions in cash at the Rate.
If a Distribution Declaration Notice has specified that the distribution will
be made in Common Stock Series A, and Citizens thereafter expects either to
pay the distribution entirely in cash or to purchase some or all of the shares
deposited with the Partnership, Citizens shall notify the Partnership, the
Trust and the holders of the Convertible Preferred Securities in writing
(which writing is also referred to herein as a "Cash Payment Election").
Distributions on the Convertible Preferred Securities must be paid to the
extent that the Trust has funds or securities, as the case may be, available
for and on hand to make the payment of such distributions. It is anticipated
that the Trust's funds and securities on hand will be limited to funds and
securities received from distributions on the Partnership Preferred
Securities. If Citizens fails to make interest payments on the Convertible
Debentures, the Partnership would not have funds or securities, as the case
may be, to pay distributions to the Trust on the Partnership Preferred
Securities, and the Trust would not have funds or securities, as the case may
be, to pay distributions on the Convertible Preferred Securities. See "Risk
Factors - Dependance on Convertible Debenture Payments," and "Guarantees."
Record Dates. Distributions declared (as opposed to deferred) on the
Convertible Preferred Securities will be payable to the holders thereof as
they appear on the books and records of the Trust on the relevant Record
Dates. Such distributions will be paid through the Property Trustee who will
hold funds and securities received in respect of the Partnership
33
Preferred Securities in the Property Account for the benefit of the holders
of the Trust Securities. Subject to any applicable laws and regulations and
the Declaration, each such payment will be made as described under
"Convertible Preferred Securities - Book-Entry-Only Issuance - The
Depository Trust Company" below. In the event that any date on which
distributions are payable on the Convertible Preferred Securities is not a
Business Day, then payment of the distributions will be made on the next
succeeding Business Day (and without any additional interest in respect of
such delay). If such Business Day is in the next succeeding calendar year,
however, the payment will be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such date. A
"Business Day" means any day other than a Saturday or a Sunday or a day on
which banking institutions in The City of New York are authorized or
obligated by law or executive order to close.
Other. Initial purchasers in the offering of the Convertible Preferred
Securities may make their Distribution Elections during a period of seven
calendar days after the offering. The Election Period will commence on or
before December 21 of each year (a date which will be at least two Business
Days after the scheduled Record Date relating to the January 31 distribution
payment), beginning in 1996, and will end at the close of business ten
Business Days later. Election forms and prospectuses will be sent to
beneficial holders of Convertible Preferred Securities on the Record Date
relating to the January 31 distribution payment each year on or about the
first day of the Election Period. Timely Distribution Election forms should
be delivered by beneficial holders of the Convertible Preferred Securities to
the broker, nominee or other entity which holds such holder's account so that
they are received by such broker, nominee or other entity on or before the
close of business on the last day of the Election Period. The brokerage
houses holding accounts for holders, nominees and other participants in DTC
will transmit the same to DTC to the extent reasonably required to implement
such elections. The Trust will be relying on information supplied through
these procedures in determining how many shares of Common Stock Series A or
how much cash to distribute on each Distribution Payment Date. While the
Company, the Partnership and the Trust believe that such procedures are not
dissimilar from those used in similar situations, each purchaser and holder of
a Convertible Preferred Security is urged to consult with his broker to insure
that his election is properly recorded. Questions may be addressed to the
Company at the phone number and address appearing elsewhere herein.
Deferrals
Unless deferred, interest and distributions are payable in arrears on the
Interest Payment Date and the Distribution Payment Date, respectively. Under
the Indenture, Citizens has the right, at any time and from time
to time, to elect to defer the date on which one or more of the quarterly
interest payments on the Convertible Debentures would otherwise become due
and payable by the giving of notice of deferral; provided that no such
deferral, including any extension thereof, may exceed 20 consecutive
quarters nor extend beyond the stated maturity date of the Convertible
Debentures; and, provided, further, that in the event of such deferral, any
interest so deferred shall not be deemed to have become due and
payable until after such deferral period has ended. As a consequence,
distributions on the Convertible Preferred
34
Securities would be deferred by the Trust during any such deferral of interest
payments. If Citizens exercises this deferral right, it will be restricted
from making certain distributions and payments (other than in shares of its
capital stock) to holders of its capital stock, or to holders of
indebtedness where such indebtedness ranks junior to the Convertible
Debentures, and from making certain guarantee payments. Upon any such
deferrals, interest will be compounded on each Interest Payment Date and
accrued until paid at the Rate on any interest so deferred until the amount
of such deferred interest (including compounded interest thereon) is paid in
full. Citizens shall give the Regular Trustees written notice of its election
to defer an interest payment on or before the Distribution Declaration Date.
Citizens shall also give written notice of any deferred interest payment (and
the consequential deferral of their distributions) to the holders of the
Convertible Preferred Securities. See "Risk Factors - Option to Defer
Payment of Distributions," and "Convertible Debentures - Option to Defer
Interest Payments." If interest payments are deferred, the resulting
deferred distributions and accrued and accumulated distributions thereon
shall be paid to holders of record of the Convertible Preferred Securities
as they appear on the books and records of the Trust on the record date
established for payment, as opposed to any record date for purposes of any
notice relating to the deferral of interest payments or distributions. As a
result, any holder who sells Convertible Preferred Securities during a
deferral period will transfer to the buyer his entitlement to any payment
made at the end of any such deferral period. Any failure by Citizens to make
interest payments on the Convertible Debentures in the absence of a deferral
would constitute an Indenture Event of Default. Citizens may not elect to
defer interest payments while an Indenture Event of Default has occurred and
is continuing.
Additional Interest
Citizens is required to pay either (i) directly to such taxing authority, or
(ii) to the Trust or Citizens Capital, as the case may be, or (iii) as
additional interest ("Additional Interest") on the Conbertible Debentures,
any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States or any other
domestic taxing authority upon either the Trust or Citizens Capital. To the
extent that such payments give rise to additional taxes of Citizens Capital
or the Trust, the Company shall also make payment for such additional taxes
of Citizens Capital or the Trust. Citizens shall be required to pay
Additional Interest or make such other payments in an amount and at such
time so that the net amounts received as interest or distribution payments
by Citizens Capital and the Trust, and distributable to the Trust and the
holders of the Convertible Preferred Securities, respectively, after all
such taxes, duties, assessments or governmental charges have been paid will
not be less than the amount that would have been received and distributed by
such entities, and the amount the holders of the Convertible Preferred
Securities would have received, had no such taxes, duties, assessments or
governmental charges been imposed. If such taxes or duties are paid to the
Trust or Citizens Capital or as Additional Interest on the Convertible
Debentures, then the Trust or Citizens Capital, as the case may be, is
required to pay such amounts over to such taxing authority in satisfaction
of such charges or assessments.
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Conversion Rights
General. The Convertible Preferred Securities will be convertible, unless
previously redeemed, at the option of the holder thereof and in the manner
described below, into shares of Common Stock Series A of Citizens at a
conversion price of $_______ per share of Common Stock Series A (equivalent
to a conversion rate of____ shares of Common Stock Series A for each $50 of
liquidation preference of Convertible Preferred Securities), subject to
adjustment as described under - "Conversion Price Adjustments" below. A
holder of Convertible Preferred Securities wishing to exercise its conversion
right as to all or a portion of such Convertible Preferred Securities shall,
in effect, surrender such Convertible Preferred Securities, or a portion
thereof, by giving an irrevocable written Notice of Conversion, to the
Conversion Agent. The Conversion Agent shall then, on behalf of such holder,
cause the Convertible Preferred Securities to be exchanged for Partnership
Preferred Securities, and in turn cause the Partnership Preferred Securities
to be exchanged for Convertible Debentures, and immediately cause the
Convertible Debentures to be converted into Common Stock Series A. Holders
may obtain copies of the Notice of Conversion from the Conversion Agent.
Convertible Preferred Securities that have been called for redemption will
not be convertible after the close of business five (5) Business Days
preceding the date fixed for redemption and no Convertible Preferred Security
will be convertible after the close of business five (5) Business Days
preceding ________________, 2036.
Holders of Convertible Preferred Securities at the close of business
on a Record Date will be entitled to receive the distribution payable on such
securities on the corresponding Distribution Payment Date notwithstanding the
conversion of such Convertible Preferred Securities following such Record
Date. Except as provided in the immediately preceding sentence, the Trust
will make no payment or allowance for accrued, deferred or otherwise unpaid
distributions on converted Convertible Preferred Securities, or for any
dividends or distributions on the shares of Common Stock Series A. Holders
of shares of Common Stock Series A which are issuable upon conversion
prior to or on a record date for any dividend or distribution on such shares
shall be entitled to receive the same dividend or distribution as other
holders of record of Common Stock Series A. Each conversion will be deemed
to have been effected immediately prior to the close of business on the day
on which the Notice of Conversion was received by the Trust.
No fractional share of Common Stock Series A will be issued as a result of
conversion; in lieu thereof such fractional interest will be settled in cash.
Citizens will, subject to compliance with the requirements of any
regulatory authority claiming jurisdiction over Citizens' business, reserve
for issuance enough shares of Common Stock Series A so as to have sufficient
shares legally available to effect such conversions.
Conversion Price Adjustments - General. Commencing in 1990, Citizens has
followed the policy of paying quarterly dividends on its common stock in
shares of common stock. The conversion price of the Convertible Preferred
Securities will be adjusted downward to reflect the declaration of each such
stock dividend. The conversion price is also subject to adjustment in
36
certain events, including (a) the issuance of shares of Common Stock Series A
as a dividend or a distribution with respect to its Common Stock Series A,
(b) subdivisions, combinations and reclassification of Common Stock Series A,
(c) the issuance to all holders of Common Stock Series A of rights or
warrants entitling them (for a period not exceeding 45 days) to subscribe
for shares of Common Stock Series A at less than the current market price,
(d) the distribution to all holders of Common Stock Series A of evidences of
indebtedness of the Company, securities or capital stock, cash or assets
(including securities, but excluding those rights, warrants, dividends and
distributions referred to above and dividends and distributions paid
exclusively in cash), (e) the payment of dividends (and other distributions)
on Common Stock Series A paid exclusively in cash, excluding cash dividends
if the annualized per share amount thereof does not exceed 15% of the current
market price of Common Stock Series A as of the Trading Day immediately
preceding the date of declaration of such dividend, and (f) payment to holders
of Common Stock Series A in respect of a tender or exchange offer (other than
an odd-lot offer) by Citizens or any subsidiary of Citizens for Common Stock
Series A at a price in excess of 110% of the current market price of Common
Stock Series A as of the Trading Day next succeeding the last date tenders or
exchanges may be made pursuant to such tender or exchange offer. A "Trading
Day" means any day on which the NYSE (or any other market used for the
determination of fair market value) is open for the trading of securities.
No adjustment of the conversion price will be made upon the issuance of any
shares of Common Stock Series A pursuant to any present or future plan
providing for the reinvestment of dividends or interest payable on
securities of Citizens and the investment of additional optional amounts in
shares of Common Stock Series A under any such plan. No adjustment in the
conversion price will be required unless such adjustment would require a
change of at least one percent (1%) in the price then in effect; provided,
however, that any adjustment that would not be required to be made shall be
carried forward and taken into account in any subsequent adjustment. If any
action would require adjustment of the conversion price pursuant to more than
one of the provisions described above, only one adjustment shall be made and
such adjustment shall be the amount of adjustment that has the highest
absolute value to the holder of the Convertible Preferred Securities.
Citizens from time to time may also reduce the conversion price of the
Convertible Debentures (and thus the conversion price of the Convertible
Preferred Securities) by any amount selected by Citizens for any period
of at least 20 days, in which case Citizens shall give at least 15 days'
notice of such reduction. Citizens may also, at its option, make such
reductions in the conversion price, in addition to those set forth above,
as the Citizens Board of Directors deems advisable to avoid or diminish
any income tax to holders of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event
treated as such for inome tax purposes. See "Certain Federal Income Tax
Considerations - Adjustment of Conversion Price".
Conversion Price Adjustments - Merger, Consolidation or Sale of Assets of
Citizens. In the event that Citizens shall be a party to any transaction
(including, without limitation, and with certain exceptions, (a)
recapitalization or reclassification of the Common Stock Series A, (b)
37
consolidation of Citizens with, or merger of Citizens into, any other Person,
or any merger of another Person into Citizens, (c) any sale or transfer of
all or substantially all of the assets of Citizens or (d) any compulsory
share exchange pursuant to which the Common Stock Series A is converted into
the right to receive other securities, cash or other property, (each of the
foregoing being referred to as a "Transaction"), then the holders of
Convertible Preferred Securities then outstanding shall have the right to
convert the Convertible Preferred Securities into the kind and amount of
securities, cash and other property receivable upon the consummation of such
Transaction by a holder of the number of shares of Common Stock Series A
issuable upon conversion of such Convertible Preferred Securities
immediately prior to such Transaction.
In the case of a Transaction, each Convertible Preferred Security would
become convertible into the securities, cash or property receivable by a
holder of the number of shares of Common Stock Series A into which such
Convertible Preferred Security was convertible immediately prior to such
Transaction. This change could substantially lessen or eliminate the value
of the conversion privilege associated with the Convertible Preferred
Securities in the future. For example, if Citizens were acquired in a cash
merger, each Convertible Preferred Security would become convertible solely
into cash and would no longer be convertible into securities whose value
would vary depending on the future prospects of Citizens and other factors.
Special Events Distribution
"Trust Investment Company Act Event" means that Citizens shall have (i)
requested and received and (ii) delivered to the Regular Trustees, an opinion
of a nationally recognized independent counsel experienced in practice under
the Investment Company Act of 1940, as amended (the "1940 Act") (an
"Investment Company Act Opinion") that, as a result of the occurrence of a
change in law or regulation or a written change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), there is a more
than an insubstantial risk that the Trust is or will be considered an
investment company which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after the first date of
issuance of the Convertible Preferred Securities.
"Trust Tax Event" means that Citizens shall have (i) requested and received
and (ii) delivered to the Regular Trustees, an opinion of a nationally
recognized independent tax counsel experienced in such matters (a "Tax Event
Opinion") to the effect that, as a result of (a) any change or prospective
change which is announced or publicly stated in the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (b) any change or prospective change in an
interpretation or application of any such laws or regulations by any
legislative body, court, governmental agency or regulatory authority
(including the enactment of any legislation and the publication of any
judicial decision or regulatory determination), (c) any interpretation or
pronouncement that provides for a position with respect to such laws or
regulations that differs from the generally accepted position or (d)
38
any action by any governmental agency or body or regulatory authority,
assuming such change is enacted, promulgated, issued or effective or such
interpretation or pronouncement is issued or announced or becomes effective
or such action is taken, in each case on or after the date of this Prospectus,
there would be more than an insubstantial risk that (i) the Trust may be
subject to United States federal income tax with respect to distributions
accrued or received on the Partnership Preferred Securities or (ii) the Trust
is subject to more than a de minimis amount of taxes, duties or other
governmental charges. (For purposes hereof, the circumstances described in
subsections (a) through (d) above are sometimes hereafter referred to as a
"Change in Tax Law".)
A Trust Tax Event and a Trust Investment Company Act Event are sometimes
herein collectively or individually referred to as "Trust Events".
"Partnership Tax Event" means that the General Partner shall have received
a Tax Event Opinion to the effect that, as a result of a Change in Tax Law,
there is more than an insubstantial risk that (i) Citizens Capital may be
subject to United States federal income tax with respect to interest accrued
or received on the Convertible Debentures or (ii) Citizens Capital is
subject to more than a de minimis amount of taxes, duties or other
governmental charges.
"Partnership Investment Company Act Event" means that the General Partner
shall have received an Investment Company Act Opinion that as a result of the
occurrence of a Change in 1940 Act Law, there is more than an insubstantial
risk that the Partnership is or will be considered an investment company
which is required to be registered under the 1940 Act, which Change in 1940
Act Law becomes effective on or after the first date of issuance of the
Partnership Preferred Securities.
A Partnership Tax Event and a Partnership Investment Company Act Event are
sometimes herein collectively or individually referred to as "Partnership
Events".
"Company Tax Event" means that Citizens shall have obtained a Tax Event
Opinion to the effect that, as a result of a Change in Tax Law, there is more
than an insubstantial risk that interest payable to the holders of the
Convertible Debentures would not be deductible by Citizens for United States
federal income tax purposes.
A Trust Event, Partnership Event, and Company Tax Event are sometimes herein
collectively or individually referred to as "Special Events".
"Rating Agency Event" shall occur when, and if, (i) any nationally recognized
securities rating agency lowers its rating of the Company's senior, unsecured
long-term debt to a rating less than the rating in effect on the date of the
issuance of the Convertible Preferred Securities and (ii) Citizens has
elected to transmit notice thereof to the Trust.
If at any time a Trust Event shall occur and be continuing, the Regular
Trustees will (except as set forth under Ministerial Action below) cause the
Trust to be liquidated with the
39
result that Partnership Preferred Securities will be distributed to holders
of the Trust Securities in liquidation of such holders' interests in the
Trust, on a pro rata basis. If a Partnership Event has also occurred and is
continuing, then Citizens may also cause the Partnership to be liquidated as
well with the result that Convertible Debentures (and not Partnership
Preferred Securities) will ultimately be received by the holders of the Trust
Securities in liquidation of such holders' interests in the Trust, on a pro
rata basis.
If at any time a Partnership Event shall occur and be continuing, the
General Partner may (except as set forth under Ministerial Action below) cause
the Partnership to be liquidated with the result that Convertible Debentures
will be distributed to the Trust in liquidation of its interests in the
Partnership. Following a Partnership liquidation, holders of Convertible
Preferred Securities would lose their right to make Distribution Elections,
Citizens will lose its right to make Stock Payment Elections, and
distributions to holders of Convertible Preferred Securities will be made
only in cash.
Upon the occurrence of a Company Tax Event, Citizens will (except as set
forth under Ministerial Action below) have the right to cause the Trust
and the Partnership to be liquidated with the result that Convertible
Debentures will ultimately be received by the holders of the Trust
Securities in liquidation of such holders' interest in the Trust, on a pro
rata basis.
Ministerial Action. If at the time of any such Special Event, Citizens,
the Partnership or the Trust are actually aware of an opportunity to
eliminate the adverse effect of the Special Event on the Trust, Citizens or
the Partnership by taking some ministerial action (such as filing a form or
making an election or pursuing some other similar reasonable measure) where
the taking of such action does not involve a material cost, then neither
Citizens, the Partnership nor the Trust shall liquidate the Partnership
or the Trust by reason of such Special Event without first having pursued
such ministerial action.
If, at any time, a Rating Agency Event shall occur and be continuing, the
Trust will be liquidated with the result that Partnership Preferred
Securities will be distributed to the holders of the Trust Securities in
liquidation of such holders' interests in the Trust, on a pro rata basis.
In addition, Citizens may notify the Trustees that it will liquidate the
Partnership with the result that Convertible Debentures (and not Partnership
Preferred Securities) will be ultimately distributed to holders of Trust
Securities, on a pro rata basis.
After the date for any distribution of Partnership Preferred Securities or
Convertible Debentures, as the case may be, upon dissolution and liquidation
of the Trust (i) the Convertible Preferred Securities will be deemed to be
no longer outstanding, (ii) the Depositary or its nominee, as the record
holder of the Convertible Preferred Securities, will receive a registered
global certificate or certificates representing the Partnership Preferred
Securities or Convertible Debentures, as the case may be, and (iii) any
certificates representing Convertible Preferred Securities not held by the
Depositary or its nominee will be deemed to represent (a) Partnership
Preferred Securities having an aggregate liquidation amount equal to the
aggregate stated liquidation amount of, with a distribution rate identical
to the distribution rate of, and accrued
40
or deferred and unpaid distributions equal to accrued or deferred and unpaid
distributions on such Convertible Preferred Securities, or (b) Convertible
Debentures having an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the distribution
rate of, and accrued or deferred and unpaid interest equal to accrued or
deferred and unpaid distributions on such Convertible Preferred Securities,
as the case may be, until such certificates are presented to Citizens or its
agent for transfer or reissuance.
There can be no assurance as to the market prices for the Convertible
Preferred Securities, or the Partnership Preferred Securities or Convertible
Debentures that may be distributed in exchange for the Convertible Preferred
Securities, if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Convertible Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Partnership Preferred Securities or Convertible Debentures,
as the case may be, that an investor may receive if a dissolution and
liquidation of the Trust were to occur, may trade at a discount or a premium
to the price that the investor paid to purchase the Convertible Preferred
Securities offered hereby. Upon the distribution of the Convertible
Debentures or the Partnership Preferred Securities, the Company will use its
best efforts to list such securities on the exchange that the Convertible
Preferred Securities are then listed.
Optional Redemption
The Convertible Debentures are also subject to redemption by Citizens, at
its option, in whole or in part, from time to time, on or after
_________________, 1999 at 100% of the principal amount being redeemed,
together with accrued or deferred and unpaid interest to the redemption date.
If Citizens redeems Convertible Debentures, the Trust must redeem Trust
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Convertible Debentures so redeemed, at $50 per Trust
Security in cash, plus accrued or deferred and unpaid distributions in either
cash or Common Stock (such amount and form of payment being the "Redemption
Price").
Redemption on Maturity or Upon Acceleration
Additionally, Convertible Preferred Securities are also subject to
redemption in whole, but not in part, upon any redemption of the Partnership
Preferred Securities occurring upon the repayment at maturity (on
_____________, 2036) or as a result of acceleration of the Convertible
Debentures upon the occurrence of an Indenture Event of Default described
under "Convertible Debentures - Events of Default." Upon the repayment of
the Convertible Debentures, the proceeds from such repayment shall
simultaneously be applied to redeem Convertible Preferred Securities having
an aggregate liquidation amount equal to the aggregate principal amount of
the Convertible Debentures so repaid at the Redemption Price. In the case
of such acceleration, the Convertible Preferred Securities will only be
redeemed when repayment of the Convertible Debentures has actually been
received by the Trust.
41
Redemption Procedures; Generally
If Convertible Preferred Securities are called for redemption, conversion
rights with regard thereto will terminate five (5) Business Days prior to the
redemption date. If the Convertible Preferred Securities are called for
redemption, optionally or at maturity or acceleration, Citizens may not redeem
the Convertible Debentures called for redemption, unless all accrued or
deferred and unpaid distributions have been paid in full on all Convertible
Preferred Securities for all quarterly distribution periods terminating on
or prior to the date of redemption.
Notice of any redemption of Convertible Preferred Securities
(which notice will be irrevocable) will be given to each record holder of
Convertible Preferred Securities that are being redeemed or exchanged not
fewer than thirty (30) nor more than sixty (60) days prior to the date fixed
for redemption thereof. If a notice of redemption has been given, then on
the redemption date, if the Partnership or Citizens, as the case may be, has
paid to the Property Trustee a sufficient amount of cash and Common Stock in
connection with the related redemption or maturity of Partnership Preferred
Securities and/or the Convertible Debentures, the Property Trustee will
irrevocably deposit such cash and Common Stock with the Paying Agent with
irrevocable instructions to pay the applicable Redemption Price (i) to the
holders of the Convertible Preferred Securities to be redeemed (in the event
that such Convertible Preferred Securities are in definitive form) or
(ii) to DTC (in the event that Convertible Preferred Securities are in
book-entry form) with irrevocable instructions to pay the Redemption Price
to the holders of the Convertible Preferred Securities to be redeemed. See
"Book-Entry-Only Issuance - The Depository Trust Company." Upon
satisfaction of the foregoing conditions, then immediately prior to the
close of business on the date of such deposit or payment all rights of
holders of such Convertible Preferred Securities so called for redemption
will cease, except the right of the holders to receive the Redemption Price,
and from and after the date fixed for redemption, such Convertible Preferred
Securities will not accrue distributions or bear interest. In the event that
any date fixed for redemption of Convertible Preferred Securities is not a
Business Day, then payment of the Redemption Price payable on such date will
be made on the next succeeding Business Day (and without any interest in
respect of any such delay), except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day. In the event that payment of the Redemption Price is improperly
withheld or refused and not paid by either the Property Trustee or Citizens,
distributions on the Convertible Preferred Securities called for redemption
will continue to accrue at the Rate, compounded quarterly, to the extent
that payment of such interest is legally available, until the Redemption
Price is actually paid.
In the event that fewer than all of the outstanding Convertible Preferred
Securities are to be redeemed, the Convertible Preferred Securities to be
redeemed will be selected as described under " - Book-Entry-Only Issuance -
The Depositary Trust Company" below.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), Citizens or its subsidiaries may at
any time, and from time to time,
42
purchase outstanding Convertible Preferred Securities by tender, in the open
market or by private agreement.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution, or
winding-up or termination of the Trust, the holders of Convertible Preferred
Securities at the time outstanding will be entitled to receive, out of the
assets of the Trust, after satisfaction of liabilities to creditors, a
liquidation preference of $50 per Convertible Preferred Security payable in
cash, plus all accrued or deferred and unpaid distributions, payable in
either cash or Common Stock, to the date of payment (the "Liquidation
Distribution"), unless, in connection with such liquidation, at the election
of the Regular Trustees, either Partnership Preferred Securities or
Convertible Debentures shall be distributed on a pro rata basis to the holders
of the Convertible Preferred Securities.
If, upon any such liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Convertible Preferred Securities shall be paid
on a pro rata basis. The holders of the Convertible Common Securities will
be entitled to receive distributions upon any such dissolution pro rata with
the holders of the Convertible Preferred Securities, except that if a
Declaration Event of Default has occurred and is continuing, the Convertible
Preferred Securities shall have a preference over the Convertible Common
Securities with regard to such distributions.
If, upon any liquidation of the Trust, the holders of Convertible Preferred
Securities are paid in full the aggregate Liquidation Distribution to which
they are entitled, then such holders will not be entitled to receive or share
in any other assets of the Trust thereafter available for distribution to any
other holders of beneficial interests in the Trust.
As set forth in greater detail in the Declaration, the Trust shall be
dissolved and its affairs shall be wound up upon the occurrence of certain
events, including the earliest to occur of: (i) _______, 2040, the
expiration of the term of the Trust; (ii) the bankruptcy of Citizens, (iii)
upon the filing of a certificate of dissolution or its equivalent with
respect to Citizens or the revocation of the charter of Citizens or of the
Trust's certificate of trust in accordance with the terms of the Declaration,
(iv) upon the distribution of Partnership Preferred Securities or Convertible
Debentures upon the occurrence of any Rating Agency Event or Special Event
and the dissolution and liquidation of the Trust, (v) upon the entry of a
decree of a judicial dissolution of Citizens or the Trust, or (vi) upon the
redemption of all the Trust Securities.
Amendment to the Declaration
The Declaration may be modified and amended if approved by the Regular
Trustees (or, if there are more than two Regular Trustees, a majority of the
Regular Trustees) (and in certain circumstances, by the Property Trustee or
the Delaware Trustee); provided that, if any proposed
43
amendment provides for, or the Regular Trustees otherwise propose to effect, (i)
any action that would adversely affect the powers, preferences or special rights
of the Trust Securities, whether by way of amendment to the Declaration or
otherwise, or (ii) the dissolution, winding-up, or termination of the Trust
other than pursuant to the terms of the Declaration, then such amendment or
proposal shall not be effective except with the approval of at least 66 2/3%
in liquidation amount of the Trust Securities affected thereby.
Notwithstanding the foregoing, no amendment may be made to the Declaration
if such amendment would (i) cause the Trust to be classified for purposes of
United States federal income taxation as other than a grantor trust, (ii)
reduce or otherwise adversely affect the powers of the Property Trustee, or
(iii) cause the Trust to be deemed an investment company which is
required to be registered under the 1940 Act.
Merger, Consolidation or Sale of Assets of the Trust
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any entity, except as described below. The
Trust may, with the consent of a majority of the Regular Trustees and
without the consent of the holders of the Trust Securities, the Delaware
Trustee or Property Trustee, consolidate, amalgamate, merge with or into, or
be replaced by a trust organized as such under the laws of any state of the
United States of America, subject to certain conditions set forth in the
Declaration. The Trust shall not, except with the consent of the holders of
100% in liquidation amount of the Trust Securities, consolidate, amalgamate,
merge with or into, or be replaced by any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it, if such
consolidation, amalgamate, merger or replacement would cause the Trust or
the successor entity to be classified as other than a grantor trust for
United States federal income tax purposes.
Declaration Events of Default
An event of default under the Limited Partnership Agreement (a "Partnership
Event of Default") constitutes an event of default under the Declaration with
respect to the Trust Securities (a "Declaration Event of Default"), provided
that, pursuant to the Declaration, the holder of the Convertible Common
Securities will be deemed to have waived any Declaration Event of Default
with respect to the Convertible Common Securities until all Declaration
Events of Default with respect to the Convertible Preferred Securities have
been cured, waived or otherwise eliminated. Until such Declaration Events
of Default with respect to the Convertible Preferred Securities have been so
cured, waived, or otherwise eliminated, the Property Trustee will be deemed
to be acting solely on behalf of the holders of the Convertible Preferred
Securities and only the holders of the Convertible Preferred Securities will
have the right to direct the Property Trustee with respect to certain matters
under the Declaration, and therefore the Indenture. The holders of a
majority in aggregate liquidation amount of Convertible Preferred Securities
may vote to waive any Declaration Event of Default, provided that if the
underlying Partnership Event of Default requires the consent of a Super
Majority (as defined
44
below), a corresponding Super Majority of Convertible Preferred Securities
will be required. A Partnership Event of Default may be waived as described
in "Partnership Preferred Securities - Limited Partnership Agreement Events
of Default" and " - Voting Rights." A waiver of a Partnership Event of
Default by the Property Trustee constitutes a waiver of the corresponding
Declaration Event of Default.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Partnership Preferred Securities of Citizens
Capital, which is the sole holder of the Convertible Debentures, will have
the right under the Declaration to enforce its rights as holder of the
Partnership Preferred Securities. Citizens and the Trust are each required
to file annually with the Property Trustee an officer's certificate as to its
compliance with all conditions and covenants under the Declaration.
Voting Rights
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Guarantees," and as otherwise required by law and the Declaration,
the holders of the Convertible Preferred Securities will have no voting
rights.
Subject to the requirement that the Property Trustee obtain a tax opinion
in certain circumstances as set forth in the last sentence of this paragraph,
the Holders of a majority in aggregate liquidation amount of the Convertible
Preferred Securities voting separately as a class may direct the time,
method, and place of conducting any proceeding for any remedy available to
the Property Trustee or exercising any trust or power conferred upon the
Property Trustee under the Declaration, including, for so long as the
Property Trustee shall hold the Partnership Preferred Securities,
causing the Special Representative (as hereafter defined) to, or, if the
Property Trustee shall hold the Convertible Debentures directly, to (i)
prosecute any proceeding for any remedy available to the Indenture Trustee or
exercise any power conferred on the Indenture Trustee with respect to the
Convertible Debentures, (ii) waive any waivable past default and its
consequences that are waivable under the Indenture, or (iii) exercise any
right to rescind or annul a declaration that the principal amount of all the
Convertible Debentures shall be due and payable, provided, however, that when
the Limited Partnership Agreement or the Indenture, as the case may be,
requires the consent of the holders of greater than a majority in aggregate
liquidation amount of Partnership Preferred Securities or greater than a
majority in aggregate principal amount of Convertible Debentures, as the
case may be, affected thereby (a "Super Majority"), a corresponding Super
Majority of Convertible Preferred Securities will be required. If the
Property Trustee fails to enforce its rights under the Declaration, any
holder of Convertible Preferred Securities may institute a legal proceeding
directly against any person to enforce the Property Trustee's rights under
the Declaration, without first instituting a legal proceeding against the
Property Trustee or any other person. Other than with respect to directing
the time, method and place of conducting any proceeding for a remedy as set
forth above, the Property Trustee shall not take any of the above actions in
accordance with the directions of the holders of the Convertible Preferred
Securities unless the Property Trustee has obtained an opinion of tax counsel
to the effect that, for the purposes of United States federal
45
income tax, the Trust will continue to be classified as a grantor trust after
consummation of such action.
Any approval or direction of holders of Convertible Preferred Securities
may be given at a separate meeting of holders of Convertible Preferred
Securities convened for such purpose, at a meeting of all of the holders of
Trust Securities or pursuant to written consent.
No vote or consent of the holders of the Convertible Preferred Securities
will be required for the Trust to redeem and cancel Convertible Preferred
Securities or to distribute Partnership Preferred Securities or Convertible
Debentures in accordance with the Declaration and the terms of the Trust
Securities.
Any Convertible Preferred Securities that are owned by Citizens, or by any
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with Citizens shall not be entitled to vote or
consent and shall, for such purposes, be treated as if they were not
outstanding; provided, however, that holders of Convertible Preferred
Securities that have been validly pledged by Citizens or any such entity to a
party otherwise eligible to vote may vote or consent under any of the
circumstances described above.
Book-Entry-Only Issuance - The Depository Trust Company
DTC will act as securities depository for the Convertible Preferred
Securities and, to the extent distributed to the holders of the Convertible
Preferred Securities, the Partnership Preferred Securities and the Convertible
Debentures. The information in this section concerning DTC and DTC's book-
entry system is based upon information obtained from DTC. The Convertible
Preferred Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (as nominee for DTC). One or more
fully-registered global Convertible Preferred Security certificates will be
issued, representing in the aggregate the total number of Convertible
Preferred Securities, and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in the global
Convertible Preferred Securities as represented by a global certificate.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act.
DTC holds securities that its participants ("Participants") deposit with DTC.
DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations ("Direct
Participants"). DTC is owned by
46
a number of its Direct Participants and by the NYSE, the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants").
Purchases of Convertible Preferred Securities within the DTC system must
be made by or through Direct Participants, which will receive a credit for
the Convertible Preferred Securities on DTC's records. The ownership
interest of each actual purchaser of a Convertible Preferred Security
("Beneficial Owner") is in turn to be recorded on the Direct or Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected
to receive written confirmations providing details of the transactions, as
well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Convertible
Preferred Securities. Transfers of ownership interests in Convertible
Preferred Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in
Convertible Preferred Securities, except upon a resignation of DTC, upon the
occurrence of an Indenture Event of Default or upon a decision by the Trust
to discontinue the book-entry system for the Convertible Preferred
Securities.
To facilitate subsequent transfers, all the Convertible Preferred
Securities deposited by Participants with DTC are registered in the name of
DTC's nominee, Cede & Co. The deposit of Convertible Preferred Securities
with DTC and their registration in the name of Cede & Co. effect no change
in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Convertible Preferred Securities; DTC's records reflect only
the identity of the Direct Participants to whose accounts such Convertible
Preferred Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices with respect to the Convertible Preferred Securities
shall be sent to Cede & Co. If less than all of the Convertible Preferred
Securities are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant in such securities to be
redeemed.
Although voting with respect to the Convertible Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will itself consent or vote with respect to Convertible Preferred Securities.
Under its usual procedures, DTC would mail an "Omnibus Proxy" (i.e., a proxy
conferring on Direct Participants the right to vote as their
47
interests appear) to the Trust as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Convertible Preferred Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy). Citizens and the Trust believe that the arrangements among DTC,
Direct and Indirect Participants, and Beneficial Owners will enable the
Beneficial Owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a holder of a beneficial interest in the
Trust.
Cash distribution payments and distribution payments in shares of Common
Stock Series A on the Convertible Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payments
on such payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of
DTC, the Trust, Citizens Capital or Citizens, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
distributions to DTC is the responsibility of the Trust, disbursement of such
payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility
of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Convertible
Preferred Security will not be entitled to receive physical delivery of
Convertible Preferred Securities. Accordingly, each Beneficial Owner must
rely on the procedures of DTC to exercise any rights under the Convertible
Preferred Securities, including elections as to form of payment.
DTC may discontinue providing its services as securities depositary with
respect to the Convertible Preferred Securities at any time by giving
reasonable notice to the Trust. Under such circumstances, in the event that
a successor securities depositary is not obtained, certificates representing
the Convertible Preferred Securities will be printed and delivered. If an
Indenture Event of Default occurs or if the Regular Trustees decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary), certificates representing the Convertible Preferred
Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Citizens and the Trust believe to be
reliable, but neither Citizens nor the Trust takes responsibility for the
accuracy thereof.
Information Concerning the Property Trustee
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after default, shall exercise
the same degree of care as a prudent individual would exercise in the conduct
of his or her own affairs. Subject to such provisions, the Property Trustee
is
48
under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Convertible Preferred Securities,
unless offered reasonable indemnity by such holder against the costs,
expenses and liabilities which might be incurred thereby. The holders of
Convertible Preferred Securities will not be required to offer such indemnity
in the event such holders direct the Property Trustee to take any action
following a Declaration Event of Default.
Transfer Agent, Paying Agent, Registrar and Conversion Agent
Chemical Bank will act as Paying Agent, Registrar, Transfer Agent and
Conversion Agent for the Convertible Preferred Securities.
Registration of transfers of Convertible Preferred Securities will be
effected without charge by or on behalf of the Trust, but upon payment (with
the giving of such indemnity as the Trust may require) in respect of any tax
or other government charges which may be imposed in relation to it.
PARTNERSHIP PREFERRED SECURITIES
The following summary of the principal terms and provisions of the
Partnership Preferred Securities does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Limited
Partnership Agreement, a copy of the form of which is filed as an exhibit to
the Registration Statement of which this Prospectus is a part.
Under certain circumstances involving the dissolution and liquidation of
the Trust following the occurrence of a Trust Event, Partnership Preferred
Securities may be distributed to the holders of the Convertible Preferred
Securities. See discussion below and in "Convertible Preferred Securities -
Special Events Distribution."
General
The General Partnership Security, which constitutes all of the partnership
interests in Citizens Capital other than the Partnership Preferred Securities
owned by the Trust (and any interests of any Special Representative), will
be owned directly or indirectly by Citizens at all times while the
Convertible Preferred Securities are outstanding. The Limited Partnership
Agreement authorizes and creates the Partnership Preferred Securities in
Citizens Capital. The Partnership Preferred Securities will have a
preference with respect to quarterly distributions and amounts payable on
liquidation and redemption over the General Partnership Security. The
Partnership Preferred Securities do not have a par value. The Limited
Partnership Agreement does not permit the issuance of other partnership
interests without the prior approval of the holders of not less than 66 2/3%
of the aggregate liquidation preference of the Partnership Preferred
Securities then outstanding.
For United States federal income tax purposes, Partnership Preferred
Securities holders will recognize interest income as it accrues. So long as
interest payments are not deferred, the
49
distributions will approximately equal the accruals of such quarterly interest.
Income received by Citizens Capital and distributions by the Partnership are not
eligible for the corporate dividends-received deduction for United States
federal income tax purposes.
Holders of Partnership Preferred Securities will not have the right to
remove or replace the General Partner. Holders of Partnership Preferred
Securities will have no preemptive rights.
Distributions
The rights of holders of the Partnership Preferred Securities to receive
cumulative distributions from Citizens Capital are essentially similar to
those of the holders of the Convertible Preferred Securities. See
"Convertible Preferred Securities - Distributions." However, the Partnership
may only make distributions to the extent that there is (i) Common Stock
Series A and/or cash on hand, and (ii) such funds are "legally available"
(as defined under applicable Delaware law) therefor.
Conversion Rights
The Partnership Preferred Securities will be convertible at the option of
the holders thereof and in a manner essentially similar to that of the
Convertible Preferred Securities. See "Convertible Preferred Securities -
Conversion Rights."
Special Events Distribution
The Partnership Securities are subject to distribution upon the occurrence
of certain Special Events and the Rating Agency Event. See "Convertible
Preferred Securities - Special Events Distribution" and "Convertible
Debentures - Special Events Distribution."
After the date for any distribution of Convertible Debentures upon
dissolution and liquidation of Citizens Capital, (i) the Partnership
Preferred Securities will no longer be deemed to be outstanding, (ii) the
record holder of the Partnership Preferred Securities will receive a
certificate or certificates representing the Convertible Debentures to be
delivered upon such distribution, and (iii) any certificates representing
Partnership Preferred Securities will be deemed to represent Convertible
Debentures having an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the distribution
rate of, and accrued or deferred and unpaid interest equal to accrued or
deferred and unpaid distributions on such Partnership Preferred Securities
until such certificates are presented to Citizens Capital or its agent for
transfer or reissuance.
Optional Redemption
Partnership Preferred Securities are subject to optional redemption in
essentially the same manner as the Convertible Preferred Securities. See
"Convertible Preferred Securities - Optional Redemption."
50
Redemption on Maturity or Upon Acceleration
Partnership Preferred Securities shall be subject to redemption upon the
repayment at maturity or upon acceleration upon default of the Convertible
Debentures in essentially the same manner as the Convertible Preferred
Securities. See "Convertible Preferred Securities - Redemption on Maturity
or Upon Acceleration."
Redemption Procedures; Generally
If Partnership Preferred Securities are called for redemption, the
conversion right will terminate five (5) Business Days prior to the
redemption date. The redemption procedures for Partnership Preferred
Securities are similar to those of the Convertible Preferred Securities. See
"Convertible Preferred Securities - Redemption Procedures; Generally." Upon
the completion of such procedures, all rights of holders of such Partnership
Preferred Securities so called for redemption will cease, except the right
of the holders to receive the Redemption Price, but without interest on such
Redemption Price.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), Citizens or its subsidiaries may at
any time, and from time to time, purchase outstanding Partnership Preferred
Securities by tender, in the open market or by private agreement.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution or
winding-up or termination of Citizens Capital, the holders of Partnership
Preferred Securities at the time outstanding will have liquidation rights
essentially similar to those of the holders of the Convertible Preferred
Securities. See "Convertible Preferred Securities - Liquidation Rights."
Pursuant to the Limited Partnership Agreement, Citizens Capital shall be
dissolved and its affairs shall be wound up upon the earliest to occur of (i)
the expiration of the term of Citizens Capital, (ii) any bankruptcy,
insolvency, expulsion or dissolution of the General Partner, (iii) upon the
entry of a decree of a judicial dissolution or (iv) upon the written consent
of all partners of Citizens Capital.
Merger, Consolidation or Sale of Assets of Citizens Capital
Citizens Capital may not consolidate, merge with or into, or be replaced
by, or convey, transfer or lease its properties and assets substantially as
an entirety to any entity, except as described below. Citizens Capital may,
in order to avoid 1940 Act consequences adverse to Citizens or Citizens
Capital or to the holders of the Partnership Preferred Securities, and in
other limited situations, without the consent of the holders of the
Partnership Preferred Securities, consolidate, merge with or into, or be
replaced by a limited partnership or trust organized as
51
such under the laws of any state of the United States of America, subject to
conditions set forth in the Limited Partnership Agreement.
Limited Partnership Agreement Event of Default
An Indenture Event of Default constitutes an event of default under the
Limited Partnership Agreement with respect to the Partnership Preferred
Securities (a "Partnership Event of Default"). The holders of a majority
in aggregate liquidation amount of Partnership Preferred Securities may
vote to waive any Partnership Event of Default, provided that if the
underlying Indenture Event of Default requires the consent of a Super
Majority, a corresponding Super Majority of Partnership Preferred
Securities will be required. An Indenture Event of Default may be waived
as described below in "Convertible Debentures - Indenture Event of Default"
and "- Modification of the Indenture." A waiver of an Indenture Event of
Default constitutes a waiver of the corresponding Partnership Event of Default.
Upon the occurrence of a Partnership Event of Default, the Special
Representative of Citizens Capital, as the sole holder of the Convertible
Debentures, will have the right under the Indenture to declare the principal
of and interest on the Convertible Debentures to be immediately due and
payable.
Voting Rights
Except as provided below and under "Guarantees - Amendments and
Assignment," "Convertible Debentures - Modification of the Indenture" and as
otherwise required by law and provided by the Limited Partnership Agreement,
the holders of the Partnership Preferred Securities will have no voting
rights.
If (i) an Indenture Event of Default occurs and is continuing with respect
to the Convertible Debentures; or (ii) Citizens is in default under any of
its payment obligations under the Partnership Guarantee, then the holders of
a majority in aggregate liquidation preference of the Partnership Preferred
Securities will be entitled to appoint and direct the actions of a special
representative (a "Special Representative") to enforce Citizens Capital's
rights under the Convertible Debentures, enforce the rights of the holders of
Partnership Preferred Securities under the Partnership Guarantee and enforce
the payments of distributions on the Partnership Preferred Securities. In
such event, the General Partner or (after the passing of a specified period
of time) the holders of 10% of the aggregate liquidation preference of the
Partnership Preferred Securities will be entitled to convene a meeting. Any
Special Representative so appointed shall vacate office immediately if Citizens
Capital (or Citizens pursuant to the Partnership Guarantee) shall have paid
in full all accrued or deferred and unpaid distributions on the Partnership
Preferred Securities or such Indenture Event of Default or default, as the
case may be, shall have been cured. Notwithstanding the appointment of any
such Special Representative, Citizens will retain all rights as obligor under
the Convertible Debentures, including the right to defer interest payments
as provided under "Convertible Debentures - Option to Defer Interest
Payments," and any such deferral will not constitute a default under the
52
Indenture or enable a holder of Partnership Preferred Securities to require
the payment of a distribution.
In the event that any quarterly distribution payment is deferred for
6 consecutive quarters, holders of a majority in aggregate liquidation
preference of the Partnership Preferred Securities will have the right to
appoint and direct the actions of a Special Representative, who will have
limited rights to act on behalf of the holders of the Partnership Preferred
Securities and, in effect, the Convertible Preferred Securities. Any Special
Representative so appointed shall have the authority to enforce the rights of
holders of Partnership Preferred Securities under the Convertible Debentures
and the Partnership Guarantee and declare and pay distributions on the
Partnership Preferred Securities.
If any proposed amendment to the Limited Partnership Agreement provides
for, or the General Partner otherwise proposes to effect, (x) any action that
would materially adversely affect the powers, preferences or rights of the
Partnership Preferred Securities, or (y) the liquidation, dissolution,
winding-up or termination of Citizens Capital (other than as described under
"- Merger, Consolidation or Sale of Assets of Citizens Capital"), then such
amendment or action shall require the approval of the holders of at least
66 2/3% or more of the aggregate liquidation preference of the Partnership
Preferred Securities; provided, however, that no such approval shall be
required if (i) the liquidation, dissolution, winding-up or termination of
Citizens Capital is proposed or initiated pursuant to the terms of the
Limited Partnership Agreement relating to dissolution (see "- Liquidation
Rights") or (ii) if Partnership Preferred Securities are distributed to the
holders of Convertible Preferred Securities in exchange for such Convertible
Preferred Securities in liquidation of the Trust.
So long as the Convertible Debentures are held by Citizens Capital, the
General Partner shall not (i) direct the time, method and place of conducting
any proceeding for any remedy available to the Special Representative, or
exercising any trust or power conferred on the Special Representative with
respect to the Convertible Debentures, (ii) waive any past default under the
Indenture, (iii) exercise any right to rescind a declaration that the
principal of all the Convertible Debentures shall be due and payable,
(iv) consent to any amendment, modification or termination of
the Convertible Debentures or of the Indenture without, in each case,
obtaining the prior approval of the holders of at least 66 2/3% or more of
the aggregate liquidation preference (or a majority of the aggregate
liquidation preference in the case of waiver of certain past defaults) of
the Partnership Preferred Securities; provided, however, that where a
consent under the Convertible Debentures would require the consent of each
holder affected thereby, no such consent shall be given by the General
Partner without the prior consent of each holder of the Partnership
Preferred Securities. The General Partner shall notify all holders of
Partnership Preferred Securities of any notice of default received from the
Debenture Trustee with respect to the Convertible Debentures.
Any required approval of holders of Partnership Preferred Securities may
be given at a meeting of such holders or pursuant to written consent.
53
Amendment to the Limited Partnership Agreement
Except as stated in "-Voting Rights" above, the Limited Partnership
Agreement may be amended by a written instrument executed by the General
Partner without the consent of any limited partner; provided, however, that
no amendment shall be made, and any such purported amendment shall be void
and ineffective, to the extent the result thereof would be to cause
Citizens Capital to be treated as anything other than a partnership for
purposes of United States income taxation or require Citizens Capital to
register under the 1940 Act. In the event of (i) a liquidation of the Trust
for any reason or (ii) any other distribution which effectively causes
Partnership Preferred Securities to be distributed to holders of Trust
Securities, the General Partner may, without the consent of the Limited
Partners, amend the Limited Partnership Agreement to provide for (i) orderly
dissemination, purchase, sale, exchange and replacement of such Partnership
Preferred Securities, (ii) all other matters to the extent required by or
desirable under then applicable law, and (iii) such other matters reasonably
incidental or related thereto; provided, however, that no such amendment may
materially adversely effect the rights, preferences and value of any class of
such Partnership Preferred Securities without the consent of a majority in
liquidation preference of the holders of the Partnership Preferred Securities so
effected.
Transfer Agent, Paying Agent, Registrar and Conversion Agent
While all of the Partnership Preferred Securities are held by the Trust, the
General Partner will act as Paying Agent, Registrar, Transfer Agent and
Conversion Agent for the Partnership Preferred Securities.
Registration of transfers of Partnership Preferred Securities will be
effected without charge by or on behalf of Citizens Capital, but upon payment
(with the giving of such indemnity as Citizens Capital may require) in
respect of any tax or other government charges which may be imposed in
relation to it.
GUARANTEES
The following is a description of the principal terms and provisions of the
Convertible Preferred Securities Guarantee and the Convertible Common
Securities Guarantee (collectively the "Trust Guarantees"), which will be
executed and delivered by Citizens for the benefit of the holders from time
to time of the Trust Securities, and the Partnership Guarantee (together
with the Trust Guarantees, the "Guarantees"), which will be executed and
delivered by Citizens for the benefit of the holders from time to time of
the Partnership Preferred Securities. The following description is qualified
in its entirety by reference to such agreements, copies of the forms of
which are filed as exhibits to the Registration Statement of which this
Prospectus is a part.
54
General
Each of the Partnership Guarantee and the Convertible Preferred Securities
Guarantee will be qualified as an indenture under the Trust Indenture Act.
Chemical Bank will act as indenture trustee under each such Guarantee (the
"Guarantee Trustee"). The terms of each such Guarantee will be those set
forth in such Guarantee and those made part of such Guarantee by the Trust
Indenture Act.
Pursuant to the Convertible Preferred Securities Guarantee, Citizens will
irrevocably agree, on a subordinated basis and to the extent set forth
therein, to pay in full to the holders of the Convertible Preferred
Securities, the Guarantee Payments (as defined below) as and when due.
The following payments, to the extent not paid by the Trust, are the
"Guarantee Payments": (a) any accrued or deferred and unpaid distributions
that are required to be paid on the Convertible Preferred Securities from
cash and/or Common Stock available therefor; (b) the Redemption Price payable
with respect to Convertible Preferred Securities called for redemption by the
Trust out of cash and/or Common Stock available therefor; and (c) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Partnership Preferred
Securities or Convertible Debentures to the holders of Convertible Preferred
Securities or the redemption of all of the Convertible Preferred Securities) the
lesser of (i) the Liquidation Distribution, to the extent that the Trust has
cash and/or Common Stock available therefor and (ii) the amount of assets
of the Trust available for distribution to holders of Convertible Preferred
Securities in liquidation of the Trust.
Pursuant to the Partnership Guarantee, Citizens will irrevocably agree,
on a subordinated basis and to the extent set forth therein, to pay in full
to the holders of the Partnership Preferred Securities, the Partnership
Guarantee Payments (as defined below) as and when due. The following
payments, to the extent not paid by Citizens Capital, are the "Partnership
Guarantee Payments": (a) any accrued or deferred and unpaid distributions
that are required to be paid on the Partnership Preferred Securities from
cash and/or Common Stock legally available therefor; (b) the Redemption
Price payable with respect to Partnership Preferred Securities called for
redemption by Citizens Capital out of cash and/or Common Stock legally
available therefor; and (c), upon a voluntary or involuntary dissolution,
winding-up or termination of Citizens Capital (other than in connection
with the distribution of Convertible Debentures to the holders of
Partnership Preferred Securities or the redemption of all of the Partnership
Preferred Securities), the lesser of (i) the Partnership Liquidation
Distribution, to the extent that Citizens Capital has cash and/or Common
Stock legally available therefor and (ii) the amount of assets of Citizens
Capital available for distribution to holders of Partnership Preferred
Securities in liquidation of Citizens Capital.
Citizens has also agreed in the Convertible Common Securities Guarantee to
irrevocably guarantee the obligations of the Trust with respect to the
Convertible Common Securities to the same extent as the Convertible
Preferred Securities Guarantee, except that, upon an Indenture Event of
Default, holders of Convertible Preferred Securities shall have priority
over holders of
55
Convertible Common Securities under the Convertible Common Securities
Guarantee with respect to distributions and payments on liquidation,
redemption or otherwise.
Citizens asserts that the Guarantees, when taken together with Citizen's
obligations under the Convertible Debentures, the Indenture, the Declaration
and the Limited Partnership Agreement, including its obligation to pay costs,
expenses and certain indemnities of the Trust ("back-up undertakings"),
constitute a full and unconditional guarantee of amounts due under the
Convertible Preferred Securities, the Partnership Preferred Securities and the
Convertible Common Securities.
Each Trust Guarantee, togther with the back-up undertakings, will be a full
and unconditional guarantee with respect to the Trust Securities issued by
the Trust but will not apply to any payment of distributions except to the
extent the Trust shall have cash and/or Common Stock available therefor.
The Partnership Guarantee, together with the back-up undertakings,
will be a full and unconditional guarantee with respect to the Partnership
Preferred Securities issued by Citizens Capital from the time of issuance of
such Partnership Preferred Securities but will not apply to any payment of
distributions except to the extent Citizens Capital shall have cash and/or
Common Stock legally available therefor. If Citizens fails to make interest
payments on the Convertible Debentures purchased by Citizens Capital,
Citizens Capital will have insufficient funds to pay distributions on the
Partnership Preferred Securities and the Trust will have insufficient funds
to pay distributions on the Convertible Preferred Securities. The
Guarantees do not cover payments of distributions when the Trust or Citizens
Capital do not have sufficient cash and/or Common Stock to pay such
distributions.
Holders of the Trust Securities and Partnership Preferred Securities may
proceed to enforce such obligations directly against Citizens as guarantor,
rather than having to proceed first against the Trust or Citizens Capital.
Such obligations will not be discharged except by payment of the Guarantee
Payments or Partnership Guarantee Payments, as the case may be, in full.
Certain Covenants of Citizens
In the Partnership Guarantee Citizens will covenant and agree that, so long
as any Partnership Preferred Securities are outstanding, and in the
Convertible Preferred Securities Guarantee Citizens will covenant and agree
that, so long as any Convertible Preferred Securities are outstanding, if
Citizens exercises its right to defer interest payments on the Convertible
Debentures or there shall have occurred any event that would constitute an
event of default under either such Guarantee, the Limited Partnership
Agreement or the Declaration, then (a) Citizens will not declare or pay any
dividend or distribution (other than in shares of its capital stock) on any
of Citizens' capital stock, (b) neither Citizens nor any of its subsidiaries
will redeem, purchase, acquire for value or make a liquidation payment to any
holder of, or with respect to, any of its capital stock or Other Subordinated
Indebtedness (with certain exceptions, see "Convertible Debentures - Certain
Covenants of Citizens"), (c) Citizens will not make any payment of principal,
premium or interest (unless payable in shares of capital stock) on Other
Subordinated Indebtedness, and (d) neither Citizens nor any of its
subsidiaries will make any
56
guarantee of payments which would be prohibited or limited by the foregoing
(other than payments under the Guarantees, payments of dividends by a
subsidiary, or guarantees of dividends or payments payable to Citizens).
As a part of the Guarantees, Citizens will agree that it will honor all
obligations described therein relating to the conversion of the Convertible
Preferred Securities and Partnership Preferred Securities into or for Common
Stock Series A, as described in "Convertible Preferred Securities -
Conversion Rights."
Subordination
Each Guarantee will constitute an unsecured obligation of Citizens and will
rank subordinate and subject in right of payment to the prior payment in full
in cash of all Senior Indebtedness of Citizens and will be subject to other
subordination provisions substantially identical to those relating to the
Convertible Debentures. See "Convertible Debentures - Subordination." The
terms of the Convertible Preferred Securities and the Partnership Preferred
Securities provide that each holder of Convertible Preferred Securities and
Partnership Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the applicable Guarantee. On the
bankruptcy, liquidation or winding-up of Citizens, its obligations under the
Guarantees will rank junior to all Senior Indebtedness and, therefore, funds
may not be available for payment under the Guarantees. As of September 30,
1995, Senior Indebtedness included (i) obligations in the amount of
$1,229,596,000 of the nature described in clauses (a) and (b) of the definition
of Senior Indebtedness, plus (ii) other obligations of Citizens of the nature
described in clauses (c) through (h) of the definition of Senior Indebtedness.
See "Convertible Debentures - Subordination."
Amendments and Assignment
Except with respect to any changes that do not adversely affect the rights
of holders of the securities guaranteed therein, the terms of each Guarantee
may be amended only with the prior approval of the holders of not less than
66 2/3% of the aggregate liquidation preference of the Convertible Preferred
Securities or Partnership Preferred Securities, as the case may be, then
outstanding. The manner of obtaining any such approval of holders of the
Convertible Preferred Securities and the Partnership Preferred Securities
will be as set forth in "Convertible Preferred Securities - Voting Rights"
and "Partnership Preferred Securities - Voting Rights." All provisions
contained in the Guarantees will bind the successors, assigns, receivers,
trustees and representatives of Citizens and will inure to the benefit of the
holders of the Convertible Preferred Securities or Partnership Preferred
Securities, as the case may be.
Termination
Citizens' obligation to make Guarantee Payments under the Convertible
Preferred Securities Guarantee will terminate as to each holder of
Convertible Preferred Securities and be of no further force and effect upon
(a) full payment of the Redemption Price of such holder's
57
Convertible Preferred Securities, (b) full payment of the amounts payable to
such holder upon liquidation of the Trust, (c) the distribution of Common
Stock Series A to such holder in respect of the conversion of all of such
holder's Convertible Preferred Securities into Common Stock Series A or (d)
distribution of the Partnership Preferred Securities or Convertible
Debentures to such holder in respect of the exchange for all of such holder's
Convertible Preferred Securities.
Citizens' obligation to make Partnership Guarantee Payments under the
Partnership Guarantee will terminate as to each holder of Partnership
Preferred Securities and be of no further force and effect upon (a) full
payment of the Partnership Redemption Price of such holder's Partnership
Preferred Securities, (b) full payment of the amounts payable to such holder
upon liquidation of Citizens Capital, (c) the distribution of Common Stock
Series A to such holder in respect of the conversion of all of such holder's
Partnership Preferred Securities into Common Stock Series A or (d)
distribution of the Convertible Debentures to such holder in respect of the
exchange for all of such holder's Partnership Preferred Securities.
Events of Default
An Event of Default under the Guarantees will occur upon the failure of
Citizens to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation amount of the Convertible
Preferred Securities and the holders of a majority in aggregate liquidation
amount of the Partnership Preferred Securities to which a Guarantee relates
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
respective Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce such Guarantee, any holder of
Convertible Preferred Securities or Partnership Preferred Securities relating
to such Guarantee may institute a legal proceeding directly against Citizens
to enforce the Guarantees Trustee's rights under such Guarantee, without
first instituting a legal proceeding against the Trust, Citizens Capital,
the Guarantee Trustee or any other person.
Citizens will be required to provide annually to the Guarantee Trustee an
officer's certificate as to the full compliance by Citizens with its
obligations under each of the Guarantees and as to any default in such
obligation.
CONVERTIBLE DEBENTURES
The following summary of principal terms and provisions of the Convertible
Debentures in which Citizens Capital will invest the proceeds of the issuance
and sale of the Trust Securities does not purport to be complete and is
qualified in its entirety by reference to the Indenture (the "Base
Indenture") between Citizens and Chemical Bank, as trustee (the "Debenture
Trustee"), supplemented by a First Supplemental Indenture (the Base
Indenture, as so supplemented, is
58
hereinafter referred to as the "Indenture") forms of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
Under certain circumstances involving the liquidation of the Trust
following the occurrence of a Trust Event and a Partnership Event,
Convertible Debentures may be distributed to the holders of the Trust
Securities. See discussion below and in "Convertible Preferred Securities -
Special Events Distribution."
General
The Convertible Debentures will be limited in aggregate principal amount
to approximately $184,000,000, such amount being the sum of (i) the
aggregate amount of the proceeds from the offering of the Convertible
Preferred Securities and the issuance and sale of the Convertible Common
Securities and (ii) the capital contributed to Citizens Capital by the
General Partner (the "General Partner Payment"), less 1% of such sum, which
amount may be increased to up to approximately $212,000,000 upon the exercise
of the Underwriters' over-allotment option.
The entire principal amount of the Convertible Debentures will become due
and payable, together with any accrued or deferred and unpaid interest
thereon on ___________, 2036. The Convertible Debentures are not entitled
to the benefit of any sinking fund.
The Convertible Debentures will be issued only in fully registered form,
without coupons, in denominations of $50 and any integral multiple thereof.
No service charge will be made for any registration of transfer or exchange
of Convertible Debentures, but Citizens may require payment of a sum
sufficient from the holders to cover any tax or other governmental charge
payable in connection therewith.
Optional Redemption
Citizens will have the right to redeem the Convertible Debentures, at its
option, in whole or in part, at any time on or after _________, 1999, at 100%
of the principal amount being redeemed, together with all accrued or deferred
and unpaid interest to the redemption date, plus Additional Interest, if any.
Citizens may also redeem the Convertible Debentures as described in the
following paragraph.
Special Events Distribution
As described elsewhere herein, the Convertible Debentures may be
distributed to holders upon the occurrence of certain Special Events or
a Rating Agency Event. For a fuller discussion of this feature, see
"Convertible Preferred Securities - Special Events Distribution." However,
if at the time there is available to Citizens, the Partnership or the Trust
the opportunity to eliminate the adverse effect of the Special Event on the
Trust, Citizens or the Partnership by taking some ministerial action, such as
filing a form or making an election or pursuing some other similar reasonable
measure, where the taking of such action does not involve a material
59
cost, Citizens may not liquidate the Partnership or the Trust without first
having pursued such ministerial action.
Interest
The Convertible Debentures will bear interest at the Rate. As described
elsewhere herein, interest may be payable in cash or securities. For a
fuller discussion of interest, see the descriptions under "Prospectus
Summary" and "Convertible Preferred Securities."
Option to Defer Interest Payments
As described in greater detail elsewhere herein, so long as no Indenture
Event of Default has occurred or is continuing, Citizens has the right to
elect to defer the date on which one or more of the quarterly interest
payments would otherwise become due and payable. Upon any such deferrals,
interest will compound on each scheduled Interest Payment Date and accrued
until paid at the Rate on any unpaid interest so deferred until the amount
of such deferred interest (including compounded interest thereon) is paid in
full. See "Convertible Preferred Securities - Distributions" for a complete
discussion of the terms and conditions governing such deferrals.
Additional Interest
Citizens is required to pay either (i) directly to such taxing authority,
(ii) to the Trust or Citizens Capital, as the case may be, or (iii) as
Additional Interest on the Convertible Debentures, any taxes, duties,
assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States or any other domestic taxing
authority upon either the Trust or Citizens Capital. To the extent that such
payments give rise to additional taxes of Citizens Capital or the Trust, the
Company shall also make payment for such additional taxes of Citizens Capital
or the Trust. Citizens shall be required to pay Additional Interest or make
such other payments in an amount and at such time so that the net amounts
received as interest or distribution payments by the Trust or Citizens
Capital, and distributable to the Trust and the holders of the Convertible
Preferred Securities, respectively, after all such taxes, duties, assessments
or governmental charges have been paid will not be less than the amount that
would have been received and distributed by such entities, and the amount the
holders of the Convertible Preferred Securities would have received, had no
such taxes, duties, assessments or governmental charges been imposed. If
such taxes or duties are paid to the Trust or Citizens Capital or as
Additional Interest on the Convertible Debentures, then the Trust or Citizens
Capital, as the case may be, is required to pay such amounts over to such
taxing authority in satisfaction of such charges or assessments.
Subordination
The Indenture provides that the Convertible Debentures are subordinate and
subject in right of payment to the prior payment in full in cash of all
Senior Indebtedness (as defined below) of Citizens.
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Upon any payment or distribution of assets of the Company to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshalling of assets or liabilities or any bankruptcy,
insolvency or similar proceedings of the Company, the holders of Senior
Indebtedness will be entitled to receive payment in full in cash of all
amounts due on or to become due on or in respect of all Senior Indebtedness,
before the holders of the Convertible Debentures are entitled to receive any
payment (including any payment to holders of the Convertible Debentures made
in respect of any other debt subordinated to the Convertible Debentures) on
account of the principal of or interest on the Convertible Debentures or on
account of any purchase, redemption or other acquisition of the Convertible
Debentures by the Company.
The Company may not make any payments on the account of the Convertible
Debentures or on account of the purchase or redemption or other acquisition
of the Convertible Debentures (except, so long as the Partnership exists, in
shares of capital stock), if there has occurred and is continuing a default
in the payment of the principal of (or premium, if any) or interest on any
Senior Indebtedness (a "Senior Payment Default"). In addition, if any
default (other than a Senior Payment Default), or any event which after
notice or lapse of time (or both) would become a default, with respect to
certain Senior Indebtedness, permitting (after notice or lapse of time or
both) the holders thereof to accelerate the maturity thereof, has occurred
and is continuing (a "Senior Nonmonetary Default"), and the Company and the
Debenture Trustee have received written notice thereof from the holder of
such certain Senior Indebtedness, then the Company may not make any payments
with respect to the Convertible Debentures (except, so long as the
Partnership exists, payments in shares of capital stock), for a period (a
"blockage period") commencing on the date the Company and the Debenture
Trustee receive such written notice and ending on the earlier of
(i) 179 days after such date or (ii) the date, if any, on which the related
Senior Indebtedness is discharged or such default is waived in writing
or otherwise ceases to exist and any acceleration of Senior Indebtedness to
which such Senior Nonmonetary Default relates is rescinded.
In any event, not more than one blockage period may be commenced during any
period of 360 consecutive days, and there must be a period of at least 181
consecutive days in each period of 360 consecutive days when no blockage
period is in effect.
By reason of such subordination, in the event of any proceeding of the type
described above involving Citizens, creditors of Citizens who are holders of
Senior Indebtedness and general unsecured creditors of Citizens may recover
more, ratably, than the holder or holders of the Convertible Debentures.
The term "Senior Indebtedness" is defined to mean the principal of,
premium, if any, interest on, and any other payment due pursuant to any of
the following, whether incurred (as defined in the Indenture) on or prior to
the date of execution of the Indenture or thereafter incurred:
(a) all obligations of Citizens for money borrowed;
61
(b) all obligations of Citizens evidenced by notes, debentures,
bonds or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses;
(c) all capitalized lease obligations of Citizens;
(d) all reimbursement obligations of Citizens with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of Citizens;
(e) all obligations of Citizens issued or assumed as the
deferred purchase price of property or services, (but excluding trade
accounts payable and accrued liabilities arising in the ordinary course of
business);
(f) all payment obligations of Citizens under interest rate swap
or similar agreements or foreign currency hedge, exchange or similar agreements
at the time of determination, including any such obligations incurred by
Citizens solely to act as a hedge against increases in interest rates that
may occur under the terms of other outstanding variable or floating rate
indebtedness of Citizens;
(g) all obligations under lease transactions pursuant to which
Citizens or any of its subsidiaries are treated as the owner of the subject
property for United States federal income tax purposes;
(h) all obligations of the type referred to in clauses (a)
through (g) above of another person and all dividends of another person, the
payment of which, in either case, Citizens has assumed or guaranteed, or for
which Citizens is responsible or liable, directly or indirectly, jointly or
severally, as obligor, guarantor or otherwise; and
(i) all amendments, modifications, renewals, extensions,
refinancings, replacements and refundings by Citizens of any such
indebtedness referred to in clauses (a) through (h) above (and of any such
amended, modified, renewed, extended, refinanced, refunded or replaced
indebtedness);
provided, however, that the following shall not constitute Senior
Indebtedness; (a) any trade accounts payable or accrued liabilities arising
in the ordinary course of business, (b) any indebtedness owed to a person
when such person is a subsidiary of Citizens, or (c) any indebtedness which
by the terms of the instrument creating or evidencing the same expressly
provides that it is not superior in right of payment to the Convertible
Debentures.
As of September 30, 1995, Senior Indebtedness included (i) obligations in
the amount of $1,229,596,000 of the nature described in clauses (a) and (b) of
the above definition of Senior Indebtedness, plus (ii) other obligations
of Citizens of the nautre described in clauses (c) through (h) of the above
definition of Senior Indebtedness. See "Convertible Debentures -
Subordination." The Indenture does not limit Citizens' ability to incur
Senior Indebtedness.
62
Certain Covenants of Citizens
Citizens will also covenant in the Indenture that (i) it will not declare
or pay any dividend or distribution (other than in shares of capital stock)
on any of the Company's capital stock, (ii) that neither it nor any of its
subsidiaries will redeem, purchase, acquire for value or make a liquidation
payment to any holder of, or with respect to, any of Citizens' capital stock
or any of Citizens' indebtedness for borrowed money which by its terms ranks
junior in subordination to the Convertible Debentures ("Other Subordinated
Indebtedness") (other than (x) as an issuance of capital stock upon
conversion of a convertible security or in payment of interest, premium or
principal or in payment in redemption, purchase or other acquisition or
liquidation of capital stock or Other Subordinated Indebtedness, (y) as a
result of reclassification of such capital stock or the exchange or
conversion of one class or series of capital stock for another class or
series of capital stock, or (z) in connection with the right of the Company
to purchase or reacquire shares of Common Stock under the First Supplemental
Indenture, the Declaration or the Limited Partnership Agreement), (iii) that
Citizens will not pay principal, interest or premium on Other Subordinated
Indebtedness (unless payable in shares of capital stock) and (iv) that
neither Citizens nor any of its subsidiaries will or make any guarantee of
payments which would be prohibited or limited by the foregoing (other than
payments under the Guarantees, payments of dividends by a subsidiary, or
guarantees of dividends or payments payable to Citizens), if at
such time (a) there shall have occurred any event that, with the giving of
notice or the lapse of time or both would constitute an Indenture Event of
Default, (b) Citizens shall be in default with respect to its payment or
other obligations under the Guarantees or (c) Citizens shall have deferred
the payment of interest and such deferral of interest payments or any
extension thereof shall be continuing. The term "Other Subordinated
Indebtedness" shall not include any indebtedness which is outstanding under
an instrument dated prior to the date of the Indenture which does not
expressly permit the deferral of payment or extension of the time for payment
of interest, premium or principal, or any installment thereof.
The Company also will covenant (i) to remain the General Partner of the
Partnership; provided that any permitted successor of the Company under the
Limited Partnership Agreement may succeed to the Company's duties as General
Partner, (ii) to cause at least 3% of the total value of the Partnership and
at least 3% of all interests in the capital, income, gain, loss, deduction
and credit of the Partnership to be held by the Company, as a General Partner
of the Partnership, (iii) not to voluntarily dissolve, wind-up or liquidate
the Partnership, (iv) to perform timely all of its duties as General Partner
(including the duty to declare and pay distributions on the Partnership
Preferred Securities), (v) to maintain direct ownership of all partnership
interests of the Partnership other than the Partnership Preferred Securities,
except as may be permitted by the Limited Partnership Agreement, (vi) to use
its reasonable efforts to cause the Partnership to remain a limited
partnership and otherwise to continue to be treated as a partnership for
United States federal income tax purposes; (vii) to issue Common Stock Series
A upon an election by holders to convert the Convertible Debentures; and
(viii) to own Convertible Common Securities equal to at least 3% of the total
undivided beneficial interests in the assets of the Trust.
63
The Company will also covenant that, so long as any Convertible Debentures
are held by the Partnership, the General Partner shall not (i) exercise its
option to select the form of payment of interest in violation of instructions
of the Special Representative, (ii) direct the time, method and place of
conducting any proceeding for any remedy available to the Special
Representative, or exercising any trust or power conferred on the Special
Representative with respect to the Convertible Debentures, (iii) waive any
past default which is waivable under the Indenture, (iv) exercise any right
to rescind or annul a declaration that the principal of all the Convertible
Debentures shall be due and payable or (v) consent to any amendment,
modification or termination of the Convertible Debentures or of the Indenture
without, in each case, obtaining the prior approval of the Property Trustee
after having received the prior consent of the holders of at least 66 2/3% or
more of the aggregate liquidation preference (or a majortiy of the aggregate
liquidation preference in the case of waiver of certain past defaults) of the
Convertible Preferred Securities then outstanding, provided, however, that
where a consent under the Convertible Debentures would require the consent
of each holder affected thereby, no such consent shall be given by the
General Partner without the prior consent of such Property Trustee, who has
received prior consent from each holder of the Convertible Preferred
Securities. The General Partner shall not revoke any action previously
authorized or approved by a vote of the Property Trustee after having
received the prior consent of the holders of the Convertible Preferred
Securities, without the approval of the holders of Convertible Preferred
Securities representing 66 2/3% or more (or 100% where the consent of each
holder affected thereby is required) of the aggregate liquidation preference
of the Convertible Preferred Securities.
The Company will further covenant that in the event of a merger,
consolidation or transfer of assets of the Company with or to another
corporation or entity, in which the Company is not the surviving corporation,
the surviving entity shall assume the obligations of the Company for the
Debentures under the Indenture by execution of a supplemental indenture.
Conversion of the Convertible Debentures
The Convertible Debentures will be convertible into Common Stock Series A
at the option of the holders of the Convertible Debentures, in whole or in
part, until and including five (5) Business Days prior to __________, 2036,
at a conversion price of $________ per share of Common Stock Series A for
each Convertible Debenture, subject to the conversion price adjustments
described under "Convertible Preferred Securities - Conversion Rights." If
Convertible Debentures are called for redemption, the conversion right will
terminate five (5) Business Days prior to the redemption date.
In order to exercise the conversion privilege, the holder of any
Convertible Debenture to be converted shall surrender such Debenture to the
Conversion Agent with a written Notice of Conversion. Upon a delivery of the
Convertible Preferred Securities and Notice of Conversion to the Conversion
Agent, the Conversion Agent will convert such Convertible Debentures to
Common Stock Series A on behalf of such holder.
Citizens' delivery to the holders of the Convertible Debentures (through
the Conversion
64
Agent) of the fixed number of shares of Common Stock Series A into which the
Convertible Debentures are convertible (together with the cash payment, if
any, in lieu of fractional shares) will be deemed to satisfy Citizens'
obligation to pay the principal amount of the Convertible Debentures and any
accrued and unpaid interest attributable to the period from the last date to
which interest has been paid or duly provided for. See "Convertible
Preferred Securities - Conversion Rights."
Indenture Events of Default
If one or more of the following events (each an "Indenture Event of
Default") shall occur and be continuing:
(a) failure to pay any principal of the Convertible Debentures when due,
and such failure continues for a period of 15 days;
(b) failure to pay any interest, other than Additional Interest (if any),
on the Convertible Debentures when due and such failure continues for a
period of 60 days; provided that a valid deferral of an interest payment by
Citizens shall not constitute a default;
(c) failure by Citizens to deliver shares of Common Stock Series A upon an
election to convert Convertible Debentures for Common Stock Series A, and
such failure continues for a period of five days;
(d) failure by Citizens to perform in any material respect any other
covenant in the Indenture for the benefit of the holders of Convertible
Debentures continued for a period of 90 days after written notice to Citizens
from the Debenture Trustee or the holders of a majority in principal or
liquidation amount of Convertible Debentures, Partnership Preferred
Securities or Convertible Preferred Securities;
(e) the dissolution, winding-up, liquidation or termination of Citizens
Capital (except as a result of a Special Event or Rating Agency Event, as
permitted in the Limited Partnership Agreement);
(f) the dissolution, winding-up, liquidation or termination of the Trust
(except as a result of a Special Event or Rating Agency Event, as permitted
in the Declaration); or
(g) certain events of bankruptcy, insolvency or liquidation of Citizens,
Citizens Capital or the Trust;
then either the Debenture Trustee or the holders of a majority in aggregate
principal amount of the Convertible Debentures then outstanding will have the
right to declare the principal of and the interest on the Convertible
Debentures and any other amount payable under the Convertible Debentures to
be forthwith due and payable and to enforce the holders' other rights as
creditors
65
with respect to the Convertible Debentures; provided, however,
that if upon an Indenture Event of Default, the Debenture Trustee or the
holders of a majority in aggregate principal amount of the Convertible
Debentures then outstanding fail to declare the payment of all amounts on
the Convertible Debentures to be immediately due and payable, the trustee
for the holders of a majority in aggregate liquidation preference of
Convertible Preferred Securities then outstanding shall have such right;
provided further, however, that after such acceleration, but before a
judgment or decree based on acceleration, the holders of a majority in
aggregate principal amount of outstanding Convertible Debentures, or the
holders of the Convertible Preferred Securities if they accelerated such
payment, may, under certain circumstances, rescind and annul such
acceleration if all Indenture Events of Default, other than the non-payment
of accelerated principal, have been cured or waived as provided in the
Indenture. For information as to waiver of defaults, see "- Modification of
the Indenture." Citizens Capital is the initial holder of the Convertible
Debentures. However, while the Convertible Preferred Securities are
outstanding, the General Partner of Citizens Capital has agreed not to waive
an Indenture Event of Default without the consent of holders of 66 2/3% in
aggregate liquidation preference of the Convertible Preferred Securities
then outstanding. Additionally, under the terms of the Partnership
Preferred Securities, the holders of outstanding Partnership Preferred
Securities will have the rights described above under "Partnership Preferred
Securities - Voting Rights," including the right to appoint a Special
Representative, which shall be authorized to exercise the right of Citizens
Capital, as the holder of Convertible Debentures, to accelerate the principal
amount of the Convertible Debentures and accrued interest thereon and to
enforce the other rights of holders of the Convertible Debentures as
creditors under the Convertible Debentures. A default under any other
indebtedness of Citizens would not constitute an Indenture Event of Default
under the Convertible Debentures.
Subject to the provision of the Indenture relating to the duties of the
Debenture Trustee in case an Indenture Event of Default shall occur and be
continuing, the Debenture Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request or direction of
any holders of Convertible Debentures, unless such holders shall have offered
to the Debenture Trustee reasonable indemnity. Subject to such provisions
for the indemnification of the Debenture Trustee, the holders of a majority
in aggregate principal amount of the Convertible Debentures then outstanding
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee or exercising
any trust or power conferred on the Debenture Trustee.
No holder of any Convertible Debenture will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such holder shall have previously given to the Debenture Trustee written
notice of a continuing Indenture Event of Default and, unless the holders of
a majority in aggregate principal amount of the Convertible Debentures then
outstanding also shall have made written request, and offered reasonable
indemnity, to the Debenture Trustee to institute such proceeding as trustee,
and the Debenture Trustee shall not have received from the holders of 66 2/3%
in aggregate principal amount of the outstanding Convertible Debentures a
direction inconsistent with such request and shall have failed to institute
such proceeding within 90 days.
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Citizens will be required to furnish to the Debenture Trustee annually a
statement as to the performance by Citizens of certain of its obligations
under the Indenture and as to any default of such performance.
Modification of the Indenture
The Indenture may be amended by Citizens and the Debenture Trustee with the
consent of the holders of not less than 66 2/3% in aggregate principal amount
of the outstanding Convertible Debentures; provided, that no such
modification or amendment may, without the consent of the holder of each
outstanding Convertible Debenture affected thereby, (a) change the Maturity
of the principal of, or any installment of interest on, any Convertible
Debenture, (b) reduce the principal amount of, or interest on, any
Convertible Debenture, (c) change the premium payable upon redemption of any
Convertible Debenture, (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any Convertible Debenture,
(e) adversely affect the right to convert or exchange Convertible Debentures,
(f) modify the subordination provision in a manner adverse to the holders of
the Convertible Debentures, (g) reduce the above-stated percentage of
outstanding Convertible Debentures necessary to modify or amend the Indenture
or (h) reduce the percentage of aggregate principal amount of outstanding
Convertible Debentures necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults; and provided
further, that so long as any of the Convertible Preferred Securities or
Partnership Preferred Securities remain outstanding, no such amendment may
be made that adversely affects the holders of Convertible Preferred
Securities or Partnership Preferred Securities, and no termination of the
Indenture may occur, and no Indenture Event of Default or compliance with any
covenant under the Indenture may be waived by the holders of the Convertible
Debentures, without the prior consent of at least 66 2/3% of the aggregate
liquidation preference (or a majority of the aggregate liquidation preference
in the case of waiver of certain past defaults) of the Convertible Preferred
Securities or Partnership Preferred Securities then outstanding unless and
until the Convertible Debentures and all accrued or deferred and unpaid
interest thereon have been paid in full.
Governing Law
The Indenture and the Convertible Debentures will be governed by, and
construed in accordance with, the laws of the State of New York.
Information Concerning the Debenture Trustee
The Indenture contains certain limitations on the right of the Debenture
Trustee should it become a creditor of Citizens, to obtain payment of claims
in certain cases, or to realize for its own account on certain property
received in respect of any such claim as security or otherwise. The
Debenture Trustee will be permitted to engage in certain other transactions;
however, if it acquires any conflicting interest and there is a default under
the Convertible Debentures, it must eliminate such conflict or resign.
67
Citizens has agreed in the Indenture to indemnify and hold harmless the
Debenture Trustee against any losses or damages it may suffer as Debenture
Trustee.
Chemical Bank, the Debenture Trustee under the Indenture, has from time to
time engaged in transactions with, or performed services for, Citizens in the
ordinary course of business. Chemical is the trustee under an indenture
dated August 15, 1991, as supplemented, pursuant to which $700 million of
principal amount of debentures are outstanding thereunder. Chemical is also
a participant lender under the Company's $600 million of committed bank lines
of credit for general corporate purposes. As of December 20, 1995, no
amounts were outstanding under such bank lines of credit.
Miscellaneous
The Indenture will provide that Citizens will pay all fees and expenses
related to (i) the issuance and sale of the Trust Securities, the Partnership
Securities and the Convertible Debentures, (ii) the organization, maintenance
and dissolution of Citizens Capital and the Trust, and other costs and
expenses of Citizens Capital and the Trust, (iii) the retention of the
Regular Trustees, (iv) the enforcement by the Property Trustee of the rights
of the holders of the Convertible Preferred Securities and (v) the extent
contemplated by the Indenture, the taxes of the Partnership and the Trust and
all liabilities, costs and expenses with respect to such taxes of the
Partnership and the Trust either by payment of Additional Interest or by
otherwise making funds available to the appropriate taxing authority or to
the Partnership or the Trust. The payment of such fees and expenses will be
fully and unconditionally guaranteed by Citizens.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
General
In the opinion of Skadden, Arps, Slate, Meagher & Flom, special tax
counsel to the Company, the Trust and Citizens Capital, the following are
the material United States federal income tax consequences of the issuance,
ownership and disposition of Convertible Preferred Securities. Unless
otherwise stated, this summary deals only with Convertible Preferred
Securities held as capital assets by holders who purchase the Convertible
Preferred Securities upon original issuance. The tax treatment of a holder
may vary depending on its particular situation. This summary does not address
all the tax consequences that may be relevant to holders who may be subject to
special tax treatment such as, for example, banks, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, or except as specifically
described herein, foreign taxpayers. This summary does not include any
description of any alternative minimum tax consequences or the tax laws of any
state or local government or of any foreign government that may be applicable
to the Convertible Preferred Securities. This summary is based on the Code,
Treasury regulations thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis.
68
Proposals Would Not Affect Tax Treatment
On December 7, 1995, the Treasury Department proposed legislation referred to
herein as the "Proposals" that, if enacted, would require certain debt
instruments that are not reflected as debt on the issuer's consolidated balance
sheet, such as the Convertible Debentures, to be characterized as equity of the
issuer for United States federal income tax purposes. On December 19, 1995, the
Treasury Department announced proposals regarding transitional relief from the
Proposals, stating that instruments will not be subject to the Proposals if
issued pursuant to a registration statement filed with the SEC on or before
December 7, 1995, to the extent of the aggregate amount of such instruments
described in the registration statement. The proposals for transitional relief
would exempt the Convertible Debentures from recharacterization under the
Proposals. Accordingly, even if the Proposals are enacted, they should not
affect the United States federal income tax treatment of the Convertible
Debentures, the Convertible Preferred Securities or the Partnership Preferred
Securities.
Classification of the Convertible Debentures
In connection with the issuance of the Convertible Debentures, Skadden,
Arps, Slate, Meagher & Flom, special tax counsel to Citizens, Citizens
Capital and the Trust, has rendered its opinion generally to the effect that,
under then current law and assuming full compliance with the terms of the
Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Convertible Debentures will be
classified for United States federal income tax purposes as indebtedness of
Citizens.
Classification of Citizens Capital
In connection with the issuance of the Partnerhsip Preferred Securities,
Skadden, Arps, Slate, Meagher & Flom, special tax counsel to Citizens,
Citizens Capital and the Trust, has rendered its opinion generally to the
effect that, under then current law and assuming full compliance with the
terms of the Limited Partnership Agreement and the Indenture (and certain
other documents), and based on certain facts and assumptions contained in such
opinion, Citizens Capital will be classified for United States federal income
tax purposes as a partnership and not as an association taxable as a corpora-
tion.
Classification of the Trust
In connection with the issuance of the Convertible Preferred Securities,
Skadden, Arps, Slate, Meagher & Flom, special tax counsel to Citizens,
Citizens Capital and the Trust, has rendered its opinion generally to the
effect that, under then current law and assuming full compliance with the
terms of the Declaration and the Indenture (and certain other documents), and
based on certain facts and assumptions contained in such opinion, the Trust
will be classified for United States federal income tax purposes as a grantor
trust and not as an association taxable as a corporation. Accordingly, for
United States federal income tax purposes, each holder of Convertible
Preferred Securities will generally be considered the owner of an undivided
interest in the Limited Partnership Securities held by the Trust, and each
holder will be required to include in its gross income its distributive share
of the net income of Citizens Capital, which net income generally will be
equal to the amount of OID accrued with respect to the allocable share
69
of the Convertible Debentures represented by its undivided interest in the
Limited Partnership Securities.
Potential Deferral of Interest Payments and Original Issue Discount
Because Citizens has the option, under the terms of the Convertible
Debentures, to defer payments of interest for up to 20 quarters, all of the
stated interest payments on the Convertible Debentures (whether made in cash
or Common Stock) will be treated as "original issue discount". Holders of
debt instruments issued with OID must include that discount in income on an
economic accrual basis without regard to the receipt of cash or Common Stock
attributable to the interest, regardless of their method of tax accounting.
The OID accrual rules may also accelerate the timing of a holder's
recognition of income in certain situations. Actual payments
and distributions of stated interest (whether made in cash or Common Stock)
will not, however, be separately reported as taxable income. The amount of
OID that accrues in any quarter and is allocated to the holders of the Trust
Securities will approximately equal the amount of the interest that accrues
on the Convertible Debentures in that quarter at the stated interest rate.
Accordingly, unless Citizens exercises its option to defer interest payments
on the Convertible Debentures, a holder of Convertible Preferred Securities
(whether it makes a Cash Distribution Election or Stock Distribution
Election) should have the same adjusted tax basis in its Convertible
Preferred Securities at the beginning of each quarterly interest payment
period.
In the event that the interest payments on the Convertible Debentures are
deferred, holders will continue to accrue OID with respect to their Convert-
ible Preferred Securities on an economic accrual basis. During such period,
OID will accrue at the stated interest rate on both the principal amount of
the Convertible Debentures, and any accrued, but unpaid, interest.
Because income on the Convertible Preferred Securities will constitute
interest (in the form of OID), corporate holders of Convertible Preferred
Securities will not be entitled to a dividends-received deduction with
respect to any income recognized with respect to the Convertible Preferred
Securities.
Holders Making a Stock Distribution Election
A holder that makes a Stock Distribution Election will recognize the same
amount of OID with respect to its Convertible Preferred Securities as a
holder who makes a Cash Distribution Election. In addition, a holder that
makes a Stock Distribution Election will not recognize any gain or loss on
the receipt of the Common Stock from the Trust even though the fair market
value of the Common Stock on the interest payment date may be greater or
lesser than the cash equivalent amount of the interest payment. Furthermore,
a holder will not recognize any additional income or loss with respect to
cash it may receive in lieu of a fractional share of Common Stock.
A holder's tax basis in the Common Stock it receives in lieu of a cash
interest payment generally will equal Citizens Capital's tax basis in such
Common Stock. Citizens Capital's tax
70
basis in the Common Stock it receives as interest on the Convertible Debentures
should equal the fair market value of the Common Stock on the Share Transfer and
Valuation Date. It is anticipated that the fair market value of the Common
Stock on the Share Transfer and Valuation Date will equal the cash equivalent
amount of such interest payment. Accordingly, a holder who makes a Stock
Distribution Election generally should have a tax basis in the shares of
Common Stock it receives in lieu of a cash interest payment equal to the
cash equivalent amount of such interest payment (less any cash received in
lieu of a fractional share of Common Stock).
In light of the fact that the value of a share of Common Stock can be
expected to vary among interest payment dates, holders who make Stock
Distribution Elections may have different tax bases in shares of Common Stock
they receive on different payment dates. Holders should consult their tax
advisors regarding the tax consequences of the ownership and disposition of
shares of Common Stock with different tax bases.
A holder's tax basis in its Convertible Preferred Securities will be (i)
increased by the amount of OID accrued with respect to its Convertible
Preferred Securities and (ii) reduced by the tax basis of the Common Stock
(and the amount of cash received in lieu of fractional shares of Common
Stock) received as interest with respect to its Convertible Preferred
Securities. It is expected that the amount of OID accrued with respect to
a quarterly interest payment period will approximately equal the tax basis
of the Common Stock (and the amount of cash received in lieu of fractional
shares of Common Stock) received as interest with respect to such interest
payment period.
Receipt of Partnership Preferred Securities, Convertible Debentures or Cash
Upon Liquidation of Citizens Capital and the Trust.
Under certain circumstances, as described under the caption "Convertible
Preferred Securities - Special Events Distribution", Convertible Debentures
may be distributed to holders in exchange for their Convertible Preferred
Securities and in liquidation of Citizens Capital and the Trust. Under
current law, such a distribution to holders, for United States federal
income tax purposes, would be treated as a nontaxable event to each holder,
and each holder would receive an aggregate tax basis in the Convertible
Debentures equal to such holder's aggregate tax basis in its Convertible
Preferred Securities. A holder's holding period in the Convertible
Debentures so received in liquidation of Citizens Capital and the Trust would
include the period during which the Convertible Preferred Securities were
held by such holder. If, however, the related Special Event is a Partnership
Tax Event or a Trust Tax Event which results in Citizens Capital or the Trust,
respectively, being treated as an association taxable as a corporation, the
distribution of the Convertible Debentures would likely constitute a taxable
event to holders of the Convertible Preferred Securities.
Under certain circumstances, as described under the caption "Convertible
Preferred Securities - Special Events Distribution", Limited Partnership
Securities may be distributed to holders in exchange for their Convertible
Preferred Securities and in liquidation of the Trust. Under current law,
such a distribution to holders, for United States federal income tax purposes,
71
would be treated as a nontaxable event to each holder, and each holder would
receive an aggregate tax basis in its Limited Partnership Securities equal to
such holder's aggregate tax basis in its Convertible Preferred Securities
exchanged therefor. A holder's holding period in the Limited Partnership
Securities so received in liquidation of the Trust would include the period
during which the Convertible Preferred Securities were held by such holder.
If, however, the related Special Event resulting in the liquidation of the
Trust is a Trust Tax Event which results in the Trust being treated as an
association taxable as a corporation, the distribution would likely
constitute a taxable event to the holders of the Convertible Preferred
Securities.
Under certain circumstances, as described under the caption "Convertible
Preferred Securities - Optional Redemption" and " - Redemption Upon Maturity
or Upon Acceleration," the Convertible Debentures may be redeemed by Citizens
for cash and the proceeds of such redemption distributed by Citizens Capital to
the Trust in redemption of the Limited Partnership Securities which, in turn,
will distribute such proceeds to holders in redemption of their Convertible
Preferred Securities. Under current law, such a redemption would, for United
States federal income tax purposes, constitute a taxable disposition of the
Convertible Preferred Securities, and a holder would recognize gain or loss
as if it sold such redeemed Convertible Preferred Securities for an amount of
cash equal to the proceeds received upon redemption. See "Convertible
Preferred Securities."
Disposition of Convertible Preferred Securities
A holder that sells Convertible Preferred Securities will recognize gain
or loss equal to the difference between the amount realized on the sale of
the Convertible Preferred Securities and the holder's adjusted tax basis in
such Convertible Preferred Securities. Such gain or loss will be a capital
gain or loss and will be a long-term capital gain or loss if the Convertible
Preferred Securities have been held for more than one year at the time of
sale.
A holder's tax basis in its Convertible Preferred Securities will be (i)
increased by the amount of OID accrued with respect to its Convertible
Preferred Securities and (ii) reduced by (x) the amount of cash and (y) the
tax basis of any shares of Common Stock received with respect to its
Convertible Preferred Securities. It is expected that the amount of OID
accrued with respect to a quarterly interest payment period will
approximately equal the amount of cash and the tax basis of the Common Stock,
if any, received as interest with respect to such interest payment period.
The Convertible Preferred Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid distributions and interest
with respect to the underlying Limited Partnership Securities and Convertible
Debentures, respectively. A holder who disposes of or converts its
Convertible Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest
on the Convertible Debentures through the date of disposition in income as
ordinary income, and to add such amount to the adjusted tax basis in its
Convertible Preferred Securities. To the extent the selling price is less
than the holder's adjusted tax basis (which basis will include, in the form
of OID, all accrued
72
but unpaid interest), a holder will recognize a capital loss. Subject to
certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
Exchange of Convertible Preferred Securities for Common Stock
A holder of Convertible Preferred Securities will not recognize income,
gain or loss upon the conversion, through the Conversion Agent, of
Convertible Preferred Securities into Common Stock in the manner described
under the caption "Convertible Preferred Securities - Conversion Rights."
A holder of Convertible Preferred Securities will, however, recognize gain
upon the receipt of cash in lieu of a fractional share of Common Stock equal
to the amount of cash received less the holder's tax basis in such fractional
share. A holder's tax basis in the Common Stock received upon the exchange
and conversion of its Convertible Preferred Securities should generally be
equal to the holder's adjusted tax basis in the Convertible Preferred
Securities delivered to the Conversion Agent for exchange less the basis
allocated to any fractional share for which cash is received. A holder's
holding period in the Common Stock received upon exchange and conversion of
its Convertible Preferred Securities should generally begin on the date such
holder acquired the Convertible Preferred Securities delivered to the
Conversion Agent for exchange.
Adjustment of Conversion Price
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Convertible Preferred Securities as having received a constructive
distribution from Citizens in the event the conversion price of the
Convertible Debentures were adjusted if (i) as a result of such adjustment,
the proportionate interest (measured by the quantum of Citizens Common Stock
into or for which the Convertible Debentures are convertible or exchangeable)
of the holders of the Preferred Securities in the assets or earnings and
profits of Citizens were increased, and (ii) the adjustment was not made
pursuant to a bona fide, reasonable antidilution formula. An adjustment in
the conversion price would not be considered made pursuant to such a formula
if the adjustment was made to compensate for certain taxable distributions
with respect to the Common Stock. Thus, under certain circumstances, a
reduction in the conversion price for the holders may result in deemed
dividend income to holders to the extent of the current or accumulated
earnings and profits of Citizens. Holders of the Convertible Preferred
Securities would be required to include their allocable share of such deemed
dividend income in gross income but will not receive any cash related
thereto. An adjustment in the conversion price made to account for
nontaxable distributions of Common Stock made with respect to Common Stock
will generally not cause holders of Convertible Preferred Securities to
realize a constructive dividend from Citizens. In addition, the failure to
fully adjust the conversion price of the Convertible Debentures to reflect
distributions of stock dividends with respect to the Common Stock may result
in a taxable dividend to the holders of the Common Stock.
73
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the
United States, a foreign corporation, a non-resident alien individual, a
foreign partnership, or a nonresident fiduciary of a foreign estate or trust.
Under present United States federal income tax law, (i) payments by the
Trust or any of its paying agents (whether in the form of cash or Common
Stock) to any holder of a Convertible Preferred Security who or which is a
United States Alien Holder will not be subject to withholding of United
States federal income tax; provided that, (a) the beneficial owner of the
Convertible Preferred Security does not actually or constructively (including
by virtue of its interest in the underlying Convertible Debentures) own 10%
or more of the total combined voting power of all classes of stock of
Citizens entitled to vote, (b) the beneficial owner of the
Convertible Preferred Security is not a controlled foreign corporation that
is related to Citizens through stock ownership, and (c) either (A) the
beneficial owner of the Convertible Preferred Security certifies to the
Trust or its agent, under penalties of perjury, that it is not a United
States holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Convertible Preferred Security in such capacity,
that certifies to the Trust or its agent, under penalties of perjury, that
such statement has been received from the beneficial owner by it or by a
Financial Institution between it and the beneficial owner and furnishes the
Trust or its agent with a copy thereof; and (ii) a United States Alien Holder
of a Convertible Preferred Security will not be subject to withholding of
United States federal income tax on any gain realized upon the sale or other
disposition of a Convertible Preferred Security, unless, in the case of a
United States Alien Holder who is an individual, such individual is present
in the United States for 183 days or more in the taxable year of sale or
other disposition, and certain other conditions are met.
If a United States Alien Holder is treated as receiving a deemed dividend
as a result of an adjustment of the conversion price of the Convertible
Debentures, as described above under "Adjustment of Conversion Price", such
deemed dividend may be subject to United States federal withholding tax at
a 30% (or lower treaty) rate.
Information Reporting and Backup Withholding
Income on the Convertible Preferred Securities will be reported to holders
on Form 1099, which form should be mailed to holders of Convertible Preferred
Securities by January 31 following each calendar year. Payments made on and
proceeds from the sale of Convertible Preferred Securities may be subject to
a "back-up" withholding tax of 31% unless the holder complies with certain
identification requirements. Any withheld amount will generally be allowed
as a credit against the holder's United States federal income tax, provided
the required information is timely filed with the Internal Revenue Service.
74
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CONVERTIBLE PREFERRED SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
UNDERWRITING
The underwriters of the offering of the Convertible Preferred Securities
named below (the "Underwriters"), for whom Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Lehman Brothers, Inc. are acting as representatives
(the "Representatives"), have severally agreed, subject to the terms and
conditions of an Underwriting Agreement (the "Underwriting Agreement"), to
purchase from the Trust the number of Convertible Preferred Securities set
forth opposite their respective names below.
Number of Convertible
Underwriters Preferred Securities
------------ --------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................
Lehman Brothers Inc..............................
-------------
Total.................................... 3,500,000
=============
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase Convertible Preferred Securities are subject to
certain conditions. The Underwriting Agreement provides that, if any
Convertible Preferred Securities are purchased pursuant to the Underwriting
Agreement, all Convertible Preferred Securities agreed to be purchased
pursuant to the Underwriting Agreement must be so purchased.
The Trust, Citizens Capital and the Company have granted to the Underwriters
an option to purchase up to an additional 525,000 aggregate liquidation
value of Convertible Preferred Securities at the public offering price less
the aggregate underwriting discount, solely to cover over-allotments. The
option may be exercised at any time up to 30 days after the date of this
Prospectus.
The Underwriters propose initially to offer the Convertible Preferred
Securities directly to the public at the offering price set forth on the
cover page of this Prospectus, and to
75
certain securities dealers at such public offering price less a selling
concession not in excess of $ per Convertible Preferred Security. The
selected dealers may reallow a discount not in excess of $ per Convertible
Preferred Security on sales to certain other dealers. After the offering of
the Convertible Preferred Securities, the public offering price, concession
and discount may be changed.
In view of the fact that the proceeds of the sale of the Convertible
Preferred Securities will ultimately be used to purchase the Convertible
Debentures of Citizens, the Underwriting Agreement provides that Citizens
will pay as compensation ("Underwriters' Compensation") to the Underwriters
arranging the investment therein of such proceeds, an amount in New York
Clearing House (next day) funds of $_____ per Convertible Preferred Security
(or $_____ in the aggregate) for the accounts of the several Underwriters.
The Company and the Trust have agreed to indemnify the Underwriters against
certain liabilities which may be incurred in connection with the offering of
the Convertible Preferred Securities and the exercise of the over-allotment
options, including liabilities under the 1933 Act.
The Trust and the Company have agreed, with certain exceptions, that they
will not sell or otherwise dispose of any Convertible Preferred Securities,
shares of Common Stock Series A or Common Stock Series B or any securities
convertible into or exchangable or exercisable for any such Convertible
Preferred Securities or common stock, with certain designated exceptions,
for a period of 90 days from the date of this Prospectus without the written
consent of the Representatives.
Application will be made to list the Convertible Preferred Securities on
the NYSE. Trading of the Convertible Preferred Securities on the NYSE is
expected to commence within a 30-day period after the initial delivery of the
Convertible Preferred Securities. The Representatives have advised the Trust
that it intends to make a market in the Convertible Preferred Securities
prior to the commencement of trading on the NYSE. The Representatives
will have no obligation to make a market in the Convertible Preferred
Securities, however, and may cease market making activities, if commenced,
at any time.
Prior to this offering there has been no public market for the Convertible
Preferred Securities. In order to meet one of the requirements for listing
the Convertible Preferred Securities on the NYSE, the Underwriters will
undertake to meet the NYSE's distribution standards with respect to
Convertible Preferred Securities.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, Citizens and its subsidiaries in the
ordinary course of business.
----------------------------
76
Common Stock Series A may be distributed by the Trust in connection with
the elections by the holders of the Convertible Preferred Securities to
receive their distributions in Common Stock Series A. These elections may be
made at the time of this offering and annually during the Election Period.
Sales of Common Stock Series A by Citizens Capital may be made from time
to time in one or more transactions (which may involve crosses or block
transactions) on the NYSE or otherwise, pursuant to and in accordance with
the rules of the NYSE, in the over-the-counter market, in negotiated
transactions, or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Citizens Capital will effect such
transactions by selling shares of Common Stock Series A to or through
broker-dealers. Such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from Citizens Capital
and/or purchasers of shares of Common Stock Series A for whom they may act
(which compensation may be in excess of customary commissions). Citizens
Capital and broker-dealers that participate with Citizens Capital in the
distributions of shares of Common Stock Series A may be deemed to be
"underwriters" within the meaning of Section 2(11) of the 1933 Act, and any
commissions received by them and any profit on the resale of shares of
Common Stock Series A may be deemed to be underwriting compensation.
LEGAL OPINIONS
The validity of the Convertible Preferred Securities, the Convertible
Preferred Securities Guarantee, the Partnership Guarantee, the Convertible
Debentures, the Partnership Preferred Securities and the Common Stock will
be passed upon by Boulanger, Hicks & Churchill, P.C., 135 East 57th Street,
New York, New York, and Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York, counsels for the Company, and by Simpson Thacher
& Bartlett (a partnership which includes professional corporations), 425
Lexington Avenue, New York, New York, counsel for the Underwriters, except
as to certain matters of Delaware law, as to which Boulanger, Hicks &
Churchill, P.C. and Simpson Thacher & Bartlett may rely upon the
opinion of Skadden, Arps, Slate, Meagher & Flom. Certain United States
federal income taxation matters will be passed upon for Citizens, Citizens
Capital and the Trust by Skadden, Arps, Slate, Meagher & Flom. Legal matters
relating to required authorization, if any, of the Convertible Preferred
Securities, the Convertible Preferred Securities Guarantee, the Partnership
Guarantee, the Convertible Debentures, the Partnership Preferred Securities
and the Common Stock by the public utilities commissions in the various
states will be passed upon by local counsel to Citizens in the states of
Arizona, Colorado, Hawaii, Louisiana, Tennessee, Vermont and West Virginia.
Boulanger, Hicks & Churchill, P.C., Skadden, Arps, Slate, Meagher & Flom and
Simpson Thacher & Bartlett may rely upon such counsel as to certain matters
governed by the laws of such states.
77
EXPERTS
The consolidated financial statements of the Company as of December 31,
1994, 1993, and 1992, and for each of the years then ended, incorporated by
reference in this Prospectus from the Company's Annual Report on Form 10-K
have been so incorporated by reference in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in
accounting and auditing.
The financial statements of the Mountain State Telephone Company, Alltel
Nevada, Inc., Navajo Communications Company, Inc., and Contel of New York,
Inc. incorporated by reference herein, have been examined by Arthur Andersen
LLP to the extent and for the periods indicated in their reports, and have
been so incorporated by reference in reliance upon the reports of Arthur
Andersen LLP also incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
78
<PAGE>
INDEX OF DEFINED TERMS
Defined Terms Page
- ------------- ----
1933 Act 2
1934 Act 2
1934 Act Reports 2
1940 Act 38
Additional Interest 35
ALLTEL 18
ALLTEL Telecommunications Properties 18
Average Market Price 37
back-up undertakings 56
Base Indenture 58
Beneficial Owner 47
blockage period 61
Business Day 34
Cash Distribution Election 7
Cash Payment Election 8
Change in 1940 Act Law 38
Change in Tax Law 39
Citizens 1
Citizens Capital ii
Code 16
Common Stock ii
Common Stock Series A ii
Company 1
Company Tax Event 39
Conversion Agent 10
Convertible Common Securities 1
Convertible Debentures ii
Convertible Preferred Securities 1
Convertible Preferred Securities Guarantee 10
CUC Capital 28
Debenture Trustee 58
Declaration 29
Declaration Event of Default 44
Delaware Trustee 29
Direct Participants 46
Distribution Declaration Date 7
Distribution Declaration Notice 7
Distribution Election 7
Distribution Payment Date ii
DTC iii
Election Period 8
Eligible Investments 28
Financial Institution 74
79
INDEX OF DEFINED TERMS
Defined Terms Page
- ------------- ----
General Partner 28
General Partner Payment 59
General Partnership Security 4
GTE 23
GTE Telecommunications Properties 23
GTE Telephone Properties 23
Guarantee Payments 55
Guarantee Trustee 29
Guarantees iii
Indenture 59
Indenture Event of Default 65
Indenture Trustee 58
Indirect Participants 47
Interest Payment Date ii
Investment Company Act Opinion 38
Limited Partnership Agreement 28
Liquidation Distribution 43
NASDAQ 9
NYSE ii
OID 16
Omnibus Proxy 47
Other Subordinated Indebtedness 63
Participants 46
Partnership ii
Partnership Event of Default 44
Partnership Events 39
Partnership Guarantee 10
Partnership Guarantee Payments 55
Partnership Investment Company Act Event 39
Partnership Preferred Securities ii
Partnership Securities ii
Partnership Tax Event 39
Property Account 29
Property Trustee 29
Proposals 3
Rate ii
Rating Agency Event 39
Record Date 8
Redemption Price 41
Registration Statement 2
Regular Trustees 29
Representatives 75
SEC 2
80
INDEX OF DEFINED TERMS
Defined Terms Page
- ------------- ----
Senior Indebtedness 61
Senior Nonmonetary Default 61
Senior Payment Default 61
Share Transfer and Valuation Date 32
Special Events 39
Special Representative 52
Sponsor 29
Stock Distribution Election 7
Stock Payment Election 8
Super Majority 45
Tax Event Opinion 38
Telecommunications Properties 23
Trading Day 37
Transaction 38
Transitional Rules 69
Trust 1
Trust Act 4
Trust Events 39
Trust Guarantees 54
Trust Indenture Act 4
Trust Investment Company Act Event 38
Trust Securities 1
Trust Tax Event 38
Trust Trustees 29
Underwriters 75
Underwriters' Compensation 1
Underwriting Agreement 75
United States Alien Holder 74
81
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
--------------------------------------------
Description Amount (1)
----------- ----------
Securities and Exchange Commission filing fee $ 83,190.00
Printing and engraving 30,000.00
Rating Agency Fee 39,375.00
Legal Services 300,000.00
Accounting services 12,000.00
New York Stock Exchange listing fee 15,000.00
Miscellaneous 12,435.00
-----------
Total(1) $492,000.00
===========
_____________________
(1) All fees are estimated except for the Securities and Exchange Commission
filing fee.
Item 15. Indemnification of Directors and Officers.
------------------------------------------
Citizens Utilities Company (the "Company"), being incorporated under the
Delaware General Corporation Law, is empowered by Section 145 of such law to
indemnify officers and directors against certain expenses, liabilities and
payments, including liabilities arising under the Securities Act of 1933,
(the "Act"), as therein provided. In addition, By-Laws 24 and 24A of the
Company and a resolution adopted by the Board of Directors in connection with
the issuance of the Convertible Debentures provide for indemnification of
specified persons, including officers and directors of the Company for
liabilities, including those arising under said Act, as provided in said By-
Laws and resolution. Generally, By-Laws 24 and 24A of the Company provide
that, to the fullest extent permitted by applicable law, the Company shall
indemnify and hold harmless, among others, any officer or director of the
Company or any other entity for which he is acting at the request of the
Company, from and against any loss, damage or claim incurred by such person
by reason of any act or omission performed or omitted by such person in good
faith on behalf of the Company and in a manner such person reasonably
believed to be in the best interests of the Company. Such By-Laws, generally
speaking, also provides that, to the fullest extent permitted by applicable
law, expenses (including legal fees) incurred by a person in defending
against any such liability shall, be advanced by the Company subject to
specified conditions. The Certificate of Incorporation further provides that
no director shall be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, with stated exceptions.
II-1
The Company also maintains insurance providing coverage for the Company and
its subsidiaries against obligations incurred as a result of indemnification
of officers and directors. The coverage also insures the officers and
directors for a liability against which they may not be indemnified by the
Company or its subsidiaries but excludes specified dishonest acts.
The Declaration of Trust of Citizens Capital Trust (the "Trust") provides
that to the fullest extent permitted by applicable law, the Trust shall
indemnify and hold harmless each of the Trustees, any Affiliate of the
Trustees, any officer, director, shareholder, member, partner, employee,
representative or agent of the Trustees, or any employee or agent of the
Trust or its Affiliates (each a "Trust Indemnified Person"), from and against
any loss, damage or claim incurred by such Trust Indemnified Person by reason
of any act or omission performed or omitted by such Trust Indemnified Person
in good faith on behalf of the Trust and in a manner such Trust Indemnified
Person reasonably believed to be within the scope of authority conferred on
such Trust Indemnified Person by the Declaration of Trust, except that no
Trust Indemnified Person shall be entitled to be indemnified in respect of
any loss, damage or claim incurred by such Trust Indemnified Person by reason
of gross negligence (or, in the case of the Property Trustee, negligence) or
willful misconduct with respect to such acts or omissions. The Declaration
of Trust also provides that, to the fullest extent permitted by applicable
law, expenses (including legal fees) incurred by a Trust Indemnified Person
in defending any claim, demand, action, suit or proceeding shall, from time
to time, be advanced by the Trust prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Trust of an
undertaking by or on behalf of the Trust Indemnified Person to repay such
amount if it shall be determined that the Trust Indemnified Person is not
entitled to be indemnified as authorized in the Declaration of Trust. The
Declaration of Trust further provides that no Trust Indemnified Person shall
be liable, responsible or accountable in damages or otherwise to the Trust
or any Covered Person (as defined therein) or for any loss, damage or claim
incurred by reason of any act or omission performed or omitted by such Trust
Indemnified Person in good faith on behalf of the Trust and in a manner such
Trust Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Trust Indemnified Person by the Declaration of
Trust or by law, except that a Trust Indemnified Person shall be liable for
any such loss, damage or claim incurred by reason of such Trust Indemnified
Person's gross negligence or willful misconduct with respect to acts or
omissions.
The Limited Partnership Agreement of Citizens Utilities L.P. (the
"Partnership") provides that to the fullest extent permitted by applicable
law, the Partnership shall indemnify and hold harmless each of the General
Partner, and any Special Representative, any Affiliate of the General Partner
or any Special Representative, any officer, director, shareholder, member,
partner, employee, representative or agent of the General Partner or any
Special Representative, or any employee or agent of the Partnership or its
Affiliates (each a "Partnership Indemnified Person"), from and against any
loss, damage or claim incurred by such Partnership Indemnified Person by
reason of any act or omission performed or omitted by such Partnership
Indemnified Person in good faith on behalf of the Partnership and in a manner
such Partnership Indemnified Person reasonably believed to be within the
scope of authority conferred on such Partnership
II-2
Indemnified Person by the Limited Partnership Agreement, except that no
Partnership Indemnified Person shall be entitled to be indemnified in
respect of any loss, damage or claim incurred by such Partnership
Indemnified Person by reason of gross negligence or willful misconduct with
respect to such acts or omissions. The Limited Partnership Agreement also
provides that, to the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Partnership Indemnified Person in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Partnership prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Partnership of
an undertaking by or on behalf of the Partnership Indemnified Person to repay
such amount if it shall be determined that the Partnership Indemnified Person
is not entitled to be indemnified as authorized in the Limited Partnership
Agreement. The Limited Partnership Agreement further provides that no
Partnership Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Partnership or any Covered Person (as defined
therein) or for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Partnership Indemnified Person in good
faith on behalf of the Partnership and in a manner such Partnership
Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Partnership Indemnified Person by the Limited
Partnership Agreement or by law, except that a Partnership Indemnified Person
shall be liable for any such loss, damage or claim incurred by reason of such
Partnership Indemnified Person's gross negligence or willful misconduct with
respect to acts or omissions.
The directors and officers of the Company and the Regular Trustees of the
Trust are covered by insurance policies indemnifying them against certain
liabilities, including certain liabilities arising under the Act, which might
be incurred by them in such capacities and against which they cannot be
indemnified by the Company or the Trust. Any agents, dealers or underwriters
who execute the agreement filed as Exhibit 1 of this Registration Statement
will agree to indemnify the Company's directors and their officers and the
Trustees who signed the Registration Statement against certain liabilities
that may arise under the Securities Act with respect to information furnished
to the Company or the Trust by or on behalf of any such indemnifying party.
Item 16. Exhibits.
---------
An Exhibit Index, containing a list of all exhibits to this registration
statement, commences on page II-11.
Item 17. Undertakings.
-------------
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Act;
II-3
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of a prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that clauses (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Act, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the 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
II-4
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the 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 Act
and will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Stamford and State of Connecticut
on the 22nd day of December, 1995.
CITIZENS UTILITIES COMPANY
By /s/ Robert J. DeSantis
----------------------
Robert J. DeSantis
Vice President and Treasurer
II-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Leonard Tow Chairman of the Board, December 22, 1995
- ----------------------- Chief Executive Officer,
(Leonard Tow) Chief Financial Officer
and Director
/s/ Robert J. DeSantis Vice President December 22, 1995
- ----------------------- and Treasurer
(Robert J. DeSantis)
Director December 22, 1995
- -----------------------
(Norman I. Botwinik)*
- ----------------------- Director December 22, 1995
(Stanley Harfenist)*
Director December 22, 1995
- -----------------------
(Andrew N. Heine)*
Director December 22, 1995
- -----------------------
(Aaron I. Fleischman)*
Director December 22, 1995
- -----------------------
(Elwood A. Rickless)*
Director December 22, 1995
- -----------------------
(John L. Schroeder)*
Director December 22, 1995
- -----------------------
(Robert D. Siff)*
Director December 22, 1995
- -----------------------
(Robert A. Stanger)*
- ----------------------------- Director December 22, 1995
(Edwin Tornberg)*
Director December 22, 1995
- -------------------
(Claire Tow)*
Director December 22, 1995
- ---------------
(Charles H. Symington, Jr.)*
*By/s/ Robert J. DeSantis
_____________________
Attorney-in-fact
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Amendment
No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford and State of
Connecticut on the 22nd day of December, 1995.
CITIZENS UTILITIES CAPITAL L.P.
By Citizens Utilities Company, as
General Partner
By /s/ Robert J. DeSantis
----------------------
Robert J. DeSantis
Vice President and Treasurer
II-8
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities with respect to the General Partner of
Citizens Utilities Capital L.P. and on the dates indicated.
Signature Title Date
- --------- ----- -----
/s/ Leonard Tow Chairman of the Board, December 22, 1995
- ------------------- Chief Executive Officer,
(Leonard Tow) Chief Financial Officer
and Director
/s/ Robert J. DeSantis Vice President December 22, 1995
- ----------------------- and Treasurer
(Robert J. DeSantis)
__________________________ Director December 22, 1995
(Norman I. Botwinik)*
_________________________ Director December 22, 1995
(Stanley Harfenist)*
_________________________ Director December 22, 1995
(Andrew N. Heine)*
_________________________ Director December 22, 1995
(Aaron I. Fleischman)*
________________________ Director December 22, 1995
(Elwood A. Rickless)*
__________________________ Director December 22, 1995
(John L. Schroeder)*
_________________________ Director December 22, 1995
(Robert D. Siff)*
_________________________ Director December 22, 1995
(Robert A. Stanger)*
____________________________ Director December 22, 1995
(Edwin Tornberg)*
_________________________ Director December 22, 1995
(Claire Tow)*
________________________ Director December 22, 1995
(Charles H. Symington, Jr.)*
*By/s/ Robert J. DeSantis
----------------------
Attorney-in-fact
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Stamford and
State of Connecticut on the 22nd day of December, 1995.
CITIZENS UTILITIES TRUST
By /s/ Robert J. DeSantis
----------------------
Robert J. DeSantis
Regular Trustee
By /s/ Edward O. Kipperman
_______________________
Edward O. Kipperman
Regular Trustee
II-10
<PAGE>
Exhibit Index
Exhibit
No. Description
- -------- -----------
1.1*** Form of Underwriting Agreement for the offering of the Convertible
Preferred Securities being registered under this Registration
Statement.
3.1* Restated Certificate of Incorporation of Citizens Utilities
Company, with all amendments to March 22, 1994.
4.1*** Certificate of Trust dated October 13, 1995, of Citizens Utilities
Trust.
4.2 Form of Amended and Restated Declaration of Trust dated
__________, 1996, of Citizens Utilities Trust, as amended and
restated.
4.3 Form of Indenture dated ___________, 1996, between Citizens
Utilities Company and Chemical Bank, as trustee.
4.4 Form of First Supplemental Indenture dated ___________, 1996,
between Citizens Utilities Company and Chemical Bank, as trustee,
with regard to the issuance of the Convertible Debentures.
4.5 Form of ___% Convertible Subordinated Debenture due _______, 2036
(contained as Exhibit A to Exhibit 4.4 above).
4.6*** Form of Certificate of Limited Partnership of Citizens Utilities
Capital L.P.
4.7*** Form of Amended and Restated Limited Partnership Agreement dated
____, 1996 of Citizens Utilities Capital L.P.
4.8*** Form of Convertible Preferred Securities Guarantee Agreement dated
___________, 1996 between Citizens Utilities Company and Chemical
Bank, as guarantee trustee.
4.9*** Form of Partnership Preferred Securities Guarantee Agreement dated
__________, 1996 between Citizens Utilities Company and Chemical
Bank, as guarantee trustee.
4.10 Form of Convertible Preferred Security Certificate (contained as
Exhibit A-1 to Exhibit 4.2 above).
4.11*** Form of Partnership Preferred Security Certificate (contained as
Annex A to Exhibit 4.7 above).
5.1 Opinion of Boulanger, Hicks & Churchill, P.C.
II-11
5.2 Opinion of Skadden, Arps, Slate, Meagher & Flom
8.1*** Opinion of Skadden, Arps, Slate, Meagher & Flom as to certain
federal income tax matters.
12.1*** Computation of Ratio of Earnings to Combined Fixed Charges and
Distributions on Convertible Preferred Securities of Citizens
Utilities Company.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Boulanger, Hicks & Churchill (to be contained in
Exhibit No. 5.1).
23.4*** Consent of Skadden, Arps, Slate, Meagher & Flom (contained
in Exhibit No. 8.1).
24*** Powers of Attorney.
25.1*** Form T-1, Statement of Eligibility Under the Trust Indenture Act
of 1939, as amended, of Chemical Bank, under the Declaration
of Trust (contained in Exhibit 4.1).
25.2*** Form T-1, Statement of Eligibility Under the Trust Indenture Act
of 1939, as amended, of Chemical Bank, under (i) the Indenture
(contained in Exhibit 4.3), (ii) the Convertible Preferred
Securities Gurantee Agreement (contained in Exhibit 4.8) and
(iii) the Partnership Preferred Securities Guarantee Agreement
(contained in Exhibit 4.9).
25.3*** Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of Chemical Bank, under the Convertible
Preferred Securities Guarantee Agreemnt (contained in Exhibit 4.8).
25.4*** Form T-1, Statement of Eligibility Under the Trust Indenture Act
of 1939, as amended, of Chemical Bank, under the Partnership
Preferred Securities Guarantee Agreement (contained in Exhibit 4.9).
_________________________
* Exhibit No. 3.1 is incorporated by reference to such document, bearing the
designation Exhibit No. 4.100.1 filed with the Company's Registration
Statement on Form S-3 No. 33-51529 filed December 16, 1993.
** To be filed by amendment.
*** Previously filed.
II-12
============================== ==================================
No dealer, salesman or other
person has been authorized to
give any information or to make
any representation, other than 3,500,000
those contained in this Prospectus,
in connection with the offer made CITIZENS UTILITIES LOGO
by this Prospectus, and, if given
or made, such information or Convertible Preferred
representations must not be relied Securities
upon as having been authorized by
the Company. Neither the delivery
of this Prospectus nor any sale
made hereunder shall, under any
circumstances, create any
implication that there has been
no change in the affairs of the
Company since the date hereof or
thereof. This Prospectus does not
constitute an offer or solicitation
by anyone in any jurisdiction in
which such offer or solicitation is
not authorized or in which the person
making such offer is not qualified to
do so or to anyone to whom it is
unlawful to make such offer or
solicitation.
---------------------
TABLE OF CONTENTS
Prospectus PAGE
Available Information 2 --------------------
Incorporation of Certain Documents
by Reference 3 PROSPECTUS
Proposed Tax Legislation 3 ____________, 1996
Ratings of the Company's Securities 3
Prospectus Summary 4
Risk Factors 12
Citizens Utilities Company 17 ---------------------
Use of Proceeds 18
Capital Requirements and Financing 18
Description of Common Stock Series A
and Series B 19 Merrill Lynch & Co.
Dividends on Common Stock Series A Lehman Brothers
and Series B 20
Common Stock Transfer Agent 20
Common Stock Price Range 20
Financial Information 21
Citizens Utilities Capital L.P. 28
Citizens Utilities Trust 29
Description of the Securities 30
Convertible Preferred Securities 30
Partnership Preferred Securities 49
Guarantees 54
Convertible Debentures 58
Certain Federal Income Tax
Considerations 68
Underwriting 75
Legal Opinions 77
Experts 78
Index of Defined Terms 79
============================== ==================================
AMENDED AND RESTATED DECLARATION
OF TRUST
CITIZENS UTILITIES TRUST
Dated as of ________, 1995
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
CITIZENS UTILITIES TRUST
____________, 1995
AMENDED AND RESTATED DECLARATION OF TRUST
("Declaration") dated and effective as of ___________, 1995, by
the undersigned trustees (together with all other Persons from
time to time duly appointed and serving as trustees in accordance
with the provisions of this Declaration, the "Trustees"),
Citizens Utilities Company, a Delaware corporation, as trust
sponsor (the "Sponsor"), and by the holders, from time to time,
of undivided beneficial interests in the Trust to be issued
pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established a
trust (the "Trust") under the Delaware Business Trust Act
pursuant to a Declaration of Trust dated as of _________, 1995,
(the "Original Declaration") and a Certificate of Trust filed
with the Secretary of State of Delaware on __________, 1995, for
the sole purpose of issuing and selling certain securities
representing undivided beneficial interests in the assets of the
Trust and contributing the proceeds thereof to Citizens Capital
to acquire certain Partnership Preferred Securities of Citizens
Capital;
WHEREAS, as of the date hereof, no interests in the
Trust have been issued;
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision
of the Original Declaration; and
NOW, THEREFORE, it being the intention of the parties
hereto to continue the Trust as a business trust under the Trust
Act and that this Declaration constitute the governing instrument
of such business trust, the Trustees declare that all assets
contributed to the Trust will be held in trust for the benefit of
the holders, from time to time, of the securities representing
undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not
defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Declaration has
the same meaning throughout;
(c) all references to "the Declaration" or "this
Declaration" are to this Declaration as modified,
supplemented or amended from time to time;
(d) all references in this Declaration to Articles and
Sections and Exhibits are to Articles and Sections
of and Exhibits to this Declaration unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the
same meaning when used in this Declaration unless
otherwise defined in this Declaration or unless
the context otherwise requires; and
(f) a reference to the singular includes the plural
and vice versa.
"Affiliate" has the same meaning as given to that term
in Rule 405 of the Securities Act or any successor rule
thereunder.
"Authorized Officer" of a Person means any Person that
is authorized to bind such Person.
"Base Indenture" has the meaning set forth in Annex II
hereto.
"Book Entry Interest" means a beneficial interest in a
Global Certificate, ownership and transfers of which shall be
maintained and made through book entries by a Clearing Agency as
described in Section 9.4.
"Business Day" has the meaning set forth in Annex II
hereto.
"Certificate" means a Common Security Certificate or a
Preferred Security Certificate.
"Citizens Capital" has the meaning set forth in Annex
II hereto.
"Clearing Agency" has the meaning set forth in Annex II
hereto.
"Clearing Agency Participant" has the meaning set forth
in Annex II hereto.
"Closing Date" has the meaning set forth in Annex II
hereto.
"Code" has the meaning set forth in Annex II hereto.
"Commission" means the Securities and Exchange
Commission.
"Common Security Certificate" means a definitive
certificate in fully registered form representing a Convertible
Common Security, substantially in the form of Exhibit A-2.
"Common Stock" has the meaning set forth in Annex II
hereto.
"Company" has the meaning set forth in Annex II hereto.
"Company Tax Event" has the meaning set forth in Annex
II hereto.
"Compounded Distributions" has the meaning set forth in
Section 2(b) of Annex I hereto.
"Conversion Agent" has the meaning set forth in Annex
II hereto.
"Conversion Date" has the meaning set forth in Section
5(b) of Annex I hereto.
"Conversion Price" has the meaning set forth in Section
5(a) of Annex I hereto.
"Convertible Common Securities" has the meaning set
forth in Annex II hereto.
"Convertible Common Securities Guarantee Agreement"
means the guarantee agreement to be dated as of ________, 1995,
of the Sponsor in respect of the Convertible Common Securities,
as amended or supplemented.
"Convertible Debentures" has the meaning set forth in
Annex II hereto, with Exhibit D being a specimen certificate for
such series of Convertible Debentures.
"Convertible Preferred Securities" has the meaning set
forth in Annex II hereto.
"Convertible Preferred Securities Guarantee Agreement"
means the Convertible Preferred Securities Guarantee Agreement,
dated as of ______, 1995, between the Sponsor and Chemical Bank,
as guarantee trustee, in respect of the Convertible Preferred
Securities, as amended or supplemented.
"Covered Person" means: (a) any officer, director,
shareholder, partner, member, representative, employee or agent
of (i) the Trust or (ii) the Trust's Affiliates; and (b) any
Holder of Securities.
"Debenture Issuer" has the meaning set forth in Annex
II hereto.
"Declaration Event of Default" has the meaning set
forth in Annex II hereto.
"Delaware Trustee" has the meaning set forth in Section
5.2.
"Definitive Preferred Security Certificates" has the
meaning set forth in Section 9.4.
"Distribution" has the meaning set forth in Section
6.1.
"Distribution Declaration Date" has the meaning set
forth in Annex II hereto.
"Distribution Declaration Notice" has the meaning set
forth in Annex II hereto.
"Distribution Payment Date" has the meaning set forth
in Annex II hereto.
"DTC" means The Depository Trust Company, the initial
Clearing Agency.
"Election Period" has the meaning set forth in Annex II
hereto.
"Equivalent Value" has the meaning set forth in Annex
II hereto.
"Exchange Act" has the meaning set forth in Annex II
hereto.
"Fiscal Year" has the meaning set forth in Section
11.1.
"General Partner" has the meaning set forth in Annex II
hereto.
"Global Certificate" has the meaning set forth in
Section 9.4.
"Guarantee Agreements" has the meaning set forth in
Annex II hereto.
"Holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a
beneficial owner within the meaning of the Business Trust Act.
"Indemnified Person" means (a) any Trustee; (b) any
Affiliate of any Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or
agents of any Trustee; or (d) any employee or agent of the Trust
or its Affiliates.
"Indenture" has the meaning set forth in Annex II
hereto.
"Indenture Trustee" has the meaning set forth in Annex
II hereto.
"Investment Company" means an investment company as
defined in the 1940 Act.
"Legal Action" has the meaning set forth in Section
3.6(g).
"Limited Partner" means the Trust in its capacity as
holder of the Partnership Preferred Securities of Citizens
Capital.
"Limited Partnership Agreement" has the meaning set
forth in Annex II hereto.
"List of Holders" has the meaning set forth in Section
2.2.
"Ministerial Action Obligation" has the meaning set
forth in Annex II hereto.
"Majority in liquidation amount of the Securities"
means, except as provided in the terms of the Convertible
Preferred Securities and by the Trust Indenture Act, Holder(s) of
outstanding Securities voting together as a single class or, as
the context may require, Holders of outstanding Convertible
Preferred Securities or Holders of outstanding Convertible Common
Securities voting separately as a class, who are the record
owners of more than 50% of the aggregate liquidation amount
(including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions
to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"1940 Act" has the meaning set forth in Annex II
hereto.
"Officers' Certificate" has the meaning set forth in
Annex II hereto.
"Partnership Event" has the meaning set forth in Annex
II hereto.
"Partnership Investment Company Act Event" has the
meaning set forth in Annex II hereto.
"Partnership Preferred Securities" has the meaning set
forth in Annex II hereto.
"Partnership Tax Event" has the meaning set forth in
Annex II hereto.
"Paying Agent" has the meaning specified in Section
3.8(i).
"Payment Amount" has the meaning specified in Section
6.1.
"Person" has the meaning set forth in Annex II hereto.
"Preferred Security Beneficial Owner" means, with
respect to a Book Entry Interest, a Person who is the beneficial
owner of such Book Entry Interest, as reflected on the books of
the Clearing Agency, or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Preferred Security Certificate" means a certificate
representing a Convertible Preferred Security substantially in
the form of Exhibit A-1.
"Property Trustee" has the meaning set forth in Annex
II hereto.
"Property Trustee Account" has the meaning set forth in
Section 3.8(d).
"Quorum" means a majority of the Regular Trustees or,
if there are only two Regular Trustees, both of them.
"Rating Agency Event" has the meaning set forth in
Section 4(e) of Annex I hereto.
"Redemption Notice" has the meaning set forth in
Section 4(e) of Annex I hereto.
"Regular Trustee" means any Trustee other than the
Property Trustee and the Delaware Trustee.
"Related Party" means, with respect to the Sponsor, any
direct or indirect wholly owned subsidiary of the Sponsor or any
other Person that owns, directly or indirectly, 100% of the
outstanding voting securities of the Sponsor.
"Responsible Officer" means, with respect to the
Property Trustee, any officer of the Property Trustee with direct
responsibility for the administration of the Trust and also
means, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular
subject.
"Securities" means the Convertible Common Securities
and the Convertible Preferred Securities.
"Securities Guarantee Agreements" means the Convertible
Common Securities Agreement and the Convertible Preferred
Securities Agreement.
"Securities Act" means the Securities Act of 1933, as
amended.
"Share Transfer and Valuation Date" has the meaning set
forth in Annex II hereto.
"66-2/3% in liquidation amount of the Securities"
means, except as provided in the terms of the Convertible
Preferred Securities and by the Trust Indenture Act, Holders of
outstanding Securities voting together as a single class or, as
the context may require, Holders of outstanding Convertible
Preferred Securities or Holders of outstanding Convertible Common
Securities voting separately as a class, representing at least
66 2/3% of the aggregate liquidation amount (including the stated
amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions, to the date
upon which the voting percentages are determined) of all
outstanding Securities of the relevant class.
"Special Distribution Notice" has the meaning set forth
in Section 4(e) of Annex I hereto.
"Special Event" has the meaning set forth in Annex II
hereto.
"Special Representative" has the meaning set forth in
the Partnership Agreement.
"Sponsor" means Citizens Utilities Company, a Delaware
corporation, or any successor entity in a merger, consolidation
or amalgamation, in its capacity as sponsor of the Trust.
"Successor Delaware Trustee" has the meaning set forth
in Section 5.6(b).
"Successor Regular Trustee" has the meaning set forth
in Section 5.6(d).
"Successor Property Trustee" has the meaning set forth
in Section 5.6(b).
"Super Majority" has the meaning set forth in
Section 2.6(a)(ii).
"10% in liquidation amount of the Securities" means,
except as provided in the terms of the Convertible Preferred
Securities or by the Trust Indenture Act, Holders of outstanding
Securities voting together as a single class or, as the context
may require, Holders of outstanding Convertible Preferred
Securities or Holders of outstanding Convertible Common
Securities, voting separately as a class, representing 10% of the
aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities
of the relevant class.
"Trading Day" has the meaning set forth in Annex II
hereto.
"Treasury Regulations" has the meaning set forth in
Annex II hereto.
"Trust Act" has the meaning set forth in Annex II
hereto.
"Trustee" or "Trustees" means each Person who has
signed this Declaration as a trustee, so long as such Person
shall continue in office in accordance with the terms hereof, and
all other Persons who may from time to time be duly appointed,
qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the
Trustees shall refer to such Person or Persons solely in their
capacity as trustees hereunder.
"Trust Event" has the meaning set forth in Annex II
hereto.
"Trust Indenture Act" means the Trust Indenture Act of
1939, as amended.
"Trust Investment Company Act Event" has the meaning
set forth in Annex II hereto.
"Trust Tax Event" has the meaning set forth in Annex II
hereto.
"Underwriting Agreement" has the meaning set forth in
Annex II hereto.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of
the Trust Indenture Act that are required to be
part of this Declaration and shall, to the extent
applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee
which is a Trustee for the purposes of the Trust
Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with
the duties imposed by SECTIONSECTION 310 to 317, inclusive,
of the Trust Indenture Act, such imposed duties shall
control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the
Securities as equity securities representing
undivided beneficial interests in the assets of
the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Regular Trustees on
behalf of the Trust shall provide the Property
Trustee (i) within 14 days after each record date
for payment of Distributions, a list, in such form
as the Property Trustee may reasonably require, of
the names and addresses of the Holders of the
Securities ("List of Holders") as of such record
date, provided that neither the Sponsor nor the
Regular Trustees on behalf of the Trust shall be
obligated to provide such List of Holders at any
time the List of Holders does not differ from the
most recent List of Holders given to the Property
Trustee by the Sponsor and the Regular Trustees on
behalf of the Trust, and (ii) at any other time,
promptly following, and in any event within 10
days of, receipt by the Trust of a written request
for a List of Holders as of a date no more than 14
days before such List of Holders is given to the
Property Trustee. The Property Trustee shall
preserve, in as current a form as is reasonably
practicable, all information contained in Lists of
Holders given to it or which it receives in the
capacity as Paying Agent (if acting in such
capacity), provided that the Property Trustee may
destroy any List of Holders previously given to it
on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its
obligations under SECTIONS 311(a), 311(b) and 312(b) of
the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after May 1 of each year, the Property
Trustee shall provide to the Holders of the Convertible Preferred
Securities such reports as are required by SECTION 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by
SECTION 313 of the Trust Indenture Act. The Property Trustee shall
also comply with the requirements of SECTION 313(d) of the Trust
Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Regular Trustees on behalf
of the Trust shall provide to the Property Trustee such
documents, reports and information as required by SECTION 314 of the
Trust Indenture Act (if any) and the compliance certificate
required by SECTION 314 of the Trust Indenture Act in the form, in the
manner and at the times required by SECTION 314 of the Trust Indenture
Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf
of the Trust shall provide to the Property Trustee such evidence
of compliance with any conditions precedent, if any, provided for
in this Declaration that relate to any of the matters set forth
in SECTION 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given by an officer pursuant to
SECTION 314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of
Convertible Preferred Securities may, by vote, on
behalf of the Holders of all of the Convertible
Preferred Securities, waive any past Declaration
Event of Default with respect to the Convertible
Preferred Securities and its consequences,
provided that, if the underlying Partnership Event
of Default:
(i) is not waivable under the Limited Partnership
Agreement, such Declaration Event of Default
shall also not be waivable; or
(ii) requires the consent or vote of the holders
of greater than a majority in principal
amount of the Partnership Preferred
Securities (a "Super Majority") to be waived
under the Limited Partnership Agreement, the
Declaration Event of Default may only be
waived by the vote of the Holders of at least
the proportion in liquidation amount of the
Convertible Preferred Securities that the
relevant Super Majority represents of the
aggregate liquidation amount of the
Partnership Preferred Securities outstanding.
Upon such waiver, any such Declaration Event of
Default shall cease to exist, and shall be deemed
to have been cured, for every purpose of this
Declaration, but no such waiver shall extend to
any subsequent or other Declaration Event of
Default or impair any right consequent thereon.
Any waiver by the Holders of the Convertible
Preferred Securities of a Declaration Event of
Default with respect to the Convertible Preferred
Securities shall also be deemed to constitute a
waiver by the Holders of the Convertible Common
Securities of any such Declaration Event of
Default with respect to the Convertible Common
Securities for all purposes of this Declaration
without any further act, vote, or consent of the
Holders of the Convertible Common Securities.
(b) The Holders of a Majority in liquidation amount of
the Convertible Common Securities may, by vote, on
behalf of the Holders of all of the Convertible
Common Securities, waive any past Declaration
Event of Default with respect to the Convertible
Common Securities and its consequences, provided
that, if the underlying Partnership Event of
Default:
(i) is not waivable under the Limited Partnership
Agreement, except where the Holders of the
Convertible Common Securities are deemed to
have waived such Declaration Event of Default
as provided below in this Section 2.6(b),
such Declaration Event of Default shall also
not be waivable; or
(ii) requires the consent or vote of a Super
Majority to be waived, except where the
Holders of the Convertible Common Securities
are deemed to have waived such Declaration
Event of Default as provided below in this
Section 2.6(b), the Declaration Event of
Default may only be waived by the vote of the
Holders of at least the proportion in
liquidation amount of the Convertible
Preferred Securities that the relevant Super
Majority represents of the aggregate
liquidation amount of the Partnership
Preferred Securities outstanding;
provided, further, that, at any time when a
Declaration Event of Default with respect to the
Convertible Preferred Securities has occurred and
is continuing, each Holder of Convertible Common
Securities will be deemed to have waived any such
Declaration Event of Default and all Declaration
Events of Default with respect to the Convertible
Common Securities and its consequences until all
Declaration Events of Default with respect to the
Convertible Preferred Securities have been cured,
waived or otherwise eliminated, and until such
Declaration Events of Default have been so cured,
waived or otherwise eliminated, the Property
Trustee will be deemed to be acting solely on
behalf of the Holders of the Convertible Preferred
Securities and only the Holders of the Convertible
Preferred Securities will have the right to direct
the Property Trustee in accordance with the terms
of the Securities. Subject to the foregoing
provisions of this Section 2.6(b), upon such
waiver, any such default shall cease to exist and
any Declaration Event of Default with respect to
the Convertible Common Securities arising
therefrom shall be deemed to have been cured for
every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other
default or Declaration Event of Default with
respect to the Convertible Common Securities or
impair any right consequent thereon.
(c) A waiver of a Partnership Event of Default by the
Property Trustee, acting at the direction of the
Holders of the Convertible Preferred Securities,
constitutes a waiver of the corresponding
Declaration Event of Default.
SECTION 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after
the occurrence of a Declaration Event of Default,
transmit by mail, first class postage prepaid, to
the Holders of the Securities, notices of all
Declaration Events of Default with respect to the
Securities known to the Property Trustee, unless
such Declaration Events of Default have been cured
before the giving of such notice; provided, that,
except for a default in the payment of liquidation
amount of (or premium, if any) or distribution on
any of the Partnership Preferred Securities or in
the payment of any sinking fund installment
established for the Partnership Preferred
Securities, the Property Trustee shall be
protected in withholding such notice if and so
long as the board of directors, the executive
committee, or a trust committee of directors
and/or Responsible Officers of the Property
Trustee in good faith determines that the
withholding of such notice is in the interests of
the Holders of the Securities.
(b) The Property Trustee shall not be deemed to have
knowledge of any Declaration Event of Default
except any default Declaration Event of Default as
to which the Property Trustee shall have received
written notice or a Responsible Officer charged
with the administration of the Declaration shall
have obtained written notice.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "Citizens Utilities Trust," or such
other name as the Regular Trustees may adopt from time to time
following written notice to the Property Trustee, the Delaware
Trustee and the Holders of Securities. The Trust's activities
may be conducted under the name of the Trust or any other name
deemed advisable by the Regular Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o
Citizens Utilities Company, High Ridge Park, P.O. Box 3801,
Stamford, Connecticut 06905. On ten (10) Business Days written
notice to the Property Trustee, the Delaware Trustee and the
Holders of Securities, the Regular Trustees may designate another
principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are
(a) to issue and sell Securities and use the proceeds from such
sale to acquire the Partnership Preferred Securities, and (b)
except as otherwise limited herein, to engage in only those other
activities necessary, or incidental thereto. The Trust shall not
borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets, or otherwise undertake (or
permit to be undertaken) any activity that would cause the Trust
not to be classified for United States federal income tax
purposes as a grantor trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration
and to the specific duties of the Property Trustee, the Regular
Trustees shall have exclusive and complete authority to carry out
the purposes of the Trust. An action taken by the Regular
Trustees in accordance with their powers shall constitute the act
of and serve to bind the Trust and an action taken by the
Property Trustee in accordance with its powers shall constitute
the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no Person shall be
required to inquire into the authority of the Trustees to bind
the Trust. Persons dealing with the Trust are entitled to rely
conclusively on the power and authority of the Trustees as set
forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the
Convertible Debentures and the Property Trustee Account or as
otherwise provided in this Declaration, legal title to all assets
of the Trust shall be vested in the Trust. The Holders shall not
have legal title to any part of the assets of the Trust, but
shall have an undivided beneficial interest in the assets of the
Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power,
duty and authority to cause the Trust to engage in the following
activities:
(a) to issue and sell the Convertible Preferred
Securities and the Convertible Common Securities
in accordance with this Declaration; provided,
however, that the Trust may issue no more than one
series of Convertible Preferred Securities and no
more than one series of Convertible Common
Securities, and, provided further, that there
shall be no interests in the Trust other than the
Securities, and the issuance of Securities shall
be limited to a simultaneous issuance of both
Convertible Preferred Securities and Convertible
Common Securities on each Closing Date;
(b) in connection with the issue and sale of the
Convertible Preferred Securities, at the direction
of the Sponsor, to:
(i) execute and file with the Commission the
registration statement on Form S-3
prepared by the Sponsor, including any
amendments thereto, pertaining to the
Convertible Preferred Securities;
(ii) execute and file any documents prepared by
the Sponsor, or take any acts as
determined by the Sponsor to be necessary
in order to qualify or register all or
part of the Convertible Preferred
Securities in any State in which the
Sponsor has determined to qualify or
register such Convertible Preferred
Securities for sale;
(iii) execute and file an application, prepared
by the Sponsor, to the New York Stock
Exchange or any other national stock
exchange or the Nasdaq National Market for
listing upon notice of issuance of the
Convertible Preferred Securities;
(iv) execute and file with the Commission a
registration statement on Form 8-A,
including any amendments thereto, prepared
by the Sponsor, relating to the
registration of the Convertible Preferred
Securities under Section 12(b) of the
Exchange Act; and
(v) execute and enter into the Underwriting
Agreement providing for the sale of the
Convertible Preferred Securities, on
behalf of the Trust, and perform the
duties and obligations of the Trust
thereunder;
(c) to acquire the Partnership Preferred Securities
with the proceeds of the sale of the Convertible
Preferred Securities and the Convertible Common
Securities; provided, however, that the Regular
Trustees shall cause legal title to the
Partnership Preferred Securities to be held of
record in the name of the Property Trustee for the
benefit of the Holders of the Convertible
Preferred Securities and the Holders of
Convertible Common Securities;
(d) to give the Sponsor and the Property Trustee
prompt written notice of the occurrence of a Trust
Event; provided that the Regular Trustees shall
consult with the Debenture Issuer, Citizens
Capital and the Property Trustee before taking or
refraining from taking any Ministerial Action
Obligation in relation to a Trust Event;
(e) to establish a record date with respect to all
actions to be taken hereunder that require a
record date be established, including and with
respect to, for the purposes of SECTION316(c) of the
Trust Indenture Act, Distributions, voting rights,
redemptions and exchanges, and to issue relevant
notices to the Holders of Convertible Preferred
Securities and Holders of Convertible Common
Securities as to such actions and applicable
record dates (with copies to the Property
Trustee);
(f) to take all actions and perform such duties as may
be required of the Regular Trustees pursuant to
the terms of the Securities;
(g) to bring or defend, pay, collect, compromise,
arbitrate, resort to legal action, or otherwise
adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section
3.8(f), the Property Trustee has the exclusive
power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents
(who may be designated as officers with titles)
and managers, contractors, advisors, and
consultants and pay reasonable compensation for
such services;
(i) to cause the Trust to comply with the Trust's
obligations under the Trust Indenture Act;
(j) to give the certificate required by SECTION 314(a)(4) of
the Trust Indenture Act to the Property Trustee,
which certificate may be executed by any Regular
Trustee;
(k) to incur expenses that are necessary or incidental
to carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as,
registrar and transfer agent for the Securities;
(m) to give prompt written notice to the Holders of
the Securities (with a copy to the Property
Trustee) of any notice received from Citizens
Capital of a decision to defer distribution
payments on the Partnership Preferred Securities
under the Limited Partnership Agreement;
(n) to execute all documents or instruments, perform
all duties and powers, and do all things for and
on behalf of the Trust in all matters necessary or
incidental to the foregoing;
(o) to take all action that may be necessary or
appropriate for the preservation and the
continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory
business trust under the laws of the State of
Delaware and of each other jurisdiction in which
such existence is necessary to protect the limited
liability of the Holders of the Convertible
Preferred Securities or to enable the Trust to
effect the purposes for which the Trust was
created;
(p) to take any action, not inconsistent with this
Declaration or with applicable law, that the
Regular Trustees determine in their discretion to
be necessary or desirable in carrying out the
activities of the Trust as set out in this Section
3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be
an Investment Company required to be
registered under the Investment Company
Act;
(ii) causing the Trust to be classified for
United States federal income tax purposes
as a grantor trust; and
(iii) cooperating with the Debenture Issuer to
ensure that the Convertible Debentures
will be treated as indebtedness of the
Debenture Issuer for United States federal
income tax purposes;
provided that such action does not adversely affect the
interests of the Holders; and
(q) to take all action necessary to cause all
applicable tax returns and tax information reports
that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular
Trustees, on behalf of the Trust.
The Regular Trustees must exercise the powers set forth
in this Section 3.6 in a manner that is consistent with the
purposes and functions of the Trust set out in Section 3.3, and
the Regular Trustees shall not take any action that is
inconsistent with the purposes and functions of the Trust set
forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall
have none of the powers or the authority of the Property Trustee
set forth in Section 3.8.
SECTION 3.7 Prohibition of Actions by the Trust and the
Trustees.
(a) The Trust shall not, and the Trustees (including
the Property Trustee) shall not, engage in any
activity other than as required or authorized by
this Declaration. In particular, the Trust shall
not and the Trustees (including the Property
Trustee) shall not take any action to cause the
Trust to:
(i) invest any proceeds received by the Trust
from holding the Partnership Preferred
Securities, but shall distribute all such
proceeds to Holders of Securities pursuant
to the terms of this Declaration and of
the Securities;
(ii) acquire any assets other than as expressly
provided herein;
(iii) possess Trust property for other than a
Trust purpose;
(iv) make any loans or incur any indebtedness
other than loans represented by the
Partnership Preferred Securities;
(v) possess any power or otherwise act in such
a way as to vary the Trust assets or the
terms of the Securities in any way
whatsoever;
(vi) issue any securities or other evidences of
beneficial ownership of, or beneficial
interest in, the Trust other than the
Securities; or
(vii) other than as set forth in Annex I hereto,
(A) if the Property Trustee holds the
Partnership Preferred Securities, (i)
cause the Special Representative to direct
the time, method and place of conducting
any proceeding for any remedy available to
the Indenture Trustee or exercising any
trust or power conferred upon the
Indenture Trustee with respect to the
Convertible Debentures, (ii) cause the
Special Representative to waive any past
default that is waivable under Section
5.13 of the Base Indenture, (iii) cause
the Special Representative to exercise any
right to rescind or annul any declaration
that the principal amount of all the
Convertible Debentures shall be due and
payable, or (iv) cause the Special
Representative to consent to any
amendment, modification or termination of
the Limited Partnership Agreement or the
Partnership Preferred Securities where
such consent shall be required unless the
Trust shall have received an opinion of
counsel to the effect that such amendment,
modification or termination will not cause
more than an insubstantial risk that for
United States federal income tax purposes
the Trust will not be classified as a
grantor trust; or (B) if the Property
Trustee holds Convertible Debentures as a
result of the liquidation of Citizens
Capital, (i) direct the time, method and
place of conducting any proceeding for any
remedy available to the Indenture Trustee
or exercising any trust or power conferred
upon the Indenture Trustee with respect to
the Convertible Debentures, (ii) waive any
past default that is waivable under
Section 5.13 of the Base Indenture,
(iii) exercise any right to rescind or
annul any declaration that the principal
amount of all the Convertible Debentures
shall be due and payable, or (iv) consent
to any amendment, modification or
termination of the Indenture or the
Convertible Debentures where such consent
shall be required unless the Trust shall
have received an opinion of counsel to the
effect that such amendment, modification
or termination will not cause more than an
insubstantial risk that for United States
federal income tax purposes the Trust will
not be classified as a grantor trust; or
(viii) other than in connection with the
liquidation of the Trust pursuant to a
Special Event or Rating Agency Event, file
a certificate of cancellation of the
Trust.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Partnership Preferred
Securities shall be owned by and held of record in
the name of the Property Trustee in trust for the
benefit of the Holders of the Securities. The
right, title and interest of the Property Trustee
to the Partnership Preferred Securities shall vest
automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with
in Section 5.6. Such vesting and cessation of
title shall be effective whether or not
conveyancing documents with regard to the
Convertible Debentures have been executed and
delivered.
(b) The Property Trustee shall not transfer its right,
title and interest in the Partnership Preferred
Securities to the Regular Trustees or to the
Delaware Trustee (if the Property Trustee does not
also act as Delaware Trustee).
(c) The Property Trustee shall not exercise any rights
of conversion with respect to any of the
Partnership Preferred Securities unless and until
it has received copies of notices of conversion
with respect to an aggregate liquidation amount of
the Securities equal to the aggregate liquidation
amount of Partnership Preferred Securities to be
converted.
(d) The Property Trustee shall:
(i) establish and maintain a segregated non-
interest bearing trust account (the
"Property Trustee Account") in the name of
and under the exclusive control of the
Property Trustee on behalf of the Holders
of the Securities and, upon the receipt of
payments of funds or securities made in
respect of the Partnership Preferred
Securities held by the Property Trustee,
deposit such funds or securities into the
Property Trustee Account and make payments
to the Holders of the Convertible
Preferred Securities and Holders of the
Convertible Common Securities from the
Property Trustee Account in accordance
with Section 6.1. Funds or securities in
the Property Trustee Account shall be held
uninvested until disbursed in accordance
with this Declaration.
(ii) engage in such ministerial activities as
shall be necessary or appropriate to
effect the redemption of the Convertible
Preferred Securities and the Convertible
Common Securities to the extent the
Partnership Preferred Securities or the
Convertible Debentures are redeemed or
mature; and
(iii) upon written notice of distribution issued
by the Regular Trustees in accordance with
the terms of the Securities, engage in
such ministerial activities as shall be
necessary or appropriate to effect the
distribution of the Partnership Preferred
Securities or the Convertible Debentures,
as the case may be, to Holders of
Securities, or redemption of the
Securities, as the case may be, upon the
occurrence of a Special Event or Rating
Agency Event.
(e) The Property Trustee shall take all actions and
perform such duties as may be specifically
required of the Property Trustee pursuant to the
terms of the Securities.
(f) The Property Trustee shall be authorized to bring
or defend any Legal Action which arises out of or
in connection with a Declaration Event of Default
or the Property Trustee's duties and obligations
under this Declaration or the Trust Indenture Act.
(g) The Property Trustee shall not resign as a Trustee
unless either:
(i) the Trust has been completely liquidated and
the proceeds of the liquidation distributed
to the Holders of Securities pursuant to the
terms of the Securities; or
(ii) a Successor Property Trustee has been
appointed and has accepted that appointment
in accordance with Section 5.6.
(h) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges
of a holder of Partnership Preferred Securities
under the Limited Partnership Agreement and, if a
Partnership Event of Default occurs and is
continuing, the Property Trustee shall, for the
benefit of Holders of the Securities, enforce its
rights as holder of the Partnership Preferred
Securities subject to the rights of the Holders
pursuant to the terms of such Securities.
(i) The Property Trustee may authorize one or more
Persons (each, a "Paying Agent") to pay
Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to
all Securities, to act as a Conversion Agent with
respect to the Securities on behalf of the Trust,
or to act as agent with respect to the election by
holders of the Convertible Preferred Securities of
the form of payments of distributions; and any
such Paying Agent shall comply with SECTION 317(b) of
the Trust Indenture Act. Any Paying Agent may be
removed by the Property Trustee at any time and a
successor Paying Agent or additional Paying Agents
may be appointed at any time by the Property
Trustee.
(j) Subject to this Section 3.8, the Property Trustee
shall have none of the duties, liabilities, powers
or the authority of the Regular Trustees set forth
in Section 3.6.
The Property Trustee must exercise the powers set forth in
this Section 3.8 in a manner that is consistent with the
purposes and functions of the Trust set out in Section 3.3,
and the Property Trustee shall not take any action that is
inconsistent with the purposes and functions of the Trust
set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the
Property Trustee.
(a) The Property Trustee, before the occurrence of any
Declaration Event of Default and after the curing
of all Declaration Events of Default that may have
occurred, shall undertake to perform only such
duties as are specifically set forth in this
Declaration and no implied covenants shall be read
into this Declaration against the Property
Trustee. In case a Declaration Event of Default
has occurred (that has not been cured or waived
pursuant to Section 2.6), the Property Trustee
shall exercise such of the rights and powers
vested in it by this Declaration, and use the same
degree of care and skill in their exercise, as a
prudent person would exercise or use under the
circumstances in the conduct of his or her own
affairs.
(b) No provision of this Declaration shall be
construed to relieve the Property Trustee from
liability for its own negligent action, its own
negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of a Declaration
Event of Default and after the curing or
waiving of all such Declaration Events of
Default that may have occurred:
(A) the duties and obligations of the Property
Trustee shall be determined solely by the
express provisions of this Declaration and
the Property Trustee shall not be liable
except for the performance of such duties
and obligations as are specifically set
forth in this Declaration, and no implied
covenants or obligations shall be read into
this Declaration against the Property
Trustee; and
(B) in the absence of bad faith on the part of
the Property Trustee, the Property Trustee
may conclusively rely, as to the truth of
the statements and the correctness of the
opinions expressed therein, upon any
certificates or opinions furnished to the
Property Trustee and, if required by the
terms of this Declaration, conforming to
the requirements of this Declaration; but
in the case of any such certificates or
opinions that by any provision hereof are
specifically required to be furnished to
the Property Trustee, the Property Trustee
shall be under a duty to examine the same
to determine whether or not they conform to
the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for
any error of judgment made in good faith by a
Responsible Officer of the Property Trustee,
unless it shall be proved that the Property
Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be
taken by it in good faith in accordance with
the direction of the Holders given pursuant to
the terms of this Declaration relating to the
time, method and place of conducting any
proceeding for any remedy available to the
Property Trustee, or exercising any trust or
power conferred upon the Property Trustee under
this Declaration;
(iv) no provision of this Declaration shall require
the Property Trustee to expend or risk its own
funds or otherwise incur personal financial
liability in the performance of any of its
duties or in the exercise of any of its rights
or powers, if it shall have reasonable grounds
for believing that the repayment of such funds
or liability is not reasonably assured to it
under the terms of this Declaration or adequate
indemnity against such risk or liability is not
reasonably assured to it;
(v) the Property Trustee's sole duty with respect
to the custody, safe keeping and physical
preservation of the Partnership Preferred
Securities (or, if applicable, Convertible
Debentures) and the Property Trustee Account
shall be to deal with such property in a
similar manner as the Property Trustee deals
with similar property for its own account,
subject to the protections and limitations on
liability afforded to the Property Trustee
under this Declaration and the Trust Indenture
Act;
(vi) the Property Trustee shall have no duty or
liability for or with respect to the value,
genuineness, existence or sufficiency of the
Partnership Preferred Securities or Convertible
Debentures or the payment of any taxes or
assessments levied thereon or in connection
therewith;
(vii) the Property Trustee shall not be liable for
any interest on any money received by it except
as it may otherwise agree in writing with the
Sponsor. Money held by the Property Trustee
need not be segregated from other funds held by
it except in relation to the Property Trustee
Account maintained by the Property Trustee
pursuant to Section 3.8(d)(i) and except to the
extent otherwise required by law; and
(viii) the Property Trustee shall not be responsible
for monitoring the compliance by the Regular
Trustees, the Delaware Trustee or the Sponsor
with their respective duties under this
Declaration, nor shall the Property Trustee be
liable for the acts, omissions, default,
negligence or misconduct of the Regular
Trustees, the Delaware Trustee or the Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may rely and shall be
fully protected in acting or refraining from
acting upon any resolution, certificate,
statement, instrument, opinion, report, notice,
request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness
or other paper or document believed by it to be
genuine and to have been signed, sent or
presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the
Regular Trustees contemplated by this
Declaration shall be sufficiently evidenced by
an Officers' Certificate;
(iii) whenever in the administration of this
Declaration, the Property Trustee shall deem it
desirable that a matter be proved or
established before taking, suffering or
omitting any action hereunder, the Property
Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of
bad faith on its part, request and rely upon an
Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by
the Sponsor or the Regular Trustees;
(iv) the Property Trustee shall have no duty to see
to any recording, filing or registration of any
instrument (including any financing or
continuation statement or any filing under tax
or securities laws) or any rerecording,
refiling or registration thereof;
(v) the Property Trustee may consult with counsel
or other experts and the advice or opinion of
such counsel and experts with respect to legal
matters or advice within the scope of such
experts' area of expertise shall be full and
complete authorization and protection in
respect of any action taken, suffered or
omitted by it hereunder in good faith and in
accordance with such advice or opinion, such
counsel may be counsel to the Sponsor or any of
its Affiliates, and may include any of its
employees. The Property Trustee shall have the
right at any time to seek instructions
concerning the administration of this
Declaration from any court of competent
jurisdiction;
(vi) the Property Trustee shall be under no
obligation to exercise any of the rights or
powers vested in it by this Declaration at the
request or direction of any Holder, unless such
Holder shall have provided to the Property
Trustee adequate security and indemnity against
the costs, expenses (including attorneys' fees
and expenses) and liabilities that might be
incurred by it in complying with such request
or direction, including such reasonable
advances as may be requested by the Property
Trustee; provided, that, nothing contained in
this Section 3.10(a)(vi) shall be taken to
relieve the Property Trustee, upon the
occurrence of a Declaration Event of Default,
of its obligation to exercise the rights and
powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make
any investigation into the facts or matters
stated in any resolution, certificate,
statement, instrument, opinion, report, notice,
request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness
or other paper or document, but the Property
Trustee, in its discretion, may make such
further inquiry or investigation into such
facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the
trusts or powers hereunder or perform any
duties hereunder either directly or by or
through agents or attorneys and the Property
Trustee shall not be responsible for any
misconduct or negligence on the part of any
agent or attorney appointed with due care by it
hereunder;
(ix) any action taken by the Property Trustee or its
agents hereunder shall bind the Trust and the
Holders of the Securities, and the signature of
the Property Trustee or its agents alone shall
be sufficient and effective to perform any such
action and no third party shall be required to
inquire as to the authority of the Property
Trustee to so act or as to its compliance with
any of the terms and provisions of this
Declaration, both of which shall be
conclusively evidenced by the Property
Trustee's or its agent's taking such action;
(x) whenever in the administration of this
Declaration the Property Trustee shall deem it
desirable to receive instructions with respect
to enforcing any remedy or right or taking any
other action hereunder, the Property Trustee
(i) may request instructions from the Holders
of the Securities, which instructions may only
be given by the Holders of the same proportion
in liquidation amount of the Securities as
would be entitled to direct the Property
Trustee under the terms of the Securities in
respect of such remedy, right or action, (ii)
may refrain from enforcing such remedy or right
or taking such other action until such
instructions are received, and (iii) shall be
protected in acting in accordance with such
instructions; and
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be
under any obligation to take any action that is
discretionary under the provisions of this
Declaration.
(b) No provision of this Declaration shall be deemed
to impose any duty or obligation on the Property
Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or
imposed on it, in any jurisdiction in which it
shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or
acts, or to exercise any such right, power, duty
or obligation. No permissive power or authority
available to the Property Trustee shall be
construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration
other than Section 5.2, the Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee
have any of the duties and responsibilities of the Regular
Trustees or the Property Trustee described in this Declaration.
Except as set forth in Section 5.2, the Delaware Trustee shall be
a Trustee for the sole and limited purpose of fulfilling the
requirements of SECTION 3807 of the Business Trust Act. In the
performance of any duties or obligations hereunder, the Delaware
Trustee shall be entitled to the same benefits and immunities as
the Property Trustee under Sections 3.9(b) and 3.10 hereof.
SECTION 3.12 Execution of Documents.
Unless otherwise determined by the Regular Trustees,
and except as otherwise required by the Business Trust Act, a
majority of or, if there are only two, any Regular Trustee or, if
there is only one, such Regular Trustee, is, authorized to
execute on behalf of the Trust any documents that the Regular
Trustees have the power and authority to execute pursuant to
Section 3.6; provided that, the registration statement referred
to in Section 3.6(b)(i), including any amendments thereto, shall
be signed by all of the Regular Trustees.
SECTION 3.13 Not Responsible for Recitals or Issuance of
Securities.
The recitals contained in this Declaration and the
Securities shall be taken as the statements of the Sponsor, and
the Trustees do not assume any responsibility for their
correctness. The Trustees make no representations as to the
value or condition of the property of the Trust or any part
thereof. The Trustees make no representations as to the validity
or sufficiency of this Declaration or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless terminated pursuant to the provisions
of Article VIII hereof, shall have existence for 45 years from
the initial Closing Date.
SECTION 3.15 Mergers.
(a) The Trust may not consolidate, amalgamate, merge
with or into, or be replaced by, or convey,
transfer or lease its properties and assets
substantially as an entirety to any corporation or
other body, except as described in Section 3.15(b)
and (c).
(b) The Trust may, with the consent of a majority of
the Regular Trustees (or if there are only one or
two Regular Trustees, with the consent of each
such Regular Trustee) and without the consent of
the Holders of the Securities, the Delaware
Trustee or the Property Trustee, consolidate,
amalgamate, merge with or into, or be replaced by
a trust organized as such under the laws of any
State; provided that:
(i) such successor entity (the "Successor Entity")
either:
(A) expressly assumes all of the obligations of
the Trust under the Securities; or
(B) substitutes for the Securities other
securities having substantially the same
terms as the Convertible Preferred
Securities (the "Successor Securities") so
long as the Successor Securities rank the
same as the Convertible Preferred
Securities rank with respect to
Distributions and payments upon
liquidation, redemption and otherwise;
(ii) Citizens Capital expressly acknowledges a
trustee of the Successor Entity that possesses
the same powers and duties as the Property
Trustee as the holder of the Partnership
Preferred Securities and that satisfies the
same criteria as required of the Property
Trustee by Section 5.3 of this Declaration;
(iii) the Convertible Preferred Securities or any
Successor Securities are listed, or any
Successor Securities will be listed upon
notification of issuance, on any national
securities exchange or with an other
organization on which the Convertible Preferred
Securities are then listed or quoted;
(iv) such merger, consolidation, amalgamation or
replacement does not cause the Convertible
Preferred Securities (including any Successor
Securities) to be downgraded by any nationally
recognized statistical rating organization;
(v) such merger, consolidation, amalgamation or
replacement does not adversely affect the
rights, preferences and privileges of the
Holders of the Securities (including any
Successor Securities) in any material respect;
(vi) such Successor Entity has a purpose identical
to that of the Trust;
(vii) prior to such merger, consolidation,
amalgamation or replacement, the Sponsor and
the Property Trustee have received an opinion
of a nationally recognized independent counsel
to the Trust experienced in such matters to the
effect that:
(A) such merger, consolidation, amalgamation or
replacement does not adversely affect the
rights, preferences and privileges of the
Holders of the Securities (including any
Successor Securities) in any material
respect;
(B) following such merger, consolidation,
amalgamation or replacement, neither the
Trust nor the Successor Entity will be
required to register as an Investment
Company;
(C) all conditions precedent in this
Declaration to such merger, consolidation,
amalgamation or replacement have been
satisfied; and
(viii) the Sponsor guarantees the obligations of such
Successor Entity under the Successor Securities
at least to the extent provided by the
Convertible Preferred Securities Guarantee
Agreement.
(c) Notwithstanding Section 3.15(b), the Trust shall
not, except with the consent of Holders of 100% in
liquidation amount of the Securities, consolidate,
amalgamate, merge with or into, or be replaced by
any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation,
merger or replacement would cause the Trust or
Successor Entity to be classified as other than a
grantor trust for United States federal income tax
purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Convertible Common Securities.
On each Closing Date, the Sponsor shall purchase for
cash all the Convertible Common Securities issued by the Trust,
in an amount equal to at least 3% of the total capital of the
Trust, at the same time as the Convertible Preferred Securities
are sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the
Convertible Preferred Securities, the Sponsor shall have the
exclusive right and responsibility to engage in the following
activities:
(a) to prepare for filing by the Trust with the
Commission a registration statement on Form S-3 in
relation to the Convertible Preferred Securities,
including any amendments thereto;
(b) to determine the States in which to take
appropriate action to qualify or register for sale
all or part of the Convertible Preferred
Securities and to do any and all such acts, other
than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and
prepare for execution and filing any documents to
be executed and filed by the Trust, as the Sponsor
deems necessary or advisable in order to comply
with the applicable laws of any such States;
(c) to prepare for filing by the Trust an application
to the New York Stock Exchange or any other
national stock exchange or the Nasdaq National
Market for listing upon notice of issuance of any
Convertible Preferred Securities;
(d) to prepare for filing by the Trust with the
Commission a registration statement on Form 8-A
relating to the registration of the Convertible
Preferred Securities under Section 12(b) of the
Exchange Act, including any amendments thereto;
and
(e) to negotiate the terms of the Underwriting
Agreement providing for the sale of the
Convertible Preferred Securities.
SECTION 4.3 Covenants of Sponsor.
Other than in connection with the liquidation of the
Trust pursuant to a Special Event or Rating Agency Event, the
Sponsor shall not cause the filing of a certificate of
cancellation of the Trust.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The number of Trustees shall initially be four (4),
and:
(a) at any time before the issuance of any Securities,
the Sponsor may, by written instrument, increase
or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number
of Trustees may be increased or decreased by vote
of the Holders of a Majority in liquidation amount
of the Convertible Common Securities voting as a
class at a meeting of the Holders of the
Convertible Common Securities.
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be:
(a) a natural person who is a resident of the State of
Delaware; or
(b) if not a natural person, an entity which has its
principal place of business in the State of
Delaware, and otherwise meets the requirements of
applicable law,
provided that, if the Property Trustee has its principal
place of business in the State of Delaware and otherwise
meets the requirements of applicable law, then the Property
Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee which
shall act as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business
under the laws of the United States of America
or any State or Territory thereof or of the
District of Columbia, or a corporation or
Person permitted by the Commission to act as an
institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise
corporate trust powers, having a combined
capital and surplus of at least 50 million U.S.
dollars ($50,000,000), and subject to
supervision or examination by Federal, State,
Territorial or District of Columbia authority.
If such corporation publishes reports of
condition at least annually, pursuant to law or
to the requirements of the supervising or
examining authority referred to above, then for
the purposes of this Section 5.3(a)(ii), the
combined capital and surplus of such
corporation shall be deemed to be its combined
capital and surplus as set forth in its most
recent report of condition so published.
(b) If at any time the Property Trustee shall cease to
be eligible to so act under Section 5.3(a), the
Property Trustee shall immediately resign in the
manner and with the effect set forth in Section
5.6(c).
(c) If the Property Trustee has or shall acquire any
"conflicting interest" within the meaning of SECTION
310(b) of the Trust Indenture Act, the Property
Trustee and the Holder of the Convertible Common
Securities (as if it were the obligor referred to
in SECTION 310(b) of the Trust Indenture Act) shall in
all respects comply with the provisions of SECTION
310(b) of the Trust Indenture Act.
(d) The Convertible Preferred Securities Guarantee
Agreement shall be deemed to be specifically
described in this Declaration for purposes of
clause (i) of the first provision contained in
Section 310(b) of the Trust Indenture Act.
SECTION 5.4 Qualifications of Regular Trustees and Delaware
Trustee Generally.
Each Regular Trustee and the Delaware Trustee (unless
the Property Trustee also acts as Delaware Trustee) shall be
either a natural person who is at least 21 years of age or a
legal entity that shall act through one or more Authorized
Officers.
SECTION 5.5 Initial Trustees.
The initial Regular Trustees shall be:
Robert J. DeSantis
Edward O. Kipperman
The initial Delaware Trustee shall be:
Chemical Bank Delaware, a Delaware banking corporation.
The initial Property Trustee shall be:
Chemical Bank, a New York banking corporation.
SECTION 5.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.6(b), Trustees may be
appointed or removed without cause at any time:
(i) until the issuance of any Securities, by
written instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote
of the Holders of a Majority in liquidation
amount of the Convertible [Common] Securities
voting as a class at a meeting of the Holders
of the Convertible [Common] Securities.
(b)(i) The Trustee that acts as Property Trustee shall
not be removed in accordance with Section
5.6(a) until a successor Property Trustee (the
"Successor Property Trustee") has been
appointed and has accepted such appointment by
written instrument executed by such Successor
Property Trustee and delivered to the Regular
Trustees and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall
not be removed in accordance with Section
5.6(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under
Sections 5.2 and 5.4 (a "Successor Delaware
Trustee") has been appointed and has accepted
such appointment by written instrument executed
by such Successor Delaware Trustee and
delivered to the Regular Trustees and the
Sponsor.
(c) A Trustee appointed to office shall hold office
until his successor shall have been appointed or
until his death, removal or resignation. Any
Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument
in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall
take effect upon such delivery or upon such later
date as is specified therein; provided, however,
that:
(i) No such resignation of the Trustee that acts as
the Property Trustee shall be effective:
(A) until a Successor Property Trustee has been
appointed and has accepted such appointment
by instrument executed by such Successor
Property Trustee and delivered to the
Trust, the Sponsor and the resigning
Property Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds
thereof distributed to the Holders of the
Securities; and
(ii) no such resignation of the Trustee that acts as
the Delaware Trustee shall be effective until a
Successor Delaware Trustee has been appointed
and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and
delivered to the Trust, the Sponsor and the
resigning Delaware Trustee.
(d) The Holders of the Convertible Common Securities
shall use their best efforts to promptly appoint a
successor Regular Trustee ("a Successor Regular
Trustee"), Successor Delaware Trustee or Successor
Property Trustee, as the case may be, if a Regular
Trustee, the Property Trustee or the Delaware
Trustee delivers an instrument of resignation in
accordance with this Section 5.6.
(e) If no Successor Property Trustee or Successor
Delaware Trustee shall have been appointed and
accepted appointment as provided in this Section
5.6 within 60 days after delivery to the Sponsor
and the Trust of an instrument of resignation, the
resigning Property Trustee or Delaware Trustee, as
applicable, may petition any court of competent
jurisdiction for appointment of a Successor
Property Trustee or Successor Delaware Trustee.
Such court may thereupon, after prescribing such
notice, if any, as it may deem proper and
prescribe, appoint a Successor Property Trustee or
Successor Delaware Trustee, as the case may be.
SECTION 5.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and
the number of Trustees is not reduced pursuant to Section 5.1, or
if the number of Trustees is increased pursuant to Section 5.1, a
vacancy shall occur. A resolution certifying the existence of
such vacancy by a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The
vacancy shall be filled with a Trustee appointed in accordance
with Section 5.6.
SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal,
bankruptcy, dissolution, liquidation, incompetence or incapacity
to perform the duties of a Trustee shall not operate to annul the
Trust. Whenever a vacancy in the number of Regular Trustees
shall occur, until such vacancy is filled by the appointment of a
Successor Regular Trustee in accordance with Section 5.6, the
Regular Trustees in office, regardless of their number, shall
have all the powers granted to the Regular Trustees and shall
discharge all the duties imposed upon the Regular Trustees by
this Declaration.
SECTION 5.9 Merger of a Trustee.
Any corporation into which a Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which a Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate
trust business of a Trustee, shall be the successor of such
Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Declaration, without the
execution or filing of any paper or any further act on the part
of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by a Trustee then in
office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as
if such successor Trustee had itself authenticated such
Securities.
SECTION 5.10 Meetings.
Meetings of the Regular Trustees shall be held from
time to time upon the call of any Regular Trustee. Regular
meetings of the Regular Trustees may be held at a time and place
fixed by resolution of the Regular Trustees. Notice of any in-
person meetings of the Regular Trustees shall be hand delivered
or otherwise delivered in writing (including by facsimile, with a
hard copy by overnight courier) not less than 48 hours before
such meeting. Notice of any telephonic meetings of the Regular
Trustees or any committee thereof shall be hand delivered or
otherwise delivered in writing (including by facsimile, with a
hard copy by overnight courier) not less than 24 hours before a
meeting. Notices shall contain a brief statement of the time,
place and anticipated purposes of the meeting. The presence
(whether in person or by telephone) of a Regular Trustee at a
meeting shall constitute a waiver of notice of such meeting
except where a Regular Trustee attends a meeting for the express
purpose of objecting to the transaction of any activity on the
ground that the meeting has not been lawfully called or convened.
Unless provided otherwise in this Declaration, any action of the
Regular Trustees may be taken at a meeting by vote of a majority
of the Regular Trustees present (whether in person or by
telephone) and eligible to vote with respect to such matter,
provided that a Quorum is present, or without a meeting by the
unanimous written consent of the Regular Trustees.
SECTION 5.11 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney
consistent with applicable law, delegate to any
other natural person over the age of 21 his or her
power for the purpose of executing any documents
contemplated in Section 3.6, including any
registration statement or amendment thereto filed
with the Commission, or making any other
governmental filing; and
(b) the Regular Trustees shall have power to delegate
from time to time to such of their number or to
officers of the Trust the doing of such things and
the execution of such instruments either in the
name of the Trust or the names of the Regular
Trustees or otherwise as the Regular Trustees may
deem expedient, to the extent such delegation is
not prohibited by applicable law or contrary to
the provisions of the Trust, as set forth herein.
SECTION 5.12 Compensation and Reimbursement
Citizens Capital agrees
(a) to pay to the Property Trustee and the
Delaware Trustee from time to time reasonable
compensation for all services rendered by each of them
hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided
herein, to reimburse the Property Trustee and the
Delaware Trustee upon either of their request for all
the respective reasonable expenses, disbursements and
advances incurred or made by the Property Trustee or
the Delaware Trustee, as the case may be, in accordance
with any provision of this Declaration (including the
reasonable compensation and the expenses and
disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be
attributable to the Property Trustee's or the Delaware
Trustee's negligence or bad faith, as the case may be;
and
(c) to indemnify the Proper Trustee and the
Delaware Trustee for, and to hold each of them harmless
against, any loss, liability or expense incurred
without negligence or bad faith on the part of the
Property Trustee or the Delaware Trustee, as the case
may be, arising out of or in connection with the
acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of
defending either of them against any claim or liability
in connection with the exercise or performance of any
of their respective powers or duties hereunder.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions in accordance with the
applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Convertible Preferred
Securities and the Convertible Common Securities in accordance
with the preferences set forth in their respective terms. If and
to the extent that Citizens Capital makes a distribution payment
(including payment of Compounded Distributions (as defined in the
Limited Partnership Agreement)) of premium and principal on the
Partnership Preferred Securities held by the Property Trustee
(the amount of any such payment being a "Payment Amount"), the
Property Trustee shall and is directed, to the extent funds
and/or Common Stock are available, to make a distribution (a
"Distribution") of the Payment Amount to Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall on behalf of the Trust
issue one class of Convertible Preferred
Securities having such terms as are set forth in
Annex I hereto and one class of Convertible Common
Securities having such terms as are set forth in
Annex I hereto. The Trust shall have no
securities or other interests in the assets of the
Trust other than the Convertible Preferred
Securities and the Convertible Common Securities.
(b) The Certificates shall be signed on behalf of the
Trust by a Regular Trustee. Such signature shall
be the manual signature of any present or any
future Regular Trustee. In case any Regular
Trustee of the Trust who shall have signed any of
the Securities shall cease to be such Regular
Trustee before the Certificates so signed shall be
delivered by the Trust, such Certificates
nevertheless may be delivered as though the person
who signed such Certificates had not ceased to be
such Regular Trustee; and any Certificate may be
signed on behalf of the Trust by such persons who,
at the actual date of execution of such Security,
shall be the Regular Trustees of the Trust,
although at the date of the execution and delivery
of the Declaration any such person was not such a
Regular Trustee. Certificates shall be printed,
lithographed or engraved or may be produced in any
other manner as is reasonably acceptable to the
Regular Trustees, as evidenced by their execution
thereof, and may have such letters, numbers or
other marks of identification or designation and
such legends or endorsements as the Regular
Trustees may deem appropriate, or as may be
required to comply with any law or with any rule
or regulation of any stock exchange on which
Securities may be listed, or to conform to usage.
(c) The consideration received by the Trust for the
issuance of the Securities shall constitute a
contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(d) Upon issuance of the Securities as provided in
this Declaration, the Securities so issued shall
be deemed to be validly issued, fully paid and
non-assessable.
(e) Every Person, by virtue of having become a Holder
or a Preferred Security Beneficial Owner in
accordance with the terms of this Declaration,
shall be deemed to have expressly assented and
agreed to the terms of, and shall be bound by,
this Declaration.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
(a) The Trust shall terminate:
(i) upon the bankruptcy of the Holder of the
Convertible Common Securities or the Sponsor;
(ii) upon the filing of a certificate of dissolution
or its equivalent with respect to the Holder of
the Convertible Common Securities or the
Sponsor; the filing of a certificate of
cancellation with respect to the Trust or the
revocation of the Holder of the Convertible
Common Securities or the Sponsor's charter and
the expiration of 90 days after the date of
revocation without a reinstatement thereof;
(iii) upon the entry of a decree of judicial
dissolution of the Holder of the Convertible
Common Securities, the Sponsor or the Trust;
(iv) when all of the Securities shall have been
called for redemption and the amounts necessary
for redemption thereof shall have been paid to
the Holders in accordance with the terms of the
Securities;
(v) upon the occurrence and continuation of a Trust
Event, Partnership Event, Company Tax Event or
Rating Agency Event pursuant to which (i) the
Trust shall have been dissolved in accordance
with the terms of the Securities and either all
of the Partnership Preferred Securities or such
amount of Convertible Debentures as set forth
in Annex I, as the case may be, shall have been
distributed to the Holders of Securities in
exchange for all of the Securities or (ii) the
Securities shall have been redeemed; or
(vi) before the issuance of any Securities, with the
consent of all of the Regular Trustees and the
Sponsor.
(b) As soon as is practicable after the occurrence of
an event referred to in Section 8.1(a), the
Regular Trustees shall file a certificate of
cancellation with the Secretary of State of the
State of Delaware.
(c) The provisions of Section 3.9 and Article X shall
survive the termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in
part, in accordance with the terms and conditions
set forth in this Declaration and in the terms of
the Securities. Any transfer or purported
transfer of any Security not made in accordance
with this Declaration shall be null and void.
(b) Subject to this Article IX, Convertible Preferred
Securities shall be freely transferable.
(c) Subject to this Article IX, the Sponsor and any
Related Party may only transfer Convertible Common
Securities to the Sponsor or a Related Party of
the Sponsor; provided that, any such transfer is
subject to the condition precedent that the
transferor obtain the written opinion of
nationally recognized independent counsel
experienced in such matters that such transfer
would not cause more than an insubstantial risk
that:
(i) the Trust would not be classified for United
States federal income tax purposes as a grantor
trust; and
(ii) the Trust would be an Investment Company or the
transferee would become an Investment Company.
SECTION 9.2 Transfer of Certificates.
The Regular Trustees shall provide for the registration
of Certificates and of transfers of Certificates, which will be
effected without charge but only upon payment (with such
indemnity as the Regular Trustees may require) in respect of any
tax or other government charges that may be imposed in relation
to it. Upon surrender for registration of transfer of any
Certificate, the Regular Trustees shall cause one or more new
Certificates to be issued in the name of the designated
transferee or transferees. Every Certificate surrendered for
registration of transfer shall be accompanied by a written
instrument of transfer in form satisfactory to the Regular
Trustees duly executed by the Holder or such Holder's attorney
duly authorized in writing. Each Certificate surrendered for
registration of transfer shall be canceled by the Regular
Trustees. A transferee of a Certificate shall be entitled to the
rights and subject to the obligations of a Holder hereunder upon
the receipt by such transferee of a Certificate. By acceptance
of a Certificate, each transferee shall be deemed to have agreed
to be bound by this Declaration.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any
Certificate shall be registered on the books and records of the
Trust as the sole holder of such Certificate and of the
Securities represented by such Certificate for purposes of
receiving Distributions and for all other purposes whatsoever
and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such Certificate or in the
Securities represented by such Certificate on the part of any
Person, whether or not the Trust shall have actual or other
notice thereof.
SECTION 9.4 Book Entry Interests.
Unless otherwise specified in the terms of the
Convertible Preferred Securities, the Preferred Securities
Certificates, on original issuance, will be issued in the form of
one or more, fully registered, global Preferred Security
Certificates (each a "Global Certificate"), to be delivered to
DTC, the initial Clearing Agency, by, or on behalf of, the Trust.
Such Global Certificates shall initially be registered on the
books and records of the Trust in the name of Cede & Co., the
nominee of DTC, and no Preferred Security Beneficial Owner will
receive a definitive Preferred Security Certificate representing
such Preferred Security Beneficial Owner's interests in such
Global Certificates, except as provided in Section 9.7. Unless
and until definitive, fully registered Preferred Security
Certificates (the "Definitive Preferred Security Certificates")
have been issued to the Preferred Security Beneficial Owners
pursuant to Section 9.7:
(a) the provisions of this Section 9.4 shall be in
full force and effect;
(b) the Trust and the Trustees shall be entitled to
deal with the Clearing Agency for all purposes of
this Declaration (including the payment of
Distributions on the Global Certificates and
receiving approvals, votes or consents hereunder)
as the Holder of the Convertible Preferred
Securities and the sole holder of the Global
Certificates and shall have no obligation to the
Preferred Security Beneficial Owners;
(c) to the extent that the provisions of this Section
9.4 conflict with any other provisions of this
Declaration, the provisions of this Section 9.4
shall control; and
(d) the rights of the Preferred Security Beneficial
Owners shall be exercised only through the
Clearing Agency and shall be limited to those
established by law and agreements between such
Preferred Security Beneficial Owners and the
Clearing Agency and/or the Clearing Agency
Participants and receive and transmit payments of
Distributions on the Global Certificates to such
Clearing Agency Participants. DTC will make book
entry transfers among the Clearing Agency
Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the
Convertible Preferred Security Holders is required under this
Declaration, unless and until Definitive Preferred Security
Certificates shall have been issued to the Preferred Security
Beneficial Owners pursuant to Section 9.7, the Trustees shall
give all such notices and communications specified herein to be
given to the Convertible Preferred Security Holders to the
Clearing Agency, and shall have no notice obligations to the
Preferred Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its
services as securities depositary with respect to the Convertible
Preferred Securities, the Regular Trustees may, in their sole
discretion, appoint a successor Clearing Agency with respect to
such Convertible Preferred Securities.
SECTION 9.7 Definitive Preferred Security Certificates.
If:
(a) a Clearing Agency elects to discontinue its
services as securities depositary with respect to
the Convertible Preferred Securities and a
successor Clearing Agency is not appointed within
90 days after such discontinuance pursuant to
Section 9.6;
(b) the Regular Trustees elect after consultation with
the Sponsor to terminate the book entry system
through the Clearing Agency with respect to the
Convertible Preferred Securities; or
(c) upon a Declaration Event of Default
then:
(d) Definitive Preferred Security Certificates shall
be prepared by the Regular Trustees on behalf of
the Trust with respect to such Convertible
Preferred Securities; and
(e) upon surrender of the Global Certificates by the
Clearing Agency, accompanied by registration
instructions, the Regular Trustees shall cause
Definitive Preferred Security Certificates to be
delivered to Preferred Security Beneficial Owners
in accordance with the instructions of the
Clearing Agency. Neither the Trustees nor the
Trust shall be liable for any delay in delivery of
such instructions and each of them may
conclusively rely on and shall be protected in
relying on, said instructions of the Clearing
Agency. The Definitive Preferred Security
Certificates shall be printed, lithographed or
engraved or may be produced in any other manner as
is reasonably acceptable to the Regular Trustees,
as evidenced by their execution thereof, and may
have such letters, numbers or other marks of
identification or designation and such legends or
endorsements as the Regular Trustees may deem
appropriate, or as may be required to comply with
any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of
any stock exchange on which Convertible Preferred
Securities may be listed, or to conform to usage.
SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates.
If:
(a) any mutilated Certificates should be surrendered
to the Regular Trustees, or if the Regular
Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of
any Certificate; and
(b) there shall be delivered to the Regular Trustees
such security or indemnity as may be required by
them to keep each of the Trustees harmless,
then:
In the absence of notice that such Certificate shall
have been acquired by a bona fide purchaser, any Regular Trustee
on behalf of the Trust shall execute and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like denomination. In
connection with the issuance of any new Certificate under this
Section 9.8, the Regular Trustees may require the payment of a
sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate
Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant
Securities, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration,
the Securities Guarantee Agreements, the Indenture
and the terms of the Securities, neither the
Sponsor nor the Trustees shall be:
(i) personally liable for the return of any portion
of the capital contributions (or any return
thereon) of the Holders of the Securities which
shall be made solely from the assets of the
Trust; and
(ii) be required to pay to the Trust or to any
Holder of Securities any deficit upon
dissolution of the Trust or otherwise.
(b) The Holder of the Convertible Common Securities
shall be liable for all of the debts and
obligations of the Trust (other than with respect
to the Securities) to the extent not satisfied out
of the Trust's assets.
(c) Pursuant to SECTION 3803(a) of the Business Trust Act,
the Holders of the Convertible Preferred
Securities shall be entitled to the same
limitation of personal liability extended to
stockholders of private corporations for profit
organized under the General Corporation Law of the
State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible
or accountable in damages or otherwise to the
Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in
good faith on behalf of the Trust and in a manner
such Indemnified Person reasonably believed to be
within the scope of the authority conferred on
such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's gross
negligence (or, in the case of the Property
Trustee, negligence) or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the
Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person
as to matters the Indemnified Person reasonably
believes are within such other Person's
professional or expert competence and who has been
selected with reasonable care by or on behalf of
the Trust, including information, opinions,
reports or statements as to the value and amount
of the assets, liabilities, profits, losses, or
any other facts pertinent to the existence and
amount of assets from which Distributions to
Holders of Securities might properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an
Indemnified Person has duties (including fiduciary
duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an
Indemnified Person acting under this Declaration
shall not be liable to the Trust or to any other
Covered Person for its good faith reliance on the
provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict
the duties and liabilities of an Indemnified
Person otherwise existing at law or in equity
(other than the duties imposed on the Property
Trustee under the Trust Indenture Act), are agreed
by the parties hereto to replace such other duties
and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or
arises between an Indemnified Person and any
Covered Person; or
(ii) whenever this Declaration or any other
agreement contemplated herein or therein
provides that an Indemnified Person shall act
in a manner that is, or provides terms that
are, fair and reasonable to the Trust or any
Holder of Securities,
the Indemnified Person shall resolve such conflict
of interest, take such action or provide such
terms, considering in each case the relative
interest of each party (including its own
interest) to such conflict, agreement, transaction
or situation and the benefits and burdens relating
to such interests, any customary or accepted
industry practices, and any applicable generally
accepted accounting practices or principles. In
the absence of bad faith by the Indemnified
Person, the resolution, action or term so made,
taken or provided by the Indemnified Person shall
not constitute a breach of this Declaration or any
other agreement contemplated herein or of any duty
or obligation of the Indemnified Person at law or
in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person
is permitted or required to make a decision
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be
entitled to consider such interests and factors
as it desires, including its own interests, and
shall have no duty or obligation to give any
consideration to any interest of or factors
affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act
under such express standard and shall not be
subject to any other or different standard
imposed by this Declaration or by applicable
law.
SECTION 10.4 Indemnification.
(a) To the fullest extent permitted by applicable law,
the Sponsor shall indemnify and hold harmless each
Indemnified Person from and against any loss,
damage, liability, tax, penalty, expense
(including legal fees and expenses) or claim of
any kind or nature whatsoever incurred by such
Indemnified Person by reason of the creation,
operation or termination of the Trust or any act
or omission performed or omitted by such
Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person
reasonably believed to be within the scope of
authority conferred on such Indemnified Person by
this Declaration, except that no Indemnified
Person shall be entitled to be indemnified in
respect of any loss, damage or claim incurred by
such Indemnified Person by reason of gross
negligence (or, in the case of the Property
Trustee, negligence) or willful misconduct with
respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand,
action, suit or proceeding shall, from time to
time, be advanced by the Sponsor prior to the
final disposition of such claim, demand, action,
suit or proceeding upon receipt by the Sponsor of
an undertaking by or on behalf of the Indemnified
Person to repay such amount if it shall be
determined that the Indemnified Person is not
entitled to be indemnified as authorized in
Section 10.4(a). The indemnification shall
survive the resignation or removal of any Trustee
and the termination of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee
and the Property Trustee may engage in or possess an interest in
other business ventures of any nature or description,
independently or with others, similar or dissimilar to the
business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in
and to such independent ventures or the income or profits derived
therefrom and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed
wrongful or improper. No Covered Person, nor the Sponsor,
Delaware Trustee or Property Trustee shall be obligated to
present any particular investment or other opportunity to the
Trust even if such opportunity is of a character that, if
presented to the Trust, could be taken by the Trust, and any
Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may
engage or be interested in any financial or other transaction
with the Sponsor or any Affiliate of the Sponsor, or may act as
depositary for, trustee or agent for, or act on any committee or
body of holders of, securities or other obligations of the
Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be
the calendar year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust,
the Regular Trustees shall keep, or cause to be
kept, full books of account, records and
supporting documents, which shall reflect in
reasonable detail each transaction of the Trust.
The books of account shall be maintained on the
accrual method of accounting, in accordance with
generally accepted accounting principles,
consistently applied. The Trust shall use the
accrual method of accounting for United States
federal income tax purposes. The books of account
and the records of the Trust shall be examined by
and reported upon as of the end of each Fiscal
Year by a firm of independent certified public
accountants selected by the Regular Trustees.
(b) The Regular Trustees shall cause to be prepared
and delivered to each of the Holders of
Securities, within 90 days after the end of each
Fiscal Year of the Trust, annual financial
statements of the Trust, including a balance sheet
of the Trust as of the end of such Fiscal Year,
and the related statements of income or loss;
(c) The Regular Trustees shall cause to be duly
prepared and delivered to each of the Holders of
Securities, any annual United States federal
income tax information statement, required by the
Code, containing such information with regard to
the Securities held by each Holder as is required
by the Code and the Treasury Regulations.
Notwithstanding any right under the Code to
deliver any such statement at a later date, the
Regular Trustees shall endeavor to deliver all
such statements within 30 days after the end of
each Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be duly
prepared and filed with the appropriate taxing
authority, an annual United States federal income
tax return, on a Form 1041 or such other form
required by United States federal income tax law,
and any other annual income tax returns required
to be filed by the Regular Trustees on behalf of
the Trust with any state or local taxing
authority.
SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in
the name and for the sole benefit of the Trust; provided,
however, that all payments of funds or securities in respect of
the Partnership Preferred Securities held by the Property Trustee
shall be made directly to the Property Trustee Account and no
other funds or securities of the Trust shall be deposited in the
Property Trustee Account. The sole signatories for such accounts
shall be designated by the Regular Trustees; provided, however,
that the Property Trustee shall designate the signatories for the
Property Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Regular Trustees shall comply with
all withholding requirements under United States federal, state
and local law. The Trust shall request, and the Holders shall
provide to the Trust, such forms or certificates as are necessary
to establish an exemption from withholding with respect to each
Holder, and any representations and forms as shall reasonably be
requested by the Trust to assist it in determining the extent of,
and in fulfilling, its withholding obligations. The Regular
Trustee shall file required forms with applicable jurisdictions
and, unless an exemption from withholding is properly established
by a Holder, shall remit amounts withheld with respect to the
Holder to applicable jurisdictions. To the extent that the Trust
is required to withhold and pay over any amounts to any authority
with respect to Distributions or allocations to any Holder, the
amount withheld shall be deemed to be a distribution in the
amount of the withholding to the Holder. In the event of any
claimed over withholding, Holders shall be limited to an action
against the applicable jurisdiction. If the amount required to
be withheld was not withheld from actual Distributions made, the
Trust may reduce subsequent Distributions by the amount of such
withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration
or by any applicable terms of the Securities, this
Declaration may only be amended by a written
instrument approved and executed by:
(i) the Regular Trustees (or, if there are more
than two Regular Trustees a majority of the
Regular Trustees);
(ii) if the amendment affects the rights, powers,
duties, obligations or immunities of the
Property Trustee, the Property Trustee; and
(iii) if the amendment affects the rights, powers,
duties, obligations or immunities of the
Delaware Trustee, the Delaware Trustee;
(b) no amendment shall be made, and any such purported
amendment shall be void and ineffective:
(i) unless, in the case of any proposed amendment,
the Property Trustee shall have first received
an Officers' Certificate from each of the Trust
and the Sponsor that such amendment is
permitted by, and conforms to, the terms of
this Declaration (including the terms of the
Securities);
(ii) unless, in the case of any proposed amendment
which affects the rights, powers, duties,
obligations or immunities of the Property
Trustee, the Property Trustee shall have first
received:
(A) an Officers' Certificate from each of the
Trust (signed by each of the Regular
Trustees) and the Sponsor that such
amendment is permitted by, and conforms to,
the terms of this Declaration (including
the terms of the Securities); and
(B) an opinion of counsel (who may be counsel
to the Sponsor, any Trustee or the Trust)
that such amendment is permitted by, and
conforms to, the terms of this Declaration
(including the terms of the Securities) and
that all conditions precedent to such
proposed amendment have been satisfied; and
(iii) to the extent the result of such amendment
would be to:
(A) cause the trust to fail to continue to be
classified for purposes of United States
federal income taxation as a grantor trust;
(B) reduce or otherwise adversely affect the
powers of the Property Trustee in
contravention of the Trust Indenture Act;
or
(C) cause the Trust to be deemed to be an
Investment Company required to be
registered under the Investment Company
Act;
(c) at such time after the Trust has issued any
Securities that remain outstanding, any amendment
that would adversely affect the rights, privileges
or preferences of any Holder of Securities may be
effected only with such additional requirements as
may be set forth in the terms of such Securities;
(d) Section 9.1(c) and this Section 12.1 shall not be
amended without the consent of all of the Holders
of the Securities;
(e) Article IV shall not be amended without the
consent of the Holders of a Majority in
liquidation amount of the Convertible Common
Securities and;
(f) the rights of the Holders of the Convertible
Common Securities under Article V to increase or
decrease the number of, and appoint and remove
Trustees shall not be amended without the consent
of the Holders of a Majority in liquidation amount
of the Convertible Common Securities; and
(g) notwithstanding Section 12.1(c), this Declaration
may be amended without the consent of the Holders
of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this
Declaration that may be defective or
inconsistent with any other provision of this
Declaration;
(iii) add to the covenants, restrictions or
obligations of the Sponsor; or
(iv) to conform to any change in the 1940 Act or
written change in interpretation or application
of the rules and regulations promulgated
thereunder by any legislative body, court,
government agency or regulatory authority in
such a manner that the Trust shall not become
an Investment Company and which amendment does
not have a material adverse effect on the
right, preferences or privileges of the
Holders.
SECTION 12.2 Meetings of the Holders of Securities; Action by
Written Consent.
(a) Meetings of the Holders of any class of Securities
may be called at any time by the Regular Trustees
or, following a Declaration Event of Default, by
the Property Trustee (or as provided in the terms
of the Securities) to consider and act on any
matter on which Holders of such class of
Securities are entitled to act under the terms of
this Declaration, the terms of the Securities or
the rules of any stock exchange on which the
Convertible Preferred Securities are listed or
admitted for trading. The Regular Trustees shall
call a meeting of the Holders of such class if
directed to do so by the Holders of at least 10%
in liquidation amount of such class of Securities.
Such direction shall be given by delivering to the
Regular Trustees one or more calls in a writing
stating that the signing Holders of Securities
wish to call a meeting and indicating the general
or specific purpose for which the meeting is to be
called. Any Holders of Securities calling a
meeting shall specify in writing the Security
Certificates held by the Holders of Securities
exercising the right to call a meeting and only
those Securities specified shall be counted for
purposes of determining whether the required
percentage set forth in the second sentence of
this paragraph has been met.
(b) Except to the extent otherwise provided in the
terms of the Securities, the following provisions
shall apply to meetings of Holders of Securities:
(i) notice of any such meeting shall be given to
all the Holders of Securities having a right to
vote thereat at least 7 days and not more than
60 days before the date of such meeting.
Whenever a vote, consent or approval of the
Holders of Securities is permitted or required
under this Declaration or the rules of any
stock exchange on which the Convertible
Preferred Securities are listed or admitted for
trading, such vote, consent or approval may be
given at a meeting of the Holders of
Securities. Any action that may be taken at a
meeting of the Holders of Securities may be
taken without a meeting if a consent in writing
setting forth the action so taken is signed by
the Holders of Securities owning not less than
the minimum amount of Securities in liquidation
amount that would be necessary to authorize or
take such action at a meeting at which all
Holders of Securities having a right to vote
thereon were present and voting. Prompt notice
of the taking of action without a meeting shall
be given to the Holders of Securities entitled
to vote who have not consented in writing. The
Regular Trustees may specify that any written
ballot submitted to the Security Holder for the
purpose of taking any action without a meeting
shall be returned to the Trust within the time
specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any
Person to act for it by proxy on all matters in
which a Holder of Securities is entitled to
participate, including waiving notice of any
meeting, or voting or participating at a
meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the
Holder of Securities executing it. Except as
otherwise provided herein, all matters relating
to the giving, voting or validity of proxies
shall be governed by the General Corporation
Law of the State of Delaware relating to
proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware
corporation and the Holders of the Securities
were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities
shall be conducted by the Regular Trustees or,
if called by the Property Trustee, the Property
Trustee or by such other Person that the
Regular Trustees or the Property Trustee, as
the case may be, may designate; and
(iv) unless the Business Trust Act, this
Declaration, the terms of the Securities, the
Trust Indenture Act or the listing rules of any
stock exchange on which the Convertible
Preferred Securities are then listed or trading
otherwise provides, the Regular Trustees, in
their sole discretion (or if any meeting of
Holders has been called by the Property
Trustee, the Property Trustee in its sole
discretion), shall establish all other
provisions relating to meetings of Holders of
Securities, including notice of the time, place
or purpose of any meeting at which any matter
is to be voted on by any Holders of Securities,
waiver of any such notice, action by consent
without a meeting, the establishment of a
record date, quorum requirements, voting in
person or by proxy or any other matter with
respect to the exercise of any such right to
vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND THE DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee
represents and warrants to the Trust and to the Sponsor at the
date of this Declaration, and each Successor Property Trustee
represents and warrants to the Trust and the Sponsor at the time
of the Successor Property Trustee's acceptance of its appointment
as Property Trustee that:
(a) The Property Trustee is a New York banking
corporation with trust powers, duly organized,
validly existing and in good standing under the
laws of the State of New York, with trust power
and authority to execute and deliver, and to carry
out and perform its obligations under the terms
of, the Declaration.
(b) The execution, delivery and performance by the
Property Trustee of the Declaration has been duly
authorized by all necessary corporate action on
the part of the Property Trustee. The Declaration
has been duly executed and delivered by the
Property Trustee, and it constitutes a legal,
valid and binding obligation of the Property
Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally
and to general principles of equity and the
discretion of the court (regardless of whether the
enforcement of such remedies is considered in a
proceeding in equity or at law).
(c) The execution, delivery and performance of the
Declaration by the Property Trustee does not
conflict with or constitute a breach of the
Articles of Organization or By-laws of the
Property Trustee.
(d) No consent, approval or authorization of, or
registration with or notice to, any State or
Federal banking authority is required for the
execution, delivery or performance by the Property
Trustee, of the Declaration.
[(e) The Property Trustee, pursuant to the Declaration,
shall hold legal title and a valid ownership
interest in the Partnership Preferred Securities
under the law of its place of incorporation and
Delaware law.]
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee
represents and warrants to the Trust and to the Sponsor at the
date of this Declaration, and each Successor Delaware Trustee
represents and warrants to the Trust and the Sponsor at the time
of the Successor Delaware Trustee's acceptance of its appointment
as Delaware Trustee that:
(a) The Delaware Trustee is a Delaware banking
corporation with trust powers, duly organized,
validly existing and in good standing under the
laws of the State of Delaware, with trust power
and authority to execute and deliver, and to carry
out and perform its obligations under the terms
of, the Declaration.
(b) The Delaware Trustee has been authorized to
perform its obligations under the Certificate of
Trust and the Declaration. The Declaration under
Delaware law constitutes a legal, valid and
binding obligation of the Delaware Trustee,
enforceable against it in accordance with its
terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally
and to general principles of equity and the
discretion of the court (regardless of whether the
enforcement of such remedies is considered in a
proceeding in equity or at law).
(c) No consent, approval or authorization of, or
registration with or notice to, any State or
Federal banking authority is required for the
execution, delivery or performance by the Delaware
Trustee of the Declaration.
(d) The Delaware Trustee is an entity which has its
principal place of business in the State of
Delaware.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in writing,
duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail,
as follows:
(a) if given to the Trust, in care of the Regular
Trustees at the Trust's mailing address set forth
below (or such other address as the Trust may give
notice of to the Trustees and the Holders of the
Securities):
CITIZENS UTILITIES TRUST
c/o Citizens Utilities Company
High Ridge Park
P.O. Box 3801
Stamford, Connecticut 06905
Attention:
(b) if given to the Delaware Trustee, at the mailing
address set forth below (or such other address as
the Delaware Trustee may give notice of to the
other Trustees):
Chemical Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
Attention: Corporate Trustee
Administration Department
(c) if given to the Property Trustee, at the mailing
address set forth below (or such other address as
the Property Trustee may give notice of to the
other Trustees):
Chemical Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Corporate Trustee
Administration Department
(d) if given to the Holder of the Convertible Common
Securities, at the mailing address of the Sponsor
set forth below (or such other address as the
Holder of the Convertible Common Securities may
give notice to the Trust):
CITIZENS UTILITIES COMPANY
High Ridge Park
P.O. Box 3801
Stamford, Connecticut 06905
Attention: _________________
(e) if given to any other Holder, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given
when received in person, telecopied with receipt confirmed, or
mailed by first class mail, postage prepaid, except that if a
notice or other document is refused delivery or cannot be
delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties
hereunder shall be governed by and interpreted in accordance with
the laws of the State of Delaware and all rights and remedies
shall be governed by such laws without regard to principles of
conflict of laws.
SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that the
Trust be classified for United States federal income tax purposes
as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the
interpretation of this Declaration or any provision hereof.
SECTION 14.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto
is named or referred to, the successors and assigns of such party
shall be deemed to be included, and all covenants and agreements
in this Declaration by the Sponsor and the Trustees shall bind
and inure to the benefit of their respective successors and
assigns, whether so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the
application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the
application of such provision to Persons or circumstances other
than those to which it is held invalid, shall not be affected
thereby. SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart
of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees and a duly
authorized officer of the Company to one of such counterpart
signature pages. All of such counterpart signature pages shall
be read as though one, and they shall have the same force and
effect as though all of the signers had signed a single signature
page.
IN WITNESS WHEREOF, the undersigned has caused these
presents to be executed as of the day and year first above
written.
Robert J. DeSantis
as Regular Trustee
__________________________
Edward O. Kipperman
as Regular Trustee
__________________________
CHEMICAL BANK DELAWARE
as Delaware Trustee
By:
Name:
Title:
CHEMICAL BANK
as Property Trustee
By:
Name:
Title:
CITIZENS UTILITIES COMPANY
as Sponsor
By:
Name:
Title:
ANNEX I
TERMS OF SECURITIES
ANNEX II
STATEMENT OF COMMON DEFINITIONS
EXHIBIT A-1
FORM OF PREFERRED SECURITY CERTIFICATE
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
EXHIBIT B
FORM OF NOTICE OF DISTRIBUTION ELECTION
TO: Citizens Utility Company,
As General Partner,
The undersigned owner of ____% Partnership Preferred
Securities (liquidation preference $50 per preferred security)
(the "Partnership Preferred Securities"), issued pursuant to the
Amended and Restated Agreement of Limited Partnership (the
"Limited Partnership Agreement"), dated as of ___________ ___,
1995, by and among Citizens Utilities Company, as the general
partner, ____________, as initial limited partner, and such other
Persons (as defined therein) who become Limited Partners (as
defined therein) as provided in the Limited Partnership
Agreement, hereby irrevocably elects to receive, in the form
prescribed below, Distributions (as such term is defined in the
Limited Partnership Agreement) due and payable to the undersigned
on the four Distribution Payment Dates (as such term is defined
in the Limited Partnership Agreement) occurring after the
Election Period during which this Notice of Distribution Election
is being submitted, and on each succeeding Distribution Payment
Date until such time as another Notice of Distribution Election
is timely submitted during an Election Period, as follows:
The Undersigned, as a Holder of Partnership Preferred
Securities, elects to receive payment of Distributions due and
payable on the next four Distribution Payment Dates on such
Partnership Preferred Securities, and on each succeeding
Distribution Payment Date until such time as another Notice of
Distribution Election is timely submitted during an Election
Period, in the form of:
Choose one:
( ) Cash
( ) An Equivalent Value of shares Common Stock Series A,
par value $.25 per share, of Citizens Utilities Company
("Common Stock")
The undersigned does also hereby direct the addressee
that any and all Distributions in the form of Common Stock made
pursuant to this Notice of Distribution Election be delivered to
and issued in the name of the undersigned, unless a different
name/different names has/have been indicated in the assignment
below. If such shares are to be issued in the name/names of a
person/persons other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.
This Notice of Distribution Election and any action
taken hereunder shall be governed by the terms of the Limited
Partnership Agreement.
Date: ____________, ____
Signature
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other
Identifying Number
(Applicable only if box (B) has
been checked.) If a name or names
other than the undersigned, please
indicate in the spaces below the
name or names in which shares of
Common Stock are to be issued,
along with the address or addresses
of such person or persons
EXHIBIT C
FORM OF PARTNERSHIP PREFERRED SECURITIES
EXHIBIT D
FORM OF CONVERTIBLE DEBENTURE
EXHIBIT E
UNDERWRITING AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I INTERPRETATION AND DEFINITIONS . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . . . . 2
ARTICLE II TRUST INDENTURE ACT . . . . . . . . . . . . . 9
SECTION 2.1 Trust Indenture Act; Application . . . . . 9
SECTION 2.2 Lists of Holders of Securities . . . . . . 9
SECTION 2.3 Reports by the Property Trustee . . . . . . 10
SECTION 2.4 Periodic Reports to Property Trustee . . . 10
SECTION 2.5 Evidence of Compliance with Conditions
Precedent . . . . . . . . . . . . . . . 10
SECTION 2.6 Events of Default; Waiver . . . . . . . . . 11
SECTION 2.7 Event of Default; Notice . . . . . . . . . 13
ARTICLE III ORGANIZATION . . . . . . . . . . . . . . . . . 14
SECTION 3.1 Name . . . . . . . . . . . . . . . . . . . 14
SECTION 3.2 Office . . . . . . . . . . . . . . . . . . 14
SECTION 3.3 Purpose . . . . . . . . . . . . . . . . . . 14
SECTION 3.4 Authority . . . . . . . . . . . . . . . . . 14
SECTION 3.5 Title to Property of the Trust . . . . . . 15
SECTION 3.6 Powers and Duties of the Regular Trustees . 15
SECTION 3.7 Prohibition of Actions by the Trust and
the Trustees . . . . . . . . . . . . . . 18
SECTION 3.8 Powers and Duties of the Property Trustee . 20
SECTION 3.9 Certain Duties and Responsibilities of the
Property Trustee . . . . . . . . . . . . 23
SECTION 3.10 Certain Rights of Property Trustee . . . . 25
SECTION 3.11 Delaware Trustee . . . . . . . . . . . . . 28
SECTION 3.12 Execution of Documents . . . . . . . . . . 28
SECTION 3.13 Not Responsible for Recitals or Issuance
of Securities . . . . . . . . . . . . . 29
SECTION 3.14 Duration of Trust . . . . . . . . . . . . 29
SECTION 3.15 Mergers . . . . . . . . . . . . . . . . . 29
ARTICLE IV SPONSOR . . . . . . . . . . . . . . . . . . . 31
SECTION 4.1 Sponsor's Purchase of Convertible Common
Securities . . . . . . . . . . . . . . . 31
SECTION 4.2 Responsibilities of the Sponsor . . . . . . 31
SECTION 4.3 Covenants of Sponsor . . . . . . . . . . . 32
ARTICLE V TRUSTEES . . . . . . . . . . . . . . . . . . . 32
SECTION 5.1 Number of Trustees . . . . . . . . . . . . 32
SECTION 5.2 Delaware Trustee . . . . . . . . . . . . . 33
SECTION 5.3 Property Trustee; Eligibility . . . . . . . 33
SECTION 5.4 Qualifications of Regular Trustees and
Delaware Trustee Generally . . . . . . . 34
SECTION 5.5 Initial Trustees . . . . . . . . . . . . . 34
SECTION 5.6 Appointment, Removal and Resignation
of Trustees . . . . . . . . . . . . . . 34
SECTION 5.7 Vacancies among Trustees . . . . . . . . . 36
SECTION 5.8 Effect of Vacancies . . . . . . . . . . . . 36
SECTION 5.9 Merger of a Trustee . . . . . . . . . . . . 37
SECTION 5.10 Meetings . . . . . . . . . . . . . . . . . 37
SECTION 5.11 Delegation of Power . . . . . . . . . . . . 38
ARTICLE VI DISTRIBUTIONS . . . . . . . . . . . . . . . . 38
SECTION 6.1 Distributions . . . . . . . . . . . . . . . 38
ARTICLE VII ISSUANCE OF SECURITIES . . . . . . . . . . . . 38
SECTION 7.1 General Provisions Regarding Securities . . 38
ARTICLE VIII TERMINATION OF TRUST . . . . . . . . . . . . . 40
SECTION 8.1 Termination of Trust . . . . . . . . . . . 40
ARTICLE IX TRANSFER OF INTERESTS . . . . . . . . . . . . 41
SECTION 9.1 Transfer of Securities . . . . . . . . . . 41
SECTION 9.2 Transfer of Certificates . . . . . . . . . 41
SECTION 9.3 Deemed Security Holders . . . . . . . . . . 42
SECTION 9.4 Book Entry Interests . . . . . . . . . . . 42
SECTION 9.5 Notices to Clearing Agency . . . . . . . . 43
SECTION 9.6 Appointment of Successor Clearing Agency . 43
SECTION 9.7 Definitive Preferred Security
Certificates . . . . . . . . . . . . . . 43
SECTION 9.8 Mutilated, Destroyed, Lost or
Stolen Certificates . . . . . . . . . . 44
ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF
SECURITIES, TRUSTEES OR OTHERS . . . . . . . 45
SECTION 10.1 Liability . . . . . . . . . . . . . . . . 45
SECTION 10.2 Exculpation . . . . . . . . . . . . . . . 46
SECTION 10.3 Fiduciary Duty . . . . . . . . . . . . . . 46
SECTION 10.4 Indemnification . . . . . . . . . . . . . 47
SECTION 10.5 Outside Businesses . . . . . . . . . . . . 48
ARTICLE XI ACCOUNTING . . . . . . . . . . . . . . . . . . 49
SECTION 11.1 Fiscal Year . . . . . . . . . . . . . . . 49
SECTION 11.2 Certain Accounting Matters . . . . . . . . 49
SECTION 11.3 Banking . . . . . . . . . . . . . . . . . 50
SECTION 11.4 Withholding . . . . . . . . . . . . . . . 50
ARTICLE XII AMENDMENTS AND MEETINGS . . . . . . . . . . . 51
SECTION 12.1 Amendments . . . . . . . . . . . . . . . . 51
SECTION 12.2 Meetings of the Holders of Securities;
Action by Written Consent . . . . . . . 53
ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE
AND THE DELAWARE TRUSTEE . . . . . . . . . . 55
SECTION 13.1 Representations and Warranties of
Property Trustee . . . . . . . . . . . 55
SECTION 13.2 Representations and Warranties of
Delaware Trustee . . . . . . . . . . . 56
ARTICLE XIV MISCELLANEOUS . . . . . . . . . . . . . . . . 57
SECTION 14.1 Notices . . . . . . . . . . . . . . . . . 57
SECTION 14.2 Governing Law . . . . . . . . . . . . . . 58
SECTION 14.3 Intention of the Parties . . . . . . . . . 58
SECTION 14.4 Headings . . . . . . . . . . . . . . . . . 58
SECTION 14.5 Successors and Assigns . . . . . . . . . . 59
SECTION 14.6 Partial Enforceability . . . . . . . . . . 59
SECTION 14.7 Counterparts . . . . . . . . . . . . . . . 59
CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
310(a) . . . . . . . . . . . . . . . . . 5.3(a)
310(c) . . . . . . . . . . . . . . . . . Inapplicable
311(c) . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . 2.2(a)
312(b) . . . . . . . . . . . . . . . . . 2.2(b)
313 . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . 2.4
314(b) . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . 2.5
314(d) . . . . . . . . . . . . . . . . . Inapplicable
314(f) . . . . . . . . . . . . . . . . . Inapplicable
315(a) . . . . . . . . . . . . . . . . . 3.9(b)
315(c) . . . . . . . . . . . . . . . . . 3.9(a)
315(d) . . . . . . . . . . . . . . . . . 3.9(a)
316(a) . . . . . . . . . . . . . . . . . Annex I
316(c) . . . . . . . . . . . . . . . . . 3.6(e)
_______________
* This Cross-Reference Table does not constitute part
of the Declaration and shall not affect the
interpretation of any of its terms or provisions.
===================================
CITIZENS UTILITIES COMPANY,
To
CHEMICAL BANK,
Trustee
-----------------------------------
INDENTURE
Dated as of _________, 1996
--------------
===================================
<PAGE>
CITIZENS UTILITIES COMPANY
Reconciliation and tie between Trust Indenture Act of 1939 and Indenture,
dated as of __________, 1995.
Trust Indenture
Act Section Indenture Section
----------- -----------------
Sec. 310(a)(1) 6.9
(a)(2) 6.9
(a)(3) Not Applicable
(a)(4) Not Applicable
(a)(5) 6.9
(b) 6.8, 6.10
Sec. 311(a) 6.13
(b) 6.13
Sec. 312(a) 7.1,7.2(a)
(b) 7.2(b)
(c) 7.2(c)
Sec. 313(a) 7.3(a)
(b) 7.3(a)
(c) 7.3(a)
(d) 7.3(b)
Sec. 314(a) 7.4
(b) Not Applicable
(c)(1) 1.2
(c)(2) 1.2
(c)(3) Not Applicable
(d) Not Applicable
(e) 1.2
Sec. 315(a) 6.1
(b) 6.2,2.7
(c) 6.1
(d) 6.1
(d)(1) 6.1
(e) 5.14
Sec. 316(a) 10.1
(a)(1)(A) 5.2,5.12
(a)(1)(B) 5.2,5.13
(a)(2) Not Applicable
(b) 5.8
(c) 1.4(c)
Sec. 317(a)(1) 5.3
(a)(2) 5.4
(b) 1.3
Sec. 318(a) 1.7
NOTE: This reconciliation and tie shall not, for any
purpose, be deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
PARTIES 1
RECITALS OF THE COMPANY 1
ARTICLE 1
Definitions and Other Provisions
of General Application
Section 1.1 Definitions 1
Section 1.2 Compliance Certificates and Opinions 7
Section 1.3 Form of Documents Delivered to Trustee 7
Section 1.4 Acts of Holders 8
Section 1.5 Notices, Etc., to Trustee or Company 9
Section 1.6 Notice to Holders; Waiver 9
Section 1.7 Conflict with Trust Indenture Act 10
Section 1.8 Effect of Headings and Table of Contents 10
Section 1.9 Successors and Assigns 10
Section 1.10 Separability Clause 10
Section 1.11 Benefits of Indenture 10
Section 1.12 Governing Law 10
Section 1.13 Legal Holidays 10
ARTICLE 2
Security Forms
Section 2.1 Forms Generally 11
Section 2.2 Form of Trustee's Certificate of Authentication 12
ARTICLE 3
The Securities
Section 3.1 Amount Unlimited; Issuable in Series 12
Section 3.2 Denominations 15
Section 3.3 Execution, Authentication, Delivery and Dating 15
Section 3.4 Temporary Securities 17
Section 3.5 Registration, Registration of Transfer and Exchange 17
(i)
TABLE OF CONTENTS
Page
----
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities 18
Section 3.7 Payment of Interest; Interest Rights Preserved 19
Section 3.8 Persons Deemed Owners 21
Section 3.9 Cancellation 22
Section 3.10 Computation of Interest 22
Section 3.11 Book-Entry Securities 22
ARTICLE 4
Satisfaction and Discharge
Section 4.1 Satisfaction and Discharge of Indenture 24
Section 4.2 Application of Trust Money 25
Section 4.3 Reinstatement 26
ARTICLE 5
Remedies
Section 5.1 Events of Default 27
Section 5.2 Acceleration of Maturity; Rescission and Annulment 28
Section 5.3 Collection of Indebtedness and Suits for Enforcement
by Trustee 29
Section 5.4 Trustee May File Proofs of Claim 30
Section 5.5 Trustee May Enforce Claims Without Possession of
Securities 31
Section 5.6 Application of Money Collected 31
Section 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert or Exchange 32
Section 5.9 Restoration of Rights and Remedies 33
Section 5.10 Rights and Remedies Cumulative 33
Section 5.11 Delay or Omission Not Waiver 33
Section 5.12 Control by Holders 33
Section 5.13 Waiver of Past Defaults 34
Section 5.14 Undertaking for Costs 34
Section 5.15 Waiver of Stay or Extension Laws 35
(ii)
TABLE OF CONTENTS
Page
----
ARTICLE 6
The Trustee
Section 6.1 Certain Duties and Responsibilities 35
Section 6.2 Notice of Defaults 35
Section 6.3 Certain Rights of Trustee 35
Section 6.4 Not Responsible for Recitals or Issuance of Securities 36
Section 6.5 May Hold Securities 37
Section 6.6 Money Held in Trust 37
Section 6.7 Compensation and Reimbursement 37
Section 6.8 Disqualification; Conflicting Interests 38
Section 6.9 Corporate Trustee Required; Eligibility 38
Section 6.10 Resignation and Removal; Appointment of Successor 38
Section 6.11 Acceptance of Appointment by Successor 40
Section 6.12 Merger, Conversion, Consolidation or Succession to
Business 41
Section 6.13 Preferential Collection of Claim Against Company 41
Section 6.14 Appointment of Authenticating Agent 41
ARTICLE 7
Holders' Lists and Reports by Trustee and Company
Section 7.1 Company to Furnish Trustee Names and Addresses
of Holders 43
Section 7.2 Preservation of Information; Communications to Holders 43
Section 7.3 Reports by Trustee 44
Section 7.4 Reports by Company 44
ARTICLE 8
Consolidation, Merger, Conveyance, Transfer or Lease
Section 8.1 Company May Consolidate, Etc., Only on Certain Terms 44
Section 8.2 Successor Substituted 45
(iii)
TABLE OF CONTENTS
Page
----
ARTICLE 9
Supplemental Indentures
Section 9.1 Supplemental Indentures Without Consent of Holders 45
Section 9.2 Supplemental Indentures with Consent of Holders 47
Section 9.3 Execution of Supplemental Indentures 48
Section 9.4 Effect of Supplemental Indentures 48
Section 9.5 Conformity with Trust Indenture Act 48
Section 9.6 Reference in Securities to Supplemental Indentures 48
ARTICLE 10
Covenants
Section 10.1 Payment of Principal, Premium and Interest 49
Section 10.2 Maintenance of Office or Agency 49
Section 10.3 Money for Securities Payments to Be Held in Trust 49
Section 10.4 Corporate Existence 51
Section 10.5 Waiver of Certain Covenants 51
Section 10.6 Certificate to Trustee 51
ARTICLE 11
Redemption of Securities
Section 11.1 Applicability of Article 52
Section 11.2 Election to Redeem; Notice to Trustee 52
Section 11.3 Selection by Trustee of Securities to Be Redeemed 52
Section 11.4 Notice of Redemption 53
Section 11.5 Deposit of Redemption Price 54
Section 11.6 Securities Payable on Redemption Date 54
Section 11.7 Securities Redeemed in Part 54
(iv)
TABLE OF CONTENTS
Page
----
ARTICLE 12
Sinking Funds
Section 12.1 Applicability of Article 55
Section 12.2 Satisfaction of Sinking Fund Payments with Securities 55
Section 12.3 Redemption of Securities for Sinking Fund 55
ARTICLE 13
Defeasance and Covenant Defeasance
Section 13.1 Applicability of Article; Company's Option to Effect
Defeasance or Covenant Defeasance 56
Section 13.2 Defeasance and Discharge 56
Section 13.3 Covenant Defeasance 57
Section 13.4 Conditions to Defeasance or Covenant Defeasance 57
Section 13.5 Deposited Money and U.S. Government Obligations to be
Held in Trust; Other Miscellaneous Provisions 59
Section 13.6 Reinstatement 60
ARTICLE 14
Immunity of Incorporators, Shareholders,
Officers and Directors
Section 14.1 Indenture and Securities Solely Corporate
Obligations 61
(v)
INDENTURE, dated as of _________, 1995, from CITIZENS UTILITIES COMPANY,
a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal administrative
offices at High Ridge Park, Building No. 3, Stamford, Connecticut 06905, to
CHEMICAL BANK, a New York banking corporation, as Trustee (herein called the
"Trustee"), having its principal corporate trust office at 450 West 33rd
Street, New York, New York 10001.
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein
called the "Securities"), to be issued in one or more series as in this
Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal
and proportionate benefit of all Holders of the Securities or of series
thereof, as follows:
ARTICLE 1
Definitions and Other Provisions
of General Application
Section 1.1 Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles,
and, except as otherwise herein expressly provided, the term "generally
accepted accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted at the date of such computation; and
Page 1
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified in
Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee to act
on behalf of the Trustee to authenticate Securities.
"Board of Directors", when used with reference to the Company, means either
the board of directors, or any duly authorized committee of the board of
directors, of the Company, as the case requires.
"Board Resolution", when used with reference to the Company, means a copy
of a resolution certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Book-Entry Security" means any Security registered in the name of CEDE &
Co., as nominee of DTC, or any successor to CEDE & Co. and/or DTC.
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in The City of New York are authorized or
obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor corporation shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or order, as
the case may be, signed in the name of the Company, by its Chairman of the
Board, its President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
Page 2
"Conversion Agent" means any Person authorized by the Company to convert
any Securities on behalf of the Company.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally
administered, which office, as at the date of this Indenture, is located at
450 West 33rd Street, 15th Floor, New York, New York 10001, Attn: Corporate
Trustee Administration Department.
The term "corporation" includes corporations, associations, companies and
business trusts.
The terms "defeasance" and "covenant defeasance" bear the meanings assigned
to such terms, respectively, by Sections 13.2 and 13.3.
"Delayed Interest" has the meaning specified in Section 3.7.
"DTC" or "Depository" means the securities depository, The Depository Trust
Company, New York, New York, and any successor.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Agent" means any Person authorized by the Company to exchange any
Securities on behalf of the Company.
"Fiscal Year" means with respect to the Company, the fiscal year ending
December 31 of each year or such other date as the Company may hereafter
elect, and with respect to any other Person, the calendar year or other
annual accounting period of the Person in question.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of particular series of Securities established
as contemplated by Section 3.1.
"Interest", when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Letter of Representation", with respect to the Securities of any series,
means that certain agreement by and among the Company, the Trustee and DTC
setting forth the rights
Page 3
and duties of DTC and its nominee to act as depository and registered owner,
with respect to such Securities.
"Maturity", when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary, of the Company and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides for
an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section
5.2.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
------
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Securities for whose payment or redemption money (or in the case
of payment by defeasance under Section 13.2, money, U.S. Government
obligations or both) in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; provided that, if such
--------
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee
has been made and provided further, in the case of payment by defeasance
----------------
under Section 13.2, that all conditions precedent to the application of such
Section shall have been satisfied; and
(iii) Securities which have been paid pursuant to Section 3.6 or
surrendered for conversion or exchange into other securities or in exchange
for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser in
whose hands such Securities are valid obligations of the Company;
Page 4
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, (i)
the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon
acceleration of the Maturity thereof pursuant to Section 5.2, (ii) the
principal amount of a Security denominated in a foreign currency or
currencies shall be the U.S. dollar equivalent, determined on the date of
original issuance of such Security, of the principal amount (or, in the case
of an Original Issue Discount Security, the U.S. dollar equivalent on the
date of original issuance of such Security of the amount determined as
provided in (i) above) of such Security, and (iii) Securities owned by the
Company, or any other obligor upon the Securities or any Affiliate of the
Company, or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Securities which the Trustee knows to be so
owned shall be so disregarded. Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to
the satisfaction of the Trustee the pledgee's independent right so to act
with respect to such Securities and that the pledgee is not the Company, or
any other obligor upon the Securities or any Affiliate of the Company or of
such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf
of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of (and premium, if any) and
interest on the Securities of that series are payable as specified as
contemplated by Section 3.1 or, if not so specified, the City of New York,
New York.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by
such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
Page 5
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Securities of any series means the date specified for that purpose as
contemplated by Section 3.1.
"Responsible Officer", when used with respect to the Trustee, means any
officer in the Corporate Trust Office of the Trustee and also means, with
respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.5.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal of such
Security or such installment of principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding Voting
Stock of which is owned, directly or indirectly, by the Company, or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed, provided, however, that
-------- -------
in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended, except as provided in Section
9.5 or Section 10.6.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "Trustee"
shall mean or include each Person who is then a Trustee hereunder, and if at
any time there is more than one such Person, "Trustee" as used with respect
to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"U.S. Government Obligation" has the meaning set forth in Section 13.4.
"Vice President", when used with respect to the Company, means any vice
president, whether or not designated by a number or a word or words added
before or after the title "vice president".
Page 6
"Voting Stock" means stock which ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency, but shall
not include securities convertible into such Voting Stock.
Section 1.2 Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of
this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.3 Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of any officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless
Page 7
such officer knows, or in the exercise of reasonable care should know, that
the certificate or opinion or representations with respect to the matters
upon which his certificate or opinion is based are erroneous. Any such
certificate or opinion of counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company stating that the information with respect
to such factual matters is in the possession of the Company unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4 Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent duly appointed
in writing; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to
the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument
or of a writing appointing any such agent shall be sufficient for any purpose
of this Indenture and (subject to Section 6.1) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the
same, may also be proved in any other manner which the Trustee deems
sufficient.
(c) The Company may, in the circumstances permitted by the Trust Indenture
Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action, or to vote on any action,
authorized or permitted to be given or taken by Holders. If not set by the
Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or,
if later, the date of the most recent list of Holders
Page 8
required to be provided pursuant to Section 7.1) prior to such first
solicitation or vote, as the case may be. With regard to any record date,
only the Holders on such date (or their duly designated proxies) shall be
entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee
or the Company in reliance thereon, whether or not notation of such action
is made upon such Security.
Section 1.5 Notices, Etc., to Trustee or Company.
------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed to
it at the address of its office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company.
Section 1.6 Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers
of notice by Holders shall be filed with the Trustee, but such filing shall
not be a condition precedent to the validity of any action taken in reliance
upon such waiver.
Page 9
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
Section 1.7 Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision
of this Indenture modifies or excludes any provision of the Trust Indenture
Act that may be so modified or excluded, the latter provision shall be deemed
to apply to this Indenture as so modified or to be excluded, as the case may
be.
Section 1.8 Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 1.9 Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 1.10 Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 1.11 Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 1.12 Governing Law.
-------------
This Indenture, and the Securities, shall be governed by and construed in
accordance with the laws of the State of New York.
Section 1.13 Legal Holidays.
--------------
Page 10
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security or the last date on which a Holder has the right to
convert or exchange his Securities shall not be a Business Day at any Place
of Payment, then (notwithstanding any other provision of this Indenture or
of the Securities) payment of interest or principal (and premium, if any) or
conversion or exchange of the Securities need not be made at such Place of
Payment on such date, but may be made on the next succeeding Business Day at
such Place of Payment with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity, or on
such last day for conversion or exchange, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, except that if such succeeding
Business Day falls in the next calendar year, payment shall be made on the
immediately preceding Business Day.
ARTICLE 2
Security Forms
Section 2.1 Forms Generally.
---------------
The Securities of each series shall be in substantially such form as shall
be established by or pursuant to a Board Resolution or, to the extent
authorized by a Board Resolution, an Officers' Certificate, or as set forth
in, or in an Exhibit to, any indenture supplemental hereto which establishes
such series in each case substantially in the form annexed to such Board
Resolution, Officers' Certificate or supplemental indenture, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of such
Securities. If the form of Securities of any series of such Securities is
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior
to the delivery of the Company Order contemplated by Section 3.3 for the
authentication and delivery of such Securities.
The Trustee's certificates of authentication shall be in substantially the
form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
Page 11
Section 2.2 Form of Trustee's Certificate of Authentication.
-----------------------------------------------
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
CHEMICAL BANK, as Trustee
By_________________________________
Authorized Signatory
ARTICLE 3
The Securities
Section 3.1 Amount Unlimited; Issuable in Series.
------------------------------------
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution or, to the extent authorized
by a Board Resolution, an Officers' Certificate, or established in one or
more indentures supplemental hereto, prior to the issuance of Securities of
any series, such of the following as may be appropriate to such series:
(1) the title of the Securities of the series (which shall distinguish
the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.7 and except for any
Securities which, pursuant to Section 3.3, are deemed never to have been
authenticated and delivered hereunder);
(3) the Person or Persons to whom any interest on a Security of the
series shall be payable, if other than the Person in whose name that Security
is registered at the close of business on the Regular Record Date for such
interest or the method of determining the same;
(4) the date or dates on which the principal of the Securities of the
series is payable or the method of determining the same;
Page 12
(5) the rate or rates (or method for establishing the rate or rates) at
which the Securities of the series shall bear interest, if any, the date or
dates from which such interest shall accrue, the Interest Payment Dates on
which such interest shall be payable and the Regular Record Date and/or
Special Record Date for the interest payable on any Interest Payment Date or
other date on which interest is paid (or method for establishing such date
or dates);
(6) the form of payment (whether by cash, securities or other property)
in satisfaction of interest requirements of the Securities of the series;
(7) the right of the Company, if any, to defer interest with respect the
Securities of the series;
(8) any subordination terms of the Securities of the series;
(9) the place or places where the principal of (and premium, if any) and
interest on Securities of the series shall be payable;
(10) if applicable, the period or periods within which, the price or
prices at which and the terms and conditions upon which Securities of the
series may be redeemed, in whole or in part, at the option of the Company;
(11) if applicable, the terms and conditions upon which the Securities
of the series may be convertible or exchangeable, in whole or in part;
(12) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous provisions
or at the option of a Holder thereof and the period or periods within which,
the price or prices at which and the terms and conditions upon which Secu-
rities of the series shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(13) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(14) if other than the full principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 5.2;
(15) if other than such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public or private
debts, the currency or currencies (including composite currencies) or
securities or other property in which payment of the principal of (and
premium, if any) and/or interest on the Securities of such series shall be
payable;
Page 13
(16) if the principal of (and premium, if any) and/or interest on the
Securities of such series are to be payable, at the election of the Company
or any Holder, in a currency or currencies (including composite currencies)
or securities or other property other than that in which the Securities are
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made;
(17) if the amounts of payments of principal of (and premium, if any)
and/or interest on the Securities of such series may be determined with
reference to an index, the manner in which such amounts shall be determined;
(18) in the case of Securities of a series the terms of which are not
established pursuant to subsection (15), (16) or (17) above, the application,
if any, of Section 13.2 and/or Section 13.3 to the Securities of such series;
or, in the case of Securities the terms of which are established pursuant to
subsection (15), (16) or (17) above, the adoption and applicability to such
Securities of any terms and conditions similar to those contained in Section
13.2 and/or Section 13.3;
(19) if applicable, the issuance of a global security representing all
of the Securities of such series and exchange of such global Security for
definitive or other Securities representing such series, or the issuance of
global securities of any other nature;
(20) any addition to, deletion or modification of any Event of Default
applicable to such series;
(21) any provisions providing for or governing one or more series of
global Securities, bearer Securities or Securities proposed to be listed or
quoted on or in any exchange or market, within or without the United States
of America, including provisions which establish the form and terms of such
Securities, including interest coupons, and govern the manner of payment of
principal and interest, registration and exchange of Securities, notice to
Holders, Acts of Holders, waivers and any and all other aspects thereof; and
(22) any other terms of the series (which terms shall not be in conflict
with the provisions of this Indenture which apply to such series).
All Securities of any one series shall be substantially identical except
as to interest rates, method for determining interest rates, Interest Payment
Dates, Regular Record Dates, redemption terms, Stated Maturity, denomination,
date of authentication, currency or other property, any index for determining
amounts payable, and except as may otherwise be provided in or pursuant to
such Board Resolution and set forth or determined as provided in such
Officers' Certificate or in any such indenture supplemental hereto.
Page 14
If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall
be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
Section 3.2 Denominations.
-------------
The Securities of each series shall be issuable in registered form without
coupons in such denominations as shall be specified as contemplated by
Section 3.1. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
Section 3.3 Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its President, one of its Vice Presidents or its Treasurer,
under its corporate seal reproduced thereon attested by its Secretary or one
of its Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did
not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Securities; and the Trustee in
accordance with such Company Order shall authenticate and deliver such
Securities. If the form or terms of the Securities of the series have been
established in or pursuant to one or more Board Resolutions or Officers'
Certificates as permitted by Sections 2.1 and 3.1, in authenticating such
Securities, and accepting the additional responsibilities under this
Indenture in relation to such Securities, the Trustee shall be entitled to
receive, and (subject to Section 6.1) shall be fully protected in relying
upon, an Opinion of Counsel stating,
(a) if the form of any of such Securities has been established by or
pursuant to Board Resolution or Officers' Certificate as permitted by Section
2.1, that such form has been established in conformity with the provisions
of this Indenture;
(b) if the terms of any of such Securities have been established by or
pursuant to Board Resolution or Officers' Certificate as permitted by Section
3.1, that such terms have been established in conformity with the provisions
of this Indenture; and
Page 15
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute valid and legally
binding obligations of the Company enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting the enforcement of creditors' rights
and to general equity principles.
If the Company shall establish pursuant to Section 3.1 that the Securities
of a series are to be issued in the form of one or more registered global
securities, then the Company shall execute and the Trustee shall, in
accordance with this Section and the Company Order with respect to such
series, authenticate and deliver one or more registered global securities
that (a)(i) shall represent and shall be denominated in an amount equal to
the aggregate principal amount of all of the Securities of such series issued
and not yet canceled, (ii) shall be registered in the name of DTC or a
nominee of DTC, (iii) shall be delivered by the Trustee to DTC or pursuant
to DTC's instructions, and (iv) shall bear a legend substantially to the
following effect: "Unless and until it is exchanged in whole or in part for
Securities in definitive registered form, this Security may not be trans-
ferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another nominee of DTC or by DTC or any such nominee to a successor
to DTC or a nominee of such successor" or such other legend as shall be
acceptable to DTC; or (b) shall comply with such other terms or procedures
as may be set forth in a Company Order with respect to such series.
Notwithstanding that such form or terms have been so established, the Trustee
shall not be required to authenticate such Securities if the issue of such
Securities pursuant to this Indenture would adversely affect the Trustee's
own rights, duties or immunities under the Securities and this Indenture or
otherwise in a manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at
one time, it shall not be necessary to deliver the Officers' Certificate
otherwise required pursuant to Section 3.1 or the Company Order and Opinion
of Counsel otherwise required pursuant to such preceding paragraph at or
prior to the time of authentication of each Security of such series if such
documents are delivered at or prior to the time of authentication upon
original issuance of the first Security of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and is entitled
to the benefits of this Indenture. Notwithstanding the foregoing, if any
Security shall have been authenticated and delivered hereunder but never
issued and sold by the Company, and the Company shall deliver such Security
to the Trustee for cancellation as provided in Section 3.9,
Page 16
together with an Officers' Certificate (which need not comply with Section
1.2 and need not be accompanied by an Opinion of Counsel) stating that such
Security has never been issued and sold by the Company, for all purposes of
this Indenture such Security shall be deemed never to have been authenticated
and delivered hereunder and shall never be entitled to the benefits of this
Indenture.
Section 3.4 Temporary Securities.
--------------------
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order, the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive securities in lieu of which they
are issued, with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities of any series, the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of the same series and of like
tenor, of authorized denominations. Until so exchanged, the temporary
Securities of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of such series.
Section 3.5 Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office being herein
sometimes referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of any series
at the office or agency in a Place of Payment for that series, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name
of the designated transferee or transferees, one or more new Securities of
the same series, of any authorized denominations and of a like aggregate
principal amount and tenor.
Page 17
At the option of the Holder, Securities of any series may be exchanged for
other Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor, upon surrender of the Securities
to be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange
is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company evidencing the same
debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities,
other than exchanges pursuant to Section 3.4, 9.6 or 11.7 not involving any
transfer.
The Company shall not be required (i) to issue, register the transfer of
or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption
of Securities of that series selected for redemption under Section 11.3 and
ending at the close of business on the day of such mailing, or (ii) to
register the transfer of or exchange any Security so selected for redemption
in whole or in part, except the unredeemed portion of any Security being
redeemed in part.
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor
a new Security of the same series and of like tenor and principal amount, and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them
and any agent of any of them harmless then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security
Page 18
of the same series and of like tenor and principal amount, and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmen-
tal charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series, issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Securities of that series duly
issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7 Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Unless otherwise provided as contemplated by Section 3.1 with respect to
any series of Securities, interest on any Security which is payable (unless
payment has been deferred pursuant to the exercise of a right of the Company
so to defer), and is punctually paid or duly provided for, on any Interest
Payment Date shall be paid to the Person in whose name that Security (or one
or more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for for any reason, including the exercise
of a right of the Company to defer such interest payment, on any Interest
Payment Date (herein called "Delayed Interest") shall forthwith cease to be
payable to the Person entitled to such interest by virtue of having been such
Holder, and such Delayed Interest may be paid by the Company, at its election
in each case, as provided in Clauses (1), (2) or (3) below:
(1) With respect to any Delayed Interest resulting from the exercise of
a right of the Company to defer such Delayed Interest, the Company may elect
to make payment, in whole or in part, as hereinafter provided in this
subparagraph (1). The Company may elect to make payment to the Persons in
whose names the Securities of such series are registered at the close of
business on a Special Record Date for the payment of such Delayed Interest,
which shall be fixed by the Company in the
Page 19
following manner: The Company shall notify the Trustee in writing of the
amount of Delayed Interest proposed to be paid on each Security of such
series, the date of the proposed payment, if payment is to be in shares of
Common Stock (the "Special Stock Transfer and Valuation Date"), and the date
of the proposed payment if payment is to be in cash (the "Special Cash
Interest Payment Date"), which shall also be the "Special Distribution
Payment Date" for purposes of the Partnership Preferred Securities and the
Convertible Preferred Securities and the related distribution. Thereupon the
Company shall fix a special record date (the "Special Record Date") for the
payment of such Delayed Interest which shall be not more than 35 days and not
less than 10 days prior to the date of the proposed payment. The Company
shall promptly cause notice of the proposed payment of such Delayed Interest
and the Special Record Date, Special Stock Transfer and Valuation Date,
Special Cash Interest Payment Date and Special Distribution Payment Date
therefor to be mailed, first-class postage prepaid, or delivered by courier
service or by hand delivery or by any other manner deemed practicable by the
Trustee, to each Holder of Securities of such series at his address as it
appears in the Security Register, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Delayed Interest and
such dates therefor having been so mailed or delivered, such Delayed Interest
shall be paid to the Persons in whose names the Securities of such series are
registered at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following Clauses (2) or (3).
(2) With respect to any Delayed Interest which has not been the subject
of the exercise of the Company's right to defer, the Company may elect to
make payment of any Delayed Interest to the Persons in whose names the
Securities of such series (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the payment
of such Delayed Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Delayed Interest
proposed to be paid on each Security of such series and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid
in respect of such Delayed Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the Persons
entitled to such Delayed Interest as in this Clause provided. Thereupon the
Trustee shall fix a special record date (the "Special Record Date") for the
payment of such Delayed Interest which shall be not more than 30 days and not
less than 10 days prior to the date of the proposed payment and not less than
10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Delayed Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, or delivered
by courier service or by hand delivery, or by any other manner deemed
practicable by the Trustee, to each Holder of Securities of such series at
his address as it appears in the Security Register, not less than 10 days
prior to such
Page 20
Special Record Date. Notice of the proposed payment of such Delayed Interest
and the Special Record Date therefor having been so mailed or delivered, such
Delayed Interest shall be paid to the Persons in whose names the Securities
of such series (or their respective Predecessor Securities) are registered
at the close of business on such Special Record Date and shall no longer be
payable pursuant to the following Clause (3).
(3) The Company may make payment of any Delayed Interest on the
Securities of any series in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed or any book-entry security system which may be applicable to the
Debentures, and upon such notice as may be required by such exchange or
system, if, after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
In the case of any Security which is converted or exchanged (other than
exchanges pursuant to Section 3.5) after any Regular Record Date or Special
Record Date and on or prior to the next succeeding Interest Payment Date
(other than any Security whose Maturity is prior to such Interest Payment
Date), interest whose Stated Maturity is on such Interest Payment Date shall
be payable on such Interest Payment Date notwithstanding such conversion or
exchange, and such interest (whether or not punctually paid or duly provided
for) shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on such
Regular Record Date or Special Record Date. Except as otherwise expressly
provided in the immediately preceding sentence, in the case of any Security
which is converted or exchanged, interest whose Stated Maturity is after the
date of conversion or exchange of such Security shall not be payable, and the
Company shall not make nor be required to make any other payment, adjustment
or allowance with respect to accrued but unpaid interest on the Securities
being converted or exchanged.
Section 3.8 Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium,
if any) and (subject to Section 3.7) interest on such Security and for all
other purposes whatsoever, whether or not such Security be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Page 21
Section 3.9 Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange or conversion or exchange or for credit against any
sinking fund payment shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee
for cancellation any Securities previously authenticated hereunder which the
Company has not issued and sold and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in
lieu of or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of as directed by a Company
Order from the Company or in the absence of such Company Order, in accordance
with the Trustee's standard procedures.
Section 3.10 Computation of Interest.
-----------------------
Except as otherwise specified as contemplated by Section 3.1 for Securities
of any series, interest on the Securities of each series shall be computed
on the basis of a 360-day year of twelve 30-day months.
Section 3.11 Book-Entry Securities.
---------------------
(a) Except as provided in subsection (c) of this Section 3.11, the
registered owner of all Securities of any series of Securities which is
designated as a Book-Entry Security series in the Board Resolution, Officers'
Certificate, indenture supplemental hereto establishing such series, or other
instrument supplemental hereto, shall be CEDE & Co., as nominee of DTC.
Payment of interest for any Securities registered as of each Record Date in
the name of CEDE & Co. shall be made by wire transfer to the account of CEDE
& Co. on the Interest Payment Date for such Securities at the address
indicated on the Record Date for CEDE & Co. in the registration books of the
Company kept by Trustee, as Security Registrar.
(b) With respect to any Book-Entry Securities, the Securities shall be
issued or registered in the form of one or more fully registered global
securities in the principal amount of each separate series of the Securities.
Upon issuance or registration, the ownership of such Securities shall be
registered in the registration books of the Company kept by the Trustee in
the name of CEDE & Co., as nominee of DTC. The Trustee and the Company may
treat DTC (or its nominee) as the sole and exclusive owner of the Securities
registered in its name for the purposes of payment of the principal of,
premium, if any, or interest on such Securities, giving any notice permitted
or required to be given to Holders under this Indenture, registering the
transfer of such Securities, obtaining any consent or other action to be
taken by Holders and for all other purposes whatsoever; and neither the
Trustee nor the Company shall be affected by any notice to the contrary.
Neither the Trustee nor the Company shall have any responsibility or
obligation to any DTC participant, any Person claiming a beneficial ownership
interest in Securities registered in
Page 22
the name of CEDE & Co. under or through DTC or any DTC participant, or any
other Person which is not shown on the registration books of the Company kept
by the Trustee as being a Holder with respect to the accuracy of any records
maintained by DTC, CEDE & Co. or any DTC participant; the payment by DTC or
any DTC participant to any beneficial owner of any amount in respect of the
principal of, premium, if any, or interest on the Securities registered in
the name of CEDE & Co.; the delivery to any DTC participant or any beneficial
owner of any notice which is permitted or required to be given to Holders
under this Indenture; the selection by DTC or any DTC participant of any
Person to receive payment in the event of a partial payment of any Securities
registered in the name of CEDE & Co.; or any consent given or other action
taken by DTC as Holder. The Paying Agent shall pay all principal of,
premium, if any, and interest on any Securities registered in the name of
CEDE & Co., only to or upon the order of CEDE & Co., as nominee of DTC, and
all such payments shall be valid and effective to fully satisfy and discharge
the Company's obligations with respect to the principal of, premium, if any,
and interest on such Securities to the extent of the sum or sums so paid.
Upon delivery by DTC to the Trustee of written notice to the effect that DTC
had determined to substitute a new nominee in place of CEDE & Co., and
subject to the provisions herein with respect to record dates, the words
"CEDE & Co." in this Indenture shall refer to such new nominee of DTC.
(c) With respect to any series of Securities registered or proposed to be
registered in the name of CEDE & Co., in the event that (i) DTC gives or has
given notice that it will discontinue its services as securities depository
for such series of Securities; or (ii) DTC ceases or has ceased to be a
clearing house registered under the Securities Exchange Act of 1934; or
(iii) the Company in its sole discretion determines or has determined that the
beneficial owners of such Securities will be entitled to obtain definitive
certificates; or (iv) an Event of Default with respect to such series has
occurred and is continuing, the Company shall, if the event is triggered by
either (i) or (ii) above, attempt to locate another qualified securities
depository. If the Company fails to locate such a replacement or if the event
is triggered by either (iii) or (iv) above, then it shall notify DTC and the
Trustee, requesting DTC to notify its participants, of the availability
through DTC of definitive certificates. In any such event, the Trustee shall
issue, register the transfer of and exchange definitive certificates as
requested by DTC and any other Holders in appropriate amounts. The Company
and the Trustee shall be obligated to deliver definitive certificates as
described in this Indenture. In the event definitive certificates are
issued to Holders other than DTC, the provisions of this Indenture shall apply
to, among other things, the registration, transfer of and exchange of such
certificates and the method of payment of principal of, premium, if any, and
interest on such certificates. Whenever DTC requests the Company and the
Trustee to do so, the Trustee and the Company will cooperate with DTC in
taking appropriate action after reasonable notice (i) to make available one
or more separate certificates evidencing the Securities registered in the
name of CEDE & Co., to any DTC participant having Securities credited to its
DTC account or (ii) to arrange for another securities depository to maintain
custody of certificates evidencing such Securities. If the Company uses a
securities depository other than DTC, the provisions of this Section shall
apply with the appropriate modifications.
Page 23
(d) Notwithstanding any other provision of this Indenture to the contrary,
so long as any Securities are registered in the name of CEDE & Co., as
nominee of DTC, all payments with respect to the principal of, premium, if
any, and interest on such Securities and all notices, with respect to such
Securities shall be made and given to DTC as provided in the applicable
Letter of Representation.
(e) In connection with any notice or other communication to be provided
to Holders pursuant to this Indenture by the Company or the Trustee with
respect to any consent or other action to be taken by Holders so long as any
Securities of a series are registered in the name of CEDE & Co., as nominee
of DTC, the Company or the Trustee, as the case may be, shall establish a
record date for such consent or other action and give DTC notice of such
record date not less than 15 calendar days in advance of such record date to
the extent possible.
(f) The notice requirements set forth in the Letter of Representation
relating to the Securities of any series with respect to redemptions,
conversions and mandatory tenders shall be effective whenever such Securities
are Book-Entry Securities, notwithstanding any other provisions of this
Indenture, to the extent such other provisions are incompatible with the
notice requirements set forth in the Letter of Representation.
ARTICLE 4
Satisfaction and Discharge
Section 4.1 Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of conversion, exchange, registration of
transfer or exchange of Securities herein expressly provided for), and the
Trustee, on the demand of and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this
Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other than
(i) Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 3.6 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held
in trust by, the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 10.3) have been delivered to the
Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
Page 24
(ii) will become due and payable at their Stated Maturity within one
year, or
(iii) are to be called for redemption under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest to the date of such deposit
(in the case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of
clause (1) of this Section, the obligations of the Trustee under Section 4.2
and the last paragraph of Section 10.3 shall survive.
Section 4.2 Application of Trust Money.
--------------------------
Subject to provisions of the last paragraph of Section 10.3, all money
deposited with the Trustee pursuant to Section 4.1, shall be held in trust
and applied by it, in accordance with the provisions of the Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine,
to the Persons entitled thereto, of the principal (and premium, if any) and
interest for whose payment such money has been deposited with or received by
the Trustee as contemplated by Section 4.1. Subject to Section 3.7, all
moneys deposited with the Trustee (and held by it or any Paying Agent) for
the payment of any Securities which are subsequently converted or exchanged
shall be returned to the Company upon Company Request.
Page 25
Section 4.3 Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or securities
in accordance with Section 4.2 of this Indenture, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
the Company's obligations under this Indenture and the Securities shall be
revived and reinstated as though no deposit had occurred pursuant to Section
4.1 of this Indenture until such time as the Trustee or Paying Agent is
permitted to apply all such money or securities in accordance with Section
4.2 of this Indenture; provided that, if the Company has made any payment of
--------
principal of or interest on any Securities because of the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the money or securities held
by the Trustee or Paying Agent.
Page 26
ARTICLE 5
Remedies
Section 5.1 Events of Default.
-----------------
"Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 60 days; or
(2) default in the payment of the principal of (or premium, if any, on)
any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as due
by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a default
in whose performance or whose breach is elsewhere in this Section specifical-
ly dealt with or which has expressly been included in this Indenture solely
for the benefit of a series of Securities other than that series), and
continuance of such default or breach for a period of 90 days after there has
been given, by registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the Holders of a majority in principal
amount of the Outstanding Securities of that series a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(5) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the
continuance any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 60 consecutive days; or
Page 27
(6) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or order
for relief in respect of the Company in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable Federal or
State law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or of any
substantial part of its property, or the making by either of them of an
assignment for the benefit of creditors, or the admission by either of them
in writing of its inability to pay its debts generally as they become due,
or the talking of corporate action by the Company in furtherance of any such
action; or
(7) any other Event of Default provided with respect to Securities of
that series;
it being understood that in each case (other than those described in
paragraphs (1) through (3) above to the extent the Trustee is the Paying
Agent for the Securities of such series) the Trustee shall not be deemed to
have knowledge of an Event of Default hereunder unless a Responsible Officer
has received written notice thereof.
Nothing contained in this Section 5.1 shall limit the rights of the Company
to add, delete or modify any Event of Default or other similar event with
respect to one or more series of Securities at the time of establishment of
any such series as provided in Section 3.1 hereof.
Section 5.2 Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee
or the Holders of a majority in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if any of the
Securities of that series are Original Issue Discount Securities, such
portion of the principal amount of such Securities as may be specified in the
terms thereof) of all of the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if
given by Holders), and upon any such declaration such principal amount (or
specified amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in
this Article provided, the Holders of a
Page 28
majority in principal amount of the Outstanding Securities of that series,
by written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series, other
than interest deferred in accordance with the provisions of any
supplemental indenture,
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate or rates prescribed therefor in
such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee.
-------------------------------------------------------
The Company covenants that if
(1) default occurs in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for a period
of 60 days;
(2) default occurs in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof; or
Page 29
(3) default occurs in the deposit of any sinking fund payment, when and
as due by the terms of a Security of that series;
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest and, to the
extent that payment of such interest shall be legally enforceable, interest
on any overdue principal (and premium, if any) and on any overdue interest,
at the rate or rates prescribed therefor in such Securities, and, addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute
a judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the
same against the Company or any other obligor upon such Securities and
collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon such
Securities, wherever situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series
by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise, to take any and all actions authorized by the Trust Indenture
Act in order to have claims of the Holders of Securities of any series and
the Trustee allowed in any such proceeding. In particular the Trustee shall
be authorized,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be
necessary or advisable in order to, have the claims of the Trustee
(including any claim for the reasonable compensation,
Page 30
expenses, disbursements and advances of the Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
Section 5.5 Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 5.6 Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal (or
premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.7;
and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or
Page 31
priority of any kind, according to the amounts due and payable on such
Securities for principal (and premium, if any) and interest,
respectively.
Section 5.7 Limitation on Suits.
-------------------
No Holder of any Security of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of a majority in principal amount of the Outstanding
Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 90 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 90-day period by the Holders of 66-2/3% in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any
other of such Holders, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all of such Holders.
Section 5.8 Unconditional Right of Holders to Receive Principal, Premium
and Interest and to Convert or Exchange.
------------------------------------------------------------
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 3.7) interest on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date), to convert or exchange such Security in accordance with the terms of
any supplemental indenture providing for conversion or exchange, and to
institute
Page 32
suit for the enforcement of any such payment and right to convert or
exchange, and such rights shall not be impaired without the consent of such
Holder.
Section 5.9 Restoration of Rights and Remedies
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontin-
ued or abandoned for any reason, or has been determined adversely to the
Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
Section 5.10 Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder
or now or hereafter existing at law or in equity or otherwise. The assertion
or employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other appropriate right
or remedy.
Section 5.11 Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default
or an acquiescence therein. Every right and remedy given by this Article or
by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
Section 5.12 Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee with respect to the
Securities of such series, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, nor subject the Trustee to a material risk of
personal liability, and
Page 33
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 5.13 Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to
such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder
of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent
or other default or impair any right consequent thereon.
Section 5.14 Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard
to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the outstanding Securities of any series, or
to any suit instituted by any Holder for the enforcement of the right to
receive payment of the principal of (or premium if any) or interest on any
Security on or after the Stated Maturity or Maturities expressed in such
Security (or, in the case of redemption, on or after the Redemption Date) or
to convert or exchange any Security.
Page 34
Section 5.15 Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that.it may lawfully do so) that it
will not at any time insist upon or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
ARTICLE 6
The Trustee
Section 6.1 Certain Duties and Responsibilities.
-----------------------------------
The duties and responsibilities of the Trustee shall be as provided by the
Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it. Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
Section 6.2 Notice of Defaults.
------------------
The Trustee shall give the Holders notice of any default hereunder as and
to the extent provided by the Trust Indenture Act; provided, however, that
-------- -------
in the case of any default of the character specified in Section 5.1(4), no
such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would
become, an Event of Default.
Section 6.3 Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of
Page 35
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, or as
otherwise expressly provided herein, and any resolution of the Board
of Directors of the Company may be sufficiently evidenced by a Board
Resolution;
(c) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(e) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney; and
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents
or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder.
Whenever in the administration of this Indenture the Trustee shall deem it
desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate.
Section 6.4 Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the
Company and the Trustee or any Authenticating Agent assumes no responsibility
for their correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities. The
Page 36
Trustee or any Authenticating Agent shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
Section 6.5 May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar, any Conversion Agent, any Exchange Agent or any other agent of the
Company or of the Trustee, in its individual or any other capacity, may
become the owner or pledgee of Securities and, subject to Sections 6.8 and
6.13, may otherwise deal with the Company with the same rights it would have
if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar, Conversion Agent, Exchange Agent or such other agent in writing.
Section 6.6 Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under
no liability for interest on money received by it hereunder except as
otherwise agreed with the Company.
Section 6.7 Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provi-
sion of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to the
Trustee's negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
As security for the performance of the obligations of the Company under
this Section the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of, premium, if any, or interest,
if any, on particular Securities.
Page 37
Section 6.8 Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject
to the provisions of, the Trust Indenture Act and this Indenture. Nothing
herein shall prohibit the Trustee from filing the application described in
the penultimate paragraph of Section 3.10(b) of the Trust Indenture Act as
the same is in effect on the date of this instrument, or any successor
provision or any other application seeking similar relief.
Section 6.9 Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a corpora-
tion organized and doing business under the laws of the United States of
America, any state thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination by
Federal or State authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section,
the combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
Section 6.10 Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 6.11
shall not have been delivered to the Trustee within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
outstanding Securities of such series, delivered to the Trustee and to the
Company.
(d) If at any time:
Page 38
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and shall
fail to resign after written request therefor by the Company or any
such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case,
(i) the Company, by a Board Resolution, may remove the Trustee with
respect to all Securities, or (ii) subject to Section 5.14, any Holder
who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee with
respect to all Securities and the appointment of a successor Trustee
or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with
respect to the Securities of that or those series (it being understood that
any such successor Trustee may be appointed with respect to the Securities
of one or more or all of such series and that at any time there shall be only
one Trustee with respect to the Securities of any particular series) and
shall comply with the applicable requirements of Section 6.11. If, within
one year after such resignation, removal or incapability, or the occurrence
of such vacancy, a successor Trustee with respect to the Securities of any
series shall be appointed by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series delivered to the Company
and the retiring Trustee, the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment in accordance with the applicable
requirements of Section 6.11, become the successor Trustee with respect to
the Securities of such series and to that extent supersede the successor
Trustee appointed by the Company. If no successor Trustee with respect to
the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 6.11,
any Holder who has been a bona fide Holder of a Security of such series for
at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment
of a successor Trustee with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by
mailing written notice of such event by first-class mail, postage prepaid,
to all Holders of Securities of such series as their
Page 39
names and addresses appear in the Security Register. Each notice shall
include the name of the successor Trustee with respect to the Securities of
such series and the address of its Corporate Trust Office.
Section 6.11 Acceptance of Appointment by Successor.
--------------------------------------
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Trustee; but,
on the request of the Company or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of
the retiring Trustee and shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee
hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company,
the retiring Trustee and each successor Trustee with respect to the
Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be necessary
or desirable to transfer and confirm to, and to vest in, each successor
Trustee all the rights, powers, trusts and duties of the retiring Trustee
with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates, (2) if the retiring Trustee
is not retiring with respect to all Securities, shall contain such provisions
as shall be deemed necessary or desirable to confirm that all the rights,
powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring Trustee, and (3) shall
add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein
or in such supplemental indenture shall constitute such Trustees co-trustees
of the same trust and that each such Trustee shall be trustee of a trust or
trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery
of such supplemental indenture the resignation or removal of the retiring
Trustee shall become effective to the extent provided therein and each such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee
with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates; but, on request of the Company
or any successor Trustee, such retiring Trustee shall duly assign, transfer
and deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
Page 40
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) and (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
Section 6.12 Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further act
on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
Section 6.13 Preferential Collection of Claim Against Company.
------------------------------------------------
If and when the Trustee shall be, or shall become, a creditor, directly or
indirectly, secured or unsecured, of the Company (or any other obligor upon
the Securities), the Trustee shall be subject to the provisions of Section
3.11 of the Trust Indenture Act.
Section 6.14 Appointment of Authenticating Agent.
-----------------------------------
At any time when any of the Securities remain Outstanding, the Trustee may
appoint an Authenticating Agent or Agents with respect to one or more series
of Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon exchange, registration of
transfer or partial redemption thereof or pursuant to Section 3.6, and
Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authen-
ticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or
the Trustee's certificate of authentication, such reference shall be deemed
to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf
of the Trustee by an Authenticating Agent. Each Authenticating Agent shall
be acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States of America,
any State thereof or the District of Columbia, authorized under such laws to
act as Authenticating Agent, having a combined capital and
Page 41
surplus of not less than $50,000,000 and subject to supervision or examina-
tion by Federal or State authority. If such Authenticating Agent publishes
reports of condition at least annually, pursuant to law or to the require-
ments of said supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time an Authenticat-
ing Agent shall cease to be eligible in accordance with the provisions of
this Section, such Authenticating Agent shall resign immediately in the
manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to the corporate agency
or corporate trust business of an Authenticating Agent, shall continue to be
an Authenticating Agent, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or
any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to
such Authenticating Agent and the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticat-
ing Agent which Authenticating Agent shall be acceptable to the Company and
shall mail written notice of such appointment by first-class mail, postage
prepaid, to all Holders of Securities of the series with respect to which
such Authenticating Agent will serve, as their names and addresses appear in
the Security Register. Any successor Authenticating Agent upon acceptance
of its appointment hereunder shall become vested with all the rights, powers
and duties of its predecessor hereunder, with like effect as if originally
named as an Authenticating Agent. No successor Authenticating Agent shall
be appointed unless eligible under the provisions of this section.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate cer-
tificate of authentication in the following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
Page 42
CHEMICAL BANK, as Trustee
By:_________________________________
As Authenticating Agent
By:_________________________________
Authorized Signatory
ARTICLE 7
Holders' Lists and Reports by Trustee and Company
Section 7.1 Company to Furnish Trustee Names and Addresses of Holders.
---------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee
(1) semi-annually, not later than 15 days after each Regular Record
Date (or, if there is no Regular Record Date relating to a series,
semi-annually on dates set forth in the Board Resolution, Officers'
Certificate or supplemental indenture with respect to such series), a
list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such date, and
(2) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list
of similar form and content as of a date not more than 15 days prior
to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in
- ---------
its capacity as Security Registrar.
Section 7.2 Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Securities and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
Page 43
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act.
Section 7.3 Reports by Trustee.
------------------
(a) On or before May 15, 1996 and on or before May 15 in each year
thereafter, so long as any Securities are Outstanding hereunder, the Trustee
shall transmit to Holders such reports concerning the Trustee and its actions
under this Indenture as may be required pursuant to the Trust Indenture Act
in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each securities exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any securities
exchange.
Section 7.4 Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and transmit
to Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant to such Act; provided that any such
--------
information, documents or reports required to be filed by the Company with
the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 shall be filed with the Trustee within 15 days after the same is so
required to be filed with the Commission.
ARTICLE 8
Consolidation, Merger, Conveyance, Transfer or Lease
Section 8.1 Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company, or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) (a) the Company shall be the surviving entity, or (b) the
surviving, resulting or transferee Person, as the case may be, shall
be a legal entity organized and existing under the laws of one of the
states of the United States of America or the District of Columbia,
shall have a consolidated net worth immediately
Page 44
subsequent to such consolidation, merger, conveyance, transfer or lease
at least equal to that of the Company immediately prior to such
consolidation, merger, conveyance, transfer or lease and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form reasonably satisfactory to the
Trustee, the due and punctual payment of the principal of (and premium,
if any) and interest on all the Securities and the performance and
observance of every covenant of this Indenture on the part of the
Company to be performed or observed; and
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be
continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental
indenture comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied
with.
Section 8.2 Successor Substituted.
---------------------
Upon any consolidation by the Company with or merger by the Company into
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with Section
8.1, the successor Person formed by such consolidation, or into which the
Company is merged or to which such conveyance, transfer or lease is made,
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except
in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the Securities.
ARTICLE 9
Supplemental Indentures
Section 9.1 Supplemental Indentures Without Consent of Holders
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes with respect to one or more series
of Securities:
Page 45
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are
to be for the benefit of less than all series of Securities, stating
that such covenants are expressly being included solely for the benefit
of such series) or to surrender any right or power herein conferred
upon the Company; or
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance
of Securities in bearer form, registerable or not registerable as to
principal, and with or without interest coupons, or to permit or
facilitate the issuance of Securities in uncertificated form, or to
permit or facilitate compliance with the procedures or requirements of
any securities exchange or market within or without the United States
of America on or in which such series may be proposed for listing or
quotation; or
(5) to provide for modifications of the DTC book-entry system or
adoption of additional or alternative systems of book-entry systems;
or
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective
--------
only when there is no Security Outstanding of any series created prior
to the execution of such supplemental indenture which is entitled to
the benefit of such provision; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 and 3.1; or
(8) to make provisions with respect to the conversion or exchange
rights of Holders of any series of Securities; or
(9) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series or to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 6.11(b); or
(10) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions
arising under this Indenture, provided such action shall not adversely
--------
Page 46
affect the interests of the Holders of Securities of any series in any
material respect.
Section 9.2 Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than 66 2/3% in principal
amount of the Outstanding Securities of all series affected by the proposed
indenture or indentures supplemental hereto referred to below by Act of said
Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no
-------- -------
such supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of principal of or interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or reduce the amount of the principal of
an Original Issue Discount Security that would be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to
Section 5.2, or impair the right to institute suit for the enforcement
of any such payment on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date), or adversely
affect the right to convert or exchange any Security, or modify the
provisions of any supplemental indenture with respect to the
subordination of any Security in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture, or
(3) modify any of the provisions of this Section or Section 5.13,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby;
provided, however, that this clause shall not be deemed to require the
-------- -------
consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section, or the deletion of
this proviso, in accordance with the requirements of Sections 6.11(b)
and 9.1(7).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of
Page 47
such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under this Indenture of the Holders of Securities
of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any supplemen-
tal indenture permitted by this Article or the modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties, immunities or liabilities under this Indenture
or otherwise.
Section 9.4 Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 9.5 Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.6 Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture
may be prepared and executed by the Company and such Securities may be
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of such series.
Page 48
ARTICLE 10
Covenants
Section 10.1 Payment of Principal, Premium and Interest.
------------------------------------------
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities of that series in accordance
with the terms of the Securities and this Indenture.
Section 10.2 Maintenance of Office or Agency.
-------------------------------
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange, where Securities of
that series, if convertible or exchangeable other than as contemplated by
Section 3.5, may be surrendered for conversion or exchange, and where notices
and demands to or upon the Company in respect of the Securities of that
series and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee,
and the Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
-------- -------
shall in any manner relieve the Company of its obligation to maintain an
office or agency in each Place of Payment for Securities of any series for
such purposes. The Company will give prompt written notice to the Trustee
of any such designation or rescission and of any change in the location of
any such other office or agency.
Section 10.3 Money for Securities Payments to Be Held in Trust.
-------------------------------------------------
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of
that series, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and premium, if any)
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee
of its failure so to act.
Page 49
Whenever the Company shall have one or more Paying Agents for any series
of Securities, it will, on or before each due date of the principal of (and
premium, if any) or interest on any Securities of that series, deposit with
a Paying Agent a sum sufficient to pay the principal (and premium, if any)
or interest so becoming due, such sum to be held in trust for the benefit of
the Persons entitled to such principal, premium or interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of
its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities of that series in trust for
the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company in the
making of any payment of principal (and premium, if any) or interest
on the Securities of that series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust
by the Company or such Paying Agent, such sums to be held by the Trustee upon
the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect
to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company in trust for the payment of the principal of (and premium, if
any) or interest on any Security of any series and remaining unclaimed for
one year after such principal (and premium, if any) or interest has become
due and payable shall be paid to the Company, on Company Request, or (if then
held by the Company) shall be discharged from such trust; and the Holder of
such Security shall thereafter, as an unsecured general creditor, look only
to the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that
-------- -------
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be
Page 50
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
Section 10.4 Corporate Existence.
-------------------
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence.
Section 10.5 Waiver of Certain Covenants.
---------------------------
A Board Resolution or Officers' Certificate or indenture supplemental
hereto which establishes the terms of a series of Securities may provide that
specified terms, provisions and conditions are subject to this Section. In
such event the Company may omit in any particular instance to comply with any
such term, provision or condition with respect to the Securities of such
series if before the time for such compliance the Holders of at least 66 2/3%
in principal amount of the Outstanding Securities of such series shall, by
Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such term, provision or condition. No such
waiver shall extend to or affect such term, provision or condition except to
the extent so expressly waived, and until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in respect of
any such term, provision or condition shall remain in full force and effect.
Section 10.6 Certificate to Trustee.
----------------------
So long as the same shall be required by the Trust Indenture Act, the
Company will deliver to the Trustee, within 120 days of the end of each
fiscal year (or such other time or times as may be required by the Trust
Indenture Act as then in effect) a certificate signed by its principal
executive officer, principal financial officer or principal accounting
officer as to his or her knowledge of the Company's compliance with all
conditions and covenants under this Indenture (such compliance to be
determined without regard to any period of grace or requirement of notice
provided in this Indenture) or in such other form and with such other
signatories as may be required by the Trust Indenture Act as then in effect.
Page 51
ARTICLE 11
Redemption of Securities
Section 11.1 Applicability of Article.
------------------------
Securities of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 3.1 for Securities of any series) in
accordance with this Article.
Section 11.2 Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities shall be evidenced by
a Board Resolution. In the case of any redemption at the election of the
Company of all the Securities of any series, the Company shall, at least 35
days prior to the Redemption Date fixed by the Company (unless a shorter
period shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date. In case of any redemption at the election of the Company
of less than all the Securities of any series, the Company shall, at least
40 days prior to the Redemption Date fixed by the Company (unless a shorter
period shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities of such series to
be redeemed. In the case of any redemption of securities prior to the
expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction. The Company may rescind its election to redeem Securities by
notice to the Trustee at any time on or before 20 days prior to the
Redemption Date (unless a shorter period shall be satisfactory to the
Trustee). To the extent the foregoing rescission provisions and the
rescission provisions of Section 11.4 are inconsistent with applicable book-
entry procedures of DTC, or any other record owner of registered global
securities, such rescission provisions shall be modified to the extent
necessary to permit coordination or conformity with such procedures, but the
minimum time limitations of the rescission provisions shall not be reduced.
Section 11.3 Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities of like tenor of any series are to be
redeemed, the particular Securities to be redeemed shall be selected not more
than 35 days prior to the Redemption Date (unless a shorter period shall be
satisfactory to the Trustee and the Company) by the Trustee, from the
Outstanding Securities of such series not previously called for redemption,
by such method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to the minimum
authorized denomination for Securities of that series or any integral
multiple thereof) of the principal amount of such Securities of a denomina-
tion larger than the minimum authorized denomination for such Securities.
Page 52
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Securities selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to
be redeemed.
Section 11.4 Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable,
that interest thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price,
(6) if such Securities are convertible or exchangeable other than
pursuant to Section 3.5, the conversion price and the last date on
which such Securities may be converted or exchanged,
(7) that the redemption is for a sinking fund, if such is the case,
and
(8) if the Company intends to retain its right to rescind the
redemption, the last date by which notice of rescission of a redemption
of Securities may be given.
Notice of redemption of Securities to be redeemed at the election of the
Company, and any notice of the rescission of any such redemption, shall be
given by the Company or,
Page 53
at the Company's request, by the Trustee in the name and at the expense of
the Company. Any notice of rescission of any redemption shall be given on
or before 15 days prior to the applicable Redemption Date.
Section 11.5 Deposit of Redemption Price.
---------------------------
On or before any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in section 10.3) an
amount of money sufficient to pay on the Redemption Date the Redemption Price
of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Securities which are to be redeemed on that
date.
Section 11.6 Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid (and not rescinded
within the time limitations referred to above), the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of
any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest to the Redemption Date; provided, however, that installments
-------- --------
of interest whose Stated Maturity is on or prior to the Redemption Date shall
be payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant
Record Dates according to their terms and the provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor
in the Security.
Section 11.7 Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered at
a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by or a written instrument of transfer in form satisfactory
to the Company and the Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing), and the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities of the same series and of like
tenor, of an authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered.
Page 54
ARTICLE 12
Sinking Funds
Section 12.1 Applicability of Article.
------------------------
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of a series except as otherwise specified as
contemplated by Section 3.1 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms
of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for
by the terms of Securities of any series is herein referred to as an
"optional sinking fund payment". If provided for by the terms of Securities
of any series, the cash amount of any sinking fund payment may be subject to
reduction as provided in Section 12.2. Each sinking fund payment shall be
applied to the redemption of securities of any series as provided for by the
terms of Securities of such series.
Section 12.2 Satisfaction of Sinking Fund Payments with Securities.
-----------------------------------------------------
The Company (1) may deliver Outstanding Securities of a series (other than
any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application
of permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking
fund payment with respect to the Securities of such series required to be
made pursuant to the terms of such Securities as provided for by the terms
of such series; provided that such Securities have not been previously so
--------
credited. Such Securities shall be received and credited for such purpose
by the Trustee at the Redemption Price specified in such Securities for
redemption through operation of the sinking fund and the amount of such
sinking fund payment shall be reduced accordingly.
Section 12.3 Redemption of Securities for Sinking Fund.
-----------------------------------------
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment
for that series pursuant to the terms of that series, the portion thereof,
if any, which is to be satisfied by payment of cash and the portion thereof,
if any, which is to be satisfied by delivering and crediting Securities of
that series pursuant to Section 12.2 and will also deliver to the Trustee any
Securities to be so delivered. Not less than 30 days before each such
sinking fund payment date the Trustee shall select the Securities to be
redeemed upon such sinking fund payment date in the manner specified in
Section 11.3 and cause notice of the redemption thereof to be given in
Page 55
the name of and at the expense of the Company in the manner provided in
Section 11.4. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
11.6 and 11.7.
ARTICLE 13
Defeasance and Covenant Defeasance
Section 13.1 Applicability of Article; Company's Option to Effect
Defeasance or Covenant Defeasance.
---------------------------------
If pursuant to Section 3.1 provision is made for either or both of (a)
defeasance of the Securities of a series under Section 13.2 or (b) covenant
defeasance of the Securities of a series under Section 13.3, then the
provisions of such Section or Sections, as the case may be, together with the
other provisions of this Article Thirteen, shall be applicable to the
Securities of such series, and the Company may at its option by or pursuant
to a Board Resolution, at any time, with respect to the Securities of such
series, elect to have either Section 13.2 (if applicable) or Section 13.3 (if
applicable) be applied to the Outstanding Securities of such series upon
compliance with the conditions set forth below in this Article Thirteen.
Section 13.2 Defeasance and Discharge.
------------------------
Upon the Company's exercise of the above option applicable to this Section,
the Company shall be deemed to have been discharged from its obligations with
respect to the Outstanding Securities of such series on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"). For
this purpose, such defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the Outstanding
Securities of such series and to have satisfied all its other obligations
under such Securities and this Indenture insofar as such Securities are
concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which
shall survive until otherwise terminated or discharged hereunder: (A) the
rights of Holders of Outstanding Securities of such series to receive, solely
from the trust fund described in Section 13.4 and as more fully set forth in
such Section, payments in respect of the principal of (and premium, if any)
and interest on such Securities when such payments are due, (B) the Company's
obligations with respect to such Securities under Sections 3.4, 3.5, 3.6,
10.2 and 10.3, (C) the rights, powers, trusts, duties, and immunities of the
Trustee under Sections 3.5, 3.6, 3.7, 3.9, 4.2, 6.7 and the last paragraph
of Section 10.3, and otherwise the duty of the Trustee to authenticate
Securities of such series issued on registration of transfer or exchange and
(D) this Article Thirteen and (E) any other Section of this Indenture
contemplated by Section 3.1 to survive. Subject to compliance with this
Article Thirteen, the Company may exercise its option under this Section 13.2
notwithstanding the prior exercise of its option under Section 13.3 with
respect to the Securities of such series.
Page 56
Section 13.3 Covenant Defeasance.
-------------------
Upon the Company's exercise of the above option applicable to this Section
with respect to the Securities of any series, the Company shall be released
from its obligations under any covenant specified in the Board Resolution,
Officers' Certificate or supplemental indenture establishing the terms,
conditions and limitations with respect to the Outstanding Securities of such
series as being subject to release pursuant to this Section on and after the
date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"). For this purpose, such covenant defeasance means that, with
respect to the Outstanding Securities of such series, the Company may omit
to comply with and shall have no liability in respect of any term, condition
or limitation set forth in any such covenant, and such covenant shall no
longer be applicable to the Company, whether directly or indirectly by reason
of any reference elsewhere herein to any such Section or by reason of any
reference in any such document to any other provision herein or in any other
document, but the remainder of this Indenture and the Securities of any other
series shall be unaffected thereby.
Section 13.4 Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section 13.2
or Section 13.3 to the Outstanding Securities of such series:
(a) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the holders of such Securities,
(A) money in an amount, or (B) U.S. Government Obligations which
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or (C) a
combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee to pay and dis
charge, (i) the principal of (and premium, if any, on) and each
installment of principal of (and premium, if any) and interest on the
Outstanding Securities of such series on the Stated Maturity of such
principal or installment of principal or interest and (ii) any
mandatory sinking fund payments or analogous payments applicable to the
Outstanding Securities of such series on the day on which such payments
are due and payable in accordance with the terms of this Indenture and
of such Securities. For this purpose, "U.S. Government Obligations"
means securities that are (x) direct obligations of the United States
of America for the payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America
the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either
Page 57
case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as
--------
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
(b) (i) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default with respect to the
Securities of such series shall have occurred and be continuing on the
date of such deposit, and (ii) with respect to a defeasance and
discharge under Section 13.2, no such Event of Default or event shall
have occurred and be continuing under subsection 501(5) or (6) hereof
at any time during the period ending on the 91st day after the date of
such deposit or, if longer, ending on the day following the expiration
of the longest preference period applicable to the Company in respect
of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period); provided that
--------
in connection with a defeasance under Section 13.2 the Company will be
released from any covenants specified as being subject to this Article
13 in a Board Resolution or Officers' Certificate or indenture
supplemental hereto which establishes the term of a series of
Securities, immediately upon the making of the deposit under subsection
(a) without reference to the additional period of time referred to in
this subsection (ii); and provided, further, however, that if (x) a
-------- -------
bank with an investment rating of at least A by each of Standard &
Poor's Corporation and Moody's Investors Service, Inc. shall issue in
favor of the Trustee, for the benefit of the Holders of the Outstanding
Securities to be defeased hereunder, an unsecured letter of credit to
guarantee the deposit referred to in subparagraph (a) above and (y) the
Company shall provide to the Trustee an Opinion of Counsel (which shall
be nationally recognized counsel experienced in bankruptcy matters)
satisfactory to the Trustee to the effect that no payments pursuant to
the letter of credit to be made for the benefit of the Holders of the
Outstanding Securities to be defeased hereunder would be subject to
recapture, as a preference or otherwise, by any trustee in bankruptcy
of the Company, then this condition shall be satisfied without regard
to the period of time referred to in subsection (ii) above.
(c) Such defeasance or covenant defeasance shall not (i) cause the
Trustee for the Securities of such series to have a conflicting
interest as defined in Section 6.8 and for purposes of the Trust
Indenture Act with respect to any securities of the Company or (ii)
result in a trust arising from such deposit which constitutes an
investment company under the Investment Company Act of 1940, as amended
(the
Page 58
"40 Act"), unless it is registered as such or exempt from
registration under the 40 Act.
(d) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture
or any other agreement or instrument to which the Company is a party
or by which it is bound.
(e) Such defeasance or covenant defeasance shall not cause any
Securities of such series then listed on any registered national
securities exchange under the Securities Exchange Act of 1934, as
amended, to be delisted.
(f) In the case of an election under Section 13.2, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the Outstanding Securities of such
series will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred.
(g) In the case of an election under Section 13.3, the Company shall
have delivered to the Trustee an opinion of Counsel to the effect that
the Holders of the Outstanding Securities of such series will not
recognize income, gain or loss for Federal income tax purposes as a
result of such covenant defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred.
(h) Such defeasance or covenant defeasance shall be effected in
compliance with any additional terms, conditions or limitations which
may be imposed on the Company in connection therewith pursuant to
Section 3.1.
(i) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent provided for relating to either the defeasance under Section
13.2 or the covenant defeasance under Section 13.3 (as the case may be)
have been complied with.
Section 13.5 Deposited Money and U.S. Government Obligations to
be Held in Trust; Other Miscellaneous Provisions.
------------------------------------------------
Page 59
Subject to the provisions of the last paragraph of Section 10.3, all money
and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee pursuant to Section 13.4 in respect of the Outstanding
Securities of such series shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and this Indenture, to
the payment, either directly or through any Paying Agent (including the
Company acting as its own paying agent) as the Trustee may determine, to the
Holders of such Securities, of all sums due and to become due thereon in
respect of principal (and premium, if any) and interest, but such money need
not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 13.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the Outstanding Securities of such series.
Anything in this Article Thirteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 13.4 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would
then be required to be deposited to effect an equivalent defeasance or
covenant defeasance.
Section 13.6 Reinstatement.
------------
If the Trustee or Paying Agent is unable to apply any money or securities
in accordance with Section 13.5 of this Indenture, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
the Company's obligations under this Indenture and the Securities of the
applicable series shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.4 of this Indenture until such time as the
Trustee or Paying Agent is permitted to apply all such money or securities
in accordance with Section 13.5 of this Indenture; provided that, if the
--------
Company has made any payment of principal of or interest on any Securities
because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or securities held by the Trustee or Paying Agent.
Page 60
ARTICLE 14
Immunity of Incorporators, Shareholders,
Officers and Directors
Section 14.1 Indenture and Securities Solely Corporate Obligations.
-----------------------------------------------------
No recourse under or upon any obligation, covenant or agreement of this
Indenture, any supplemental indenture or of any Security, or for any claim
based thereon or otherwise in respect thereof, shall be had against any
incorporator, shareholder, officer or director, as such, past, present or
future, of the Company or of any successor Person either directly or through
the Company, whether by virtue of any constitution, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Indenture and the obligations issued hereunder
are solely corporate obligations, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, the incorporators,
shareholders, officers or directors, as such, of the Company or of any
successor Person, or any of them, because of the creation of the indebtedness
hereby authorized, or under or by reason of the obligations, covenants or
agreements contained in this Indenture or in any of the Securities or implied
therefrom; and that any and all such personal liability, either at common law
or in equity or by constitution or statute, of, and any and all such rights
and claims against, every such incorporator, shareholder, officer or
director, as such, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Securities or implied therefrom,
are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of such
Securities.
* * * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counter-
parts shall together constitute but one and the same instrument.
Page 61
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed,
all as of the day and year first above written.
CITIZENS UTILITIES COMPANY
By:__________________________________
Title: Vice President, Treasurer and
Chief Financial Officer
Attest:
__________________________
Assistant Secretary
CHEMICAL BANK, as Trustee
By:_________________________________
Title: Vice President
Attest:
__________________________
Assistant Vice President
<PAGE>
County of Fairfield )
) ss.:
State of Connecticut )
On the ____ day of ______, 1996, before me personally came Robert J.
DeSantis, to me known, who, being by me duly sworn, did depose and say that
he is Vice President and Treasurer of CITIZENS UTILITIES COMPANY, one of
the corporations described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his name thereto
by like authority.
______________________________________
<PAGE>
County of New York )
) ss.:
State of New York )
On this ____ day of ___________ in the year of 1996 before me personally
came ________________, to me personally known, who being by me duly sworn did
depose and say that he is Vice President of CHEMICAL BANK, one of the
corporations described in and which executed the foregoing Indenture; that
he knows the seal of said corporation; that the seal affixed to said
instrument opposite the execution thereof on behalf of said corporation is
the corporate seal of said corporation; that said instrument was signed and
said corporate seal was so affixed on behalf of said corporation by authority
and order of its Board of Directors; that he signed his name thereto by like
authority; and he acknowledged said instrument to be his free act and deed
and the free act and deed of said Chemical Bank.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official
seal, at New York in said State of New York, the day and year first above
written.
____________________________________
Draft dated: December 221, 1995
=================================================
CITIZENS UTILITIES COMPANY
TO
CHEMICAL BANK
(Trustee)
------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of _______, 1996
------------------------------------------------
SUPPLEMENTAL TO THE INDENTURE
Dated as of _______, 1996
------------------------------------------------
TABLE OF CONTENTS PAGE
- ----------------- ----
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions 3
ARTICLE 2
FORMS OF DEBENTURES
Section 2.1 Form of the Debentures 9
ARTICLE 3
TERMS OF THE DEBENTURES
Section 3.1 Terms of the Debentures 9
ARTICLE 4
SUBORDINATION OF DEBENTURES
Section 4.1 Debentures Subordinate to Senior Indebtedness 14
Section 4.2 Payment Over of Proceeds Upon Dissolution, etc. 14
Section 4.3 No Payment When Senior Indebtedness In Senior
Payment Default or Senior Indebtedness Accelerated 15
Section 4.4 Payment Permitted If No Default 17
Section 4.5 Subrogation To Rights Of Holders Of Senior Indebtedness 17
Section 4.6 Provisions Solely To Define Relative Rights 17
Section 4.7 Trustee To Effectuate Subordination 18
Section 4.8 No Waiver Of Subordination Provisions 18
Section 4.9 Notice To Trustee 18
Section 4.10 Reliance On Judicial Order Or Certificate Of Liquidating
Agent 19
Section 4.11 Trustee Not Fiduciary For Holders Of Senior Indebtedness 20
Section 4.12 Rights of Trustee As Holder Of Senior Indebtedness;
Preservation Of Trustee's Rights 20
Section 4.13 Article Applicable to Paying Agents 20
ARTICLE 5
CONVERSION OF DEBENTURES
Section 5.1 Conversion Privilege 21
Section 5.2 Manner of Exercise of Conversion Privilege 21
Section 5.3 Fractional Shares 22
(i)
Section 5.4 Conversion Price 22
Section 5.5 Adjustment of Conversion Price 22
Section 5.6 Reclassification, Consolidation, Merger or Sale of Assets 28
Section 5.7 Notice of Adjustments of Conversion Price 28
Section 5.8 Notices 29
Section 5.9 Taxes on Conversion 30
Section 5.10 Company to Provide Stock 30
Section 5.11 Disclaimer of Responsibility for Certain Matters 31
Section 5.12 Return of Funds Deposited for Redemption of Converted
Debentures 31
Section 5.13 Disposition of Converted Debentures 31
ARTICLE 6
REDEMPTION OF DEBENTURES
Section 6.1 Redemption 31
Section 6.2 Applicability of Article 32
Section 6.3 Election to Redeem; Notice to Trustee 32
Section 6.4 Notice of Redemption 33
Section 6.5 Deposit of Redemption Price 33
Section 6.6 Debentures Payable on Redemption Date 33
ARTICLE 7
AMENDMENTS TO INDENTURE FOR PURPOSES
OF FIRST SERIES OF DEBENTURES
Section 7.1 Amendment to Section 5.1 of Indenture
for Purposes of First Series of Debentures 34
Section 7.2 Amendment to Section 9.1 of Indenture
for Purposes of First Series of Debentures 36
Section 7.3 Amendment to Section 9.2 of Indenture
for Purposes of First Series of Debentures 36
ARTICLE 8
EXPENSES
Section 8.1 Payment and Expenses 37
ARTICLE 9
COVENANTS
Section 9.1 Covenants 38
(ii)
ARTICLE 10
Section 10.1 Benefits of Indenture 40
Section 10.2 Incorporation of Indenture 40
Section 10.3 Acceptance of Trust 40
Section 10.4 Conflict with Trust Indenture Act 41
Section 10.5 Governing Law 41
Section 10.6 Recitals 41
Section 10.7 Amendments 41
Section 10.8 Counterparts 41
(iii)
FIRST SUPPLEMENTAL INDENTURE, dated as of _______, 1996, between CITIZENS
UTILITIES COMPANY, a corporation duly organized and existing under the laws
of the State of Delaware (herein called "Citizens" or the "Company"), having
its principal administrative offices at High Ridge Park, Building No. 3,
Stamford, Connecticut 06905, and CHEMICAL BANK, a New York banking
corporation, as Trustee (herein called the "Trustee"), having its principal
corporate trust office at 450 West 33rd Street, New York, New York 10001. The
First Supplemental Indenture is one of several agreements executed in
connection with the issuance by the Company and certain of its affiliates of
up to $185,993,000 principal amount of Debentures, up to $180,413,000
liquidating value of Partnership Preferred Securities and up to $175,000,000
liquidating value of Convertible Preferred Securities (the "Offering"). Said
$185,993,000 principal amount of Debentures is subject to increase to not
more than $213,895,000 by a supplemental instrument hereto. For ease of
reference, certain of the operative agreements in connection with the
Offering make use of a Statement of Common Definitions. In this First
Supplemental Indenture, such Statement of Common Definitions ("Statement of
Common Definitions") is found at Exhibit B. For the purposes hereof,
capitalized terms are defined in Section 1.1 hereof, elsewhere in this First
Supplemental Indenture, in the Indenture, and in the Statement of Common
Definitions.
RECITALS
WHEREAS, the Company has entered into an Indenture dated as of __________,
1996 (the "Indenture"), with the Trustee to provide for the issuance from
time to time of the Company's debentures, notes or other evidences of
indebtedness (herein called the "Securities"), to be issued in one or more
series; and
WHEREAS, Section 9.1 of the Indenture provides, among other things, that
the Company and the Trustee may enter into indentures supplemental to the
Indenture for, among other things, the purpose of establishing the form and
terms of the Securities of any series as permitted in Sections 2.1 and 3.1
of the Indenture and adding to the covenants of the Company for the benefit
of the Holders of any series of Securities; and
WHEREAS, the Company or one of its wholly owned subsidiaries is the general
partner of Citizens Capital, and the Company formed Citizens Capital to issue
the Partnership Preferred Securities, with a liquidation preference of $50
per Partnership Preferred Security, and to issue the General Partnership
Security; and
WHEREAS, the Company has formed the Trust under the Trust Act pursuant to
the Declaration for the purpose of issuing the Convertible Preferred
Securities and the Convertible Common Securities (the Convertible Common
Securities and the Convertible Preferred Securities are together, the "Trust
Securities"), selling such Trust Securities and contributing the proceeds
thereof to Citizens Capital; and
1
WHEREAS, the Company wishes to sell to Citizens Capital, and Citizens
Capital wishes to purchase from the Company, Debentures in exchange for the
funds received by Citizens Capital from the Trust and capital contributed to
Citizens Capital by the General Partner; and
WHEREAS, the Declaration provides that the holders of Convertible Preferred
Securities may cause the Conversion Agent to exchange such Convertible
Preferred Securities for Partnership Preferred Securities, and, in turn, such
Partnership Preferred Securities for Debentures held by Citizens Capital, and
immediately convert such Debentures into Common Stock Series A; and
WHEREAS, the Company is irrevocably guaranteeing, on a subordinated basis,
payment of distributions, payment of the Redemption Price (as defined herein)
and payments on liquidation, to the extent provided in the Convertible
Preferred Securities Guarantee Agreement dated _______________, 1996 and the
Convertible Common Securities Guarantee Agreement dated ___________________,
1996, each between the Company and Chemical Bank, as guarantee trustee for
the benefit of the holders of the Trust Securities, which guarantee, together
with the back-up undertakings (as defined herein), will be full and
unconditional; and
WHEREAS, the Company, by corporate action duly taken, has authorized the
issuance of a first series of Securities designated as the ____% Convertible
Subordinated Debentures Due 2036 (hereinafter sometimes called the
"Debentures"), which series is limited in aggregate principal amount to
$185,993,000 (subject to increase by supplement hereto), such Debentures to
contain such provisions as have been determined by or at the direction of the
Board of Directors of the Company and as are set forth in this First
Supplemental Indenture; and
WHEREAS, all conditions have been complied with, all actions have been
taken and all things have been done which are necessary to make the
Debentures, when executed by the Company and authenticated by or on behalf
of the Trustee and when delivered as herein and in the Indenture provided,
the valid obligations of the Company, and to make this First Supplemental
Indenture a valid and binding supplemental indenture.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Debentures
by the Holders thereof, it is mutually covenanted and agreed, for the equal
and proportionate benefit of all Holders of the Debentures, as follows:
2
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions.
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For all purposes of this First Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(1) capitalized terms used in this First Supplemental Indenture shall
have the meanings ascribed to them in the Indenture, this First
Supplemental Indenture or, to the extent not inconsistent with the
Indenture or this First Supplemental Indenture, the Statement of Common
Definitions;
(2) the words "herein", "hereof" and "hereto" and other words of
similar import used in this First Supplemental Indenture refer to this
First Supplemental Indenture as a whole and not to any particular
Article or Section or other subdivision of this First Supplemental
Indenture;
(3) the provisions of this First Supplemental Indenture shall be read
in conjunction with the provisions of the Indenture only with respect
to the Debentures and the provisions of the Indenture shall not be
modified by this First Supplemental Indenture with respect to any
series of the Securities outstanding or to be outstanding under the
Indenture, other than the Debentures; and
(4) terms defined in this First Supplemental Indenture shall apply
only to this First Supplemental Indenture and the Debentures hereunder,
and such definitions shall not apply to any supplemental indenture
other than this First Supplemental Indenture or to any Securities
outstanding or to be outstanding under the Indenture, other than the
Debentures.
"Additional Interest" has the meaning specified in Section 3.1(17).
"Average Market Price" is defined in the Statement of Common Definitions.
"back-up undertakings" is defined in the Statement of Common Definitions.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Indebtedness
arrangements conveying the right to use) real or personal property of such
Person which is required to be classified and accounted for as a capital
lease or a liability on the face of a balance sheet of such Person in
accordance with generally accepted accounting principles. The stated
maturity of such obligation shall be the date of the last payment of rent or
any other amount due under such lease prior to the first date upon which such
lease may be terminated by the lessee without payment of a penalty.
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"Cash Interest Payment Date" has the meaning specified in Section 3.1(4).
"Citizens Capital" is defined in the Statement of Common Definitions.
"Common Stock" and "Common Stock Series A" are defined in the Statement of
Common Definitions.
"Company Tax Event" is defined in the Statement of Common Definitions.
"Compound Interest" is defined in the Statement of Common Definitions.
"Conversion Agent" is defined in the Statement of Common Definitions.
"Conversion Price" has the meaning specified in Section 5.4.
"Convertible Common Securities" is defined in the Statement of Common
Definitions.
"Convertible Preferred Securities" is defined in the Statement of Common
Definitions.
"Date of Conversion" has the meaning specified in Section 5.2.
"Debentures Payment" has the meaning specified in Section 4.2.
"Declaration" is defined in the Statement of Common Definitions.
"Delaware Trustee" is defined in the Statement of Common Definitions.
"Designated Senior Holder" means, with respect to any Senior Indebtedness,
the Person designated as such in accordance with the terms of the instrument
evidencing such Senior Indebtedness.
"Distribution Declaration Date" has the meaning specified in Section
3.1(4).
"Distribution Declaration Notice" has the meaning specified in Section
3.1(4).
"Election Period" is defined in the Statement of Common Definitions.
"Equivalent Value" is defined in the Statement of Common Definitions.
"Expiration Time" has the meaning specified in Section 5.5(e).
"General Partnership Security" is defined in the Statement of Common
Definitions.
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"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person guaranteeing any Indebtedness of any other Person where such
other Person is the Primary Obligor under such Indebtedness, in any manner,
whether directly or indirectly, and including, without limitation, any
obligation of such Person (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness, (ii) to purchase property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the Primary Obligor so as to
enable the Primary Obligor to pay such Indebtedness (and "Guaranteed,"
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided, however, that the Guarantee by any Person shall
not include endorsements by such Person for collection or deposit, in either
case, in the ordinary course of business.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, Guarantee or otherwise become liable in respect of such Indebtedness
or other obligation or the recording, as required pursuant to generally
accepted accounting principles or otherwise, of any such Indebtedness or
other obligation as a liability on the balance sheet of such Person (and
"Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in generally
accepted accounting principles that results in an obligation of such Person
that exists at such time becoming Indebtedness shall not be deemed an
Incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person, (i) all
Indebtedness described in clauses (i)-(vii) of the definition of Senior
Indebtedness (all references to Citizens in such definition being deemed to
refer to such Person) and (ii) the maximum fixed redemption or repurchase
price of Redeemable Interests of such Person at the time of determination.
"Junior Subordinated Payment" has the meaning specified in Section 4.2.
"Limited Partnership Agreement" is defined in the Statement of Common
Definitions.
"Ministerial Action Obligation" is defined in the Statement of Common
Definitions.
"NASDAQ" is defined in the Statement of Common Definitions.
"Notice of Conversion" means the notice to be given by a Holder of
Debentures to the Conversion Agent directing the Conversion Agent to convert
the Debentures into Common Stock Series A on behalf of such Holder.
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"NYSE" is defined in the Statement of Common Definitions.
"Other Subordinated Indebtedness" has the meaning specified in Section 9.1.
"Partnership Event" is defined in the Statement of Common Definitions.
"Partnership Preferred Securities" is defined in the Statement of Common
Definitions.
"Partnership Securities" is defined in the Statement of Common Definitions.
"Paying Agent" is defined in the Statement of Common Definitions.
"Payment Blockage Period" has the meaning specified in Section 4.3.
"Person" is defined in the Statement of Common Definitions.
"Primary Obligor" shall refer to the Person who is primarily liable under
any Indebtedness.
"Proceeding" has the meaning specified in Section 4.2.
"Property Trustee" is defined in the Statement of Common Definitions.
"Purchased Shares" has the meaning specified in Section 5.5(e).
"Rating Agency Event" is defined in the Statement of Common Definitions.
"Redeemable Interest" of any Person means any equity security of or other
ownership interest in such Person that by its terms or otherwise is required
to be redeemed prior to the Stated Maturity of the principal of the
Debentures or is or may be redeemable at the option of the holder thereof at
any time prior to the Stated Maturity of the principal of the Debentures;
provided, however, that interests which are redeemable solely for any equity
security of or other ownership interest in such Person that by its terms or
otherwise is not required to be redeemed prior to the Stated Maturity of the
principal of the Debentures shall not constitute Redeemable Interests.
"Redemption Price" has the meaning specified in Section 6.1.
"Reference Date" has the meaning specified in Section 5.5(c).
"Regular Record Date" has the meaning specified in Section 3.1(4).
"Securities" has the meaning specified in the Recitals to this instrument.
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"Senior Indebtedness" means the principal of, premium, if any, interest on
and any other payment due pursuant to any of the following, whether Incurred
on or prior to the date hereof or hereafter Incurred:
(i) all obligations of Citizens for money borrowed;
(ii) all obligations of Citizens evidenced by notes, debentures, bonds
or other similar instruments, including obligations Incurred in
connection with the acquisition of property, assets or businesses;
(iii) all Capital Lease Obligations of Citizens;
(iv) all reimbursement obligations of Citizens with respect to letters
of credit, bankers' acceptances or similar facilities issued for the
account of Citizens;
(v) all obligations of Citizens issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts
payable and accrued liabilities arising in the ordinary course of
business);
(vi) all payment obligations of Citizens under interest rate swap or
similar agreements or foreign currency hedge, exchange or similar
agreements at the time of determination, including any such obligations
Incurred by Citizens solely to act as a hedge against increases in
interest rates that may occur under the terms of other outstanding
variable or floating rate Indebtedness of Citizens;
(vii) all obligations under lease transactions pursuant to which
Citizens or any of its Subsidiaries are treated as the owner of the
subject property for United States federal income tax purposes;
(viii) all obligations of the type referred to in clauses (i) through
(vii) above of another Person and all dividends of another Person the
payment of which, in either case, Citizens has assumed or Guaranteed
or for which Citizens is responsible or liable, directly or indirectly,
jointly or severally, as obligor, Guarantor or otherwise; and
(ix) all amendments, modifications, renewals, extensions,
refinancings, replacements and refundings by Citizens of any such
Indebtedness referred to in clauses (i) through (viii) above (and of
any such amended, modified, renewed, extended, refinanced, refunded or
replaced Indebtedness);
provided, however, that the following shall not constitute Senior
Indebtedness: (A) any trade accounts payable or accrued liabilities arising
in the ordinary course of business, (B) any Indebtedness owed to a Person
when such Person is a Subsidiary of Citizens, or (C) any Indebtedness which
by the terms of the instrument creating or evidencing the same expressly
provides that it is not superior in right of payment to the Debentures. For
purposes of this
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Definition, "Indebtedness" includes any obligation to pay principal, premium
(if any), interest, penalties, reimbursement or indemnity amounts, fees and
expenses (including interest accruing on or after the filing of any petition
in bankruptcy or for reorganization relating to Citizens whether or not a
claim for post-petition interest is allowed in such proceeding). Such Senior
Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
"Senior Nonmonetary Default" has the meaning specified in Section 4.3.
"Senior Payment Default" has the meaning specified in Section 4.3.
"Share Transfer and Valuation Date" is defined in the Statement of Common
Definitions.
"Special Event" is defined in the Statement of Common Definitions.
"Special Representative" is defined in the Statement of Common Definitions.
"Subsidiary" is defined in the Statement of Common Definitions.
"Trading Day" is defined in the Statement of Common Definitions.
"Trustee" shall mean Chemical Bank as trustee with respect to the
Debentures, until a successor Trustee shall have become such pursuant to the
terms of the Indenture.
"Trust" is defined in the Statement of Common Definitions.
"Trust Event" is defined in the Statement of Common Definitions.
"Trust Securities" has the meaning specified in the Recitals to this
instrument.
"Underwriting Agreement" is defined in the Statement of Common Definitions.
"Voting Stock" has the meaning specified in the Statement of Common
Definitions.
Except as otherwise expressly provided or unless the context otherwise
requires, "First Supplemental Indenture" means this instrument as originally
executed or, if amended or supplemented pursuant to the applicable provisions
of the Indenture, as amended or supplemented.
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ARTICLE 2
FORMS OF DEBENTURES
Section 2.1 Form of the Debentures.
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The Debentures shall be in substantially the form set forth in Exhibit A
to this First Supplemental Indenture, as such form may be completed pursuant
to Article 3 hereof, the terms of which Exhibit A are herein incorporated by
reference and made a part of this First Supplemental Indenture.
ARTICLE 3
TERMS OF THE DEBENTURES
Section 3.1 Terms of the Debentures.
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The terms of the Debentures shall be as follows:
(1) The Securities to be issued under the Indenture and this First
Supplemental Indenture shall be the Debentures and shall be designated as the
"____% Convertible Subordinated Debentures Due 2036".
(2) The Debentures shall constitute a single series of the Securities
under the Indenture, which series is limited in aggregate principal amount
to $185,993,000 subject to increase by supplemental instrument to an
aggregate of not more than $213,895,000.
(3) So long as all of the Debentures are registered in the name of CEDE
& Co., or any other nominee of The Depository Trust Company, and are intended
to be Book-Entry Securities, the provisions of Section 3.11 of the Indenture
shall apply to the Debentures. Thereafter, or in lieu thereof, the
Debentures may be subjected to the requirements of a successor or different
book-entry securities system that may be adopted by the Company in accordance
with the provisions of the Indenture and this First Supplemental Indenture.
(4) Interest on the Debentures will be paid in either shares of Common
Stock Series A or cash, as specified in paragraphs (4), (5) and (6) of this
Section. Interest which is paid in shares of Common Stock Series A shall be
paid on the Share Transfer and Valuation Date, as defined in paragraph (5)
below. Interest which is paid in cash shall be paid on the Cash Interest
Payment Date, as defined in this paragraph (4). Computation of the interest
payments shall be as follows: Interest on each of the Debentures shall be
payable at the rate per annum specified in the title of the Debenture from
_______, 1996, or from the most recent Cash Interest Payment Date to which
interest has been paid or duly provided for, quarterly in arrears, on (or,
if interest is paid in shares of Common Stock Series A, computed as of)
January 31, April 30, July 31 and October 31 in each year (each such date,
a "Cash Interest Payment Date"),
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commencing on ____________, 1996, subject to the right of deferral of the
Company referred to in paragraph (7) of this Section. Interest shall be
calculated on the basis of a 360-day year consisting of 12 months of 30 days
each. For any period shorter than a full quarter, interest will be computed
on the basis of the actual number of days elapsed in such period. The
interest payable and punctually paid or duly provided for on or before
any Cash Interest Payment Date will be paid to the Person in whose name such
Debenture (or one or more Predecessor Securities) is registered at the close
of business on the regular record date ("Regular Record Date") next preceding
such interest payment. Upon or before the day on which the Trust, the
Partnership or the Company (or any direct or indirect beneficial owner of the
Debentures) is required to give notice of the record date for the next
scheduled distribution payable on the Convertible Preferred Securities, the
Partnership Preferred Securities or the Debentures to the NYSE, or NASDAQ,
or other applicable self-regulatory organization, or to the holders of the
Convertible Preferred Securities, the Partnership Preferred Securities or
the Debentures (the "Distribution Declaration Date," a date which will be
specified in advance by the Company in a written notice delivered to the
Trustee, and which date shall initially be the date specified in paragraph
(8) of this Section unless changed by the Company in accordance with the
provisions of this Section), the Company shall give written notice
("Distribution Declaration Notice") to the Trustee and the Holders of the
Debentures and the holders of the Convertible Preferred Securities and the
Partnership Preferred Securities, which notice shall specify (a) whether the
Company is exercising its option in whole or in part to make the next
interest payment in cash, (b) whether the Company is exercising its right to
elect to defer such next interest payment as permitted by paragraph (7) of
this Section (unless written notice of the Company's election to defer such
interest payment shall previously have been given to the Trustee and such
holders), (c) the Regular Record Date for such interest payment (unless such
Regular Record Date has theretofore been established by the Company and
notice thereof has previously been given to the Trustee and such holders),
(d) the Share Transfer and Valuation Date (as set forth in paragraph (5) of
this Section) and (e) if such Distribution Declaration Notice relates to the
January 31 Cash Interest Payment Date, the Election Period procedures.
The Regular Record Date shall be established by the Company in the
Distribution Declaration Notice as aforesaid or in a separate written notice
given to the Trustee and the Holders no later than the Distribution
Declaration Date immediately preceding the Cash Interest Payment Date in
question. Such notice (or a separate notice) may also establish a schedule
for subsequent Regular Record Dates which shall remain in effect until
changed by a later written notice to the Trustee and Holders. In the event
that any date on which interest is payable on the Debentures is not a
Business Day, then payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest
or other payment in respect of any such delay) except that, if such Business
Day is in the next succeeding calendar year, such payment shall be made on
the immediately preceding Business Day, in each case with the same force and
effect as if made on the Cash Interest Payment Date. Any interest not so
punctually paid or duly provided for will forthwith cease to be payable to
the Holder on such Regular Record Date by virtue of having been such a
Holder and shall be paid by the Company as provided in Section 3.7 of the
Indenture. Any interest that has been properly
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deferred pursuant to Section 3.1(7) hereof shall be payable only as
provided in Section 3.7 of the Indenture.
Upon the deferral of any interest payment as permitted by paragraph (7) of
this Section, interest on such deferred interest payment will be compounded
on each Cash Interest Payment Date and accrued until paid at the rate
specified in the title of the Debenture until the amount of such deferred
interest (including compounded interest thereon) is paid in full.
(5) So long as Citizens Capital shall be the Holder of all of the
Outstanding Debentures, and subject to provisions of paragraph (6) of this
Section, payment of interest shall be made by delivery (which may be by book-
entry) on a date (the "Share Transfer and Valuation Date"), which will be
specified by the Company in the immediately preceding Distribution
Declaration Notice, of shares of Common Stock Series A with an
Equivalent Value to the interest requirement set forth in paragraph (4) of
this Section. At any time subsequent to the Share Transfer and Valuation
Date, the Company shall have the right to purchase some or all of the shares
of Common Stock Series A delivered to the Holder as aforesaid at a price
equal to the Equivalent Value of such shares on the relevant Share Transfer
and Valuation Date. If subsequent to the delivery of shares of Common Stock
Series A to Citizens Capital on the Share Transfer and Valuation Date,
Citizens Capital sells shares of Common Stock Series A to make cash
distributions with respect to the Partnership Preferred Securities, and the
net proceeds from the sale of such shares of Common Stock Series A is less
than the proportionate share of the interest requirement set forth in
paragraph (4) of this Section that is allocable to the Partnership
Preferred Securities for which a cash distribution election has been made (the
amount by which net cash proceeds from the sale of such shares falls short of
such interest requirement being referred to as the "Cash Shortfall"), then
the Company, in its capacity as borrower with respect to the Outstanding
Debentures, shall be obligated to transfer an amount of cash to Citizens
Capital equal to the Cash Shortfall on or prior to the Cash Interest Payment
Date.
(6) So long as Citizens Capital shall be the Holder of all of the
Outstanding Debentures, the Company shall have the option to elect, at any
time prior to the Share Transfer and Valuation Date, to make payment of
interest on or before the Cash Interest Payment Date in cash, which shall be
payable either, at the option of the Company exercised on or before the Cash
Interest Payment Date, (i) by check mailed to the address of the Holder
appearing on the Security Register, (ii) by wire transfer in immediately
available funds at such place and to such account as may be designated by a
Holder upon application to the Security Registrar not later than the Regular
Record Date with respect to the first Cash Interest Payment Date for which
such transfer is requested, or (iii) as otherwise provided with respect to a
Book-Entry Security or pursuant to any applicable book-entry security system
or similar system. The Company shall also have the continuing right at any
time prior to the Share Transfer and Valuation Date to elect to pay all or
part of the next interest payment in cash as aforesaid (notwithstanding the
relevant Distribution Declaration Notice) by delivering a further written
notice of override to the Holders, the Trustee and the holders of the
Convertible Preferred Securities, and by complying with any
requirements of any stock exchange or market quotation system or the
Commission with respect to the public notification or notice of such
override. If the Company has made an election to
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pay interest in cash, the payment of such cash to the Holders shall occur on
the Cash Interest Payment Date and need not be made on the Share Transfer and
Valuation Date. If the Company has not elected prior to the Share Transfer
and Valuation Date to pay interest in cash, the payment of such interest in
shares of Common Stock shall occur on the Share Transfer and Valuation Date.
If Citizens Capital ceases to be the Holder of all of the outstanding
Debentures, Citizens will be deemed to have elected to make each subsequent
payment of interest in cash.
The principal amount of the Debentures together with all accrued or
deferred but unpaid interest will be paid at maturity or redemption by check
and shares of Common Stock, if any, against presentation of the Debentures by
the Holders or their duly authorized agent at the office or agency of the
Trustee, in New York, New York or such other address in New York, New York as
the Trustee shall designate by written notice to the Holders of the Debentures.
(7) The Company shall have the right, at any time and from time to time
during the term of the Debentures, to elect to defer the date on which one
or more of the quarterly interest payments would otherwise become due and
payable by giving of notice of deferral; provided that (a) no deferred
quarterly interest payment, including any extension of deferral, shall
remain unpaid for more than 20 consecutive quarters or be deferred beyond
the Stated Maturity of the Debentures, (b) no Event of Default has occurred
and is continuing, and (c) so long as any deferred interest has not been
paid, the Company shall not take any action prohibited in the first sentence
of Section 9.1 of this First Supplemental Indenture.
If the Company intends to exercise such right to elect to defer one or more
interest payments, it shall give written notification thereof to the Trustee
and the Holders no later than the Distribution Declaration Date occurring
immediately prior to the first Cash Interest Payment Date with respect to
which interest is being deferred. A deferred interest payment will become
due and payable by the Company only upon the Company's giving a deferred
distribution notice to the Holders of the Debentures and the Trustee in
accordance with the provisions of Section 3.7 of the Indenture applicable to
delayed interest payments, including deferred interest. The Company shall
also give notice of any deferred interest payment to the holders of the Trust
Securities and Partnership Preferred Securities. No interest payment
deferred in accordance with this paragraph shall be deemed due or payable
until the date specified for payment in Section 3.7 of the Indenture, or at
Stated Maturity, whichever occurs first.
(8) Prior to and pending the establishment by the Company of a different
schedule by written notice given by the Company to the Trustee, the Holders
and the holders of the Partnership Preferred Securities and the Convertible
Preferred Securities, the Regular Record Dates and related Distribution
Declaration Dates and Share Transfer and Valuation Dates shall occur on the
days set forth on Annex A.
Upon the completion of the giving of notice or taking of other action to
establish or change any Distribution Declaration Date, Regular Record Date
or Share Transfer and Valuation Date, the Company shall deliver (which
delivery may be contemporaneous with the
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delivery of such notice) to the Trustee, and shall retain, a copy of a
revised Annex A duly reflecting any such date which has been established or
changed.
(9) If carried out in accordance with the provisions of paragraphs (4),
(5), (6), (7) and (8) of this Section, the Company may give notice or take
other action to establish or change any Distribution Declaration Date,
Regular Record Date, Special Record Date or Share Transfer and Valuation Date
(each of such days being referred to as a "Date" or collectively, "Dates" for
the purposes of this paragraph), or to establish or change any schedule for
one or more of the Dates, without any requirement of receiving the consent,
authorization, or any other action by any other Person, including the
Trustee, Citizens Capital, the Trust, any Holder or any beneficial owner of
the Debentures, or any holder of Partnership Securities or Trust Securities.
Such establishment or change shall not be deemed to be an act or change
requiring a supplemental indenture pursuant to Section 9.2 of the Indenture.
Any Annex A and revised Annex A given to the Trustee pursuant to this Section
shall be deemed to be included within the term "notice" as used in Section
6.3 of the Indenture. The Trustee shall be under no obligation with respect
to the establishment, or change, of Dates and may rely upon such notice or
notification to the full extent provided in such Section 6.3.
(10) Notwithstanding the foregoing, so long as Citizens Capital or the
Trust is the Holder of the Debenture, payment of the principal and interest
on the Debenture will be made at such place and to such account as may be
designated by such Holder.
(11) The Debentures shall be subordinated in right of payment to Senior
Indebtedness as provided in Article 4.
(12) The Debentures shall be convertible as provided in Article 5.
(13) The Debentures shall be redeemable as provided in Article 6.
(14) The Debentures shall be issued in registered form only and in
denominations of $50 or any amount in excess thereof which is an integral
multiple of $50.
(15) When principal and interest on the Debentures is payable in cash, it
shall be payable in the coin or currency of the United States of America,
which, at the time of payment, is legal tender for public and private debts.
(16) The Debentures shall not be subject to the defeasance provided for
in Sections 13.2 and 13.3 of the Indenture.
(17) If at any time while Citizens Capital or the Trust is the Holder of
the Outstanding Debentures or the Trust is the holder of the Outstanding
Partnership Preferred Securities of Citizens Capital, Citizens Capital or the
Trust becomes legally obligated to pay any Taxes, then, in such case, the
Company shall pay, but without duplication, such amounts, if any, as shall be
required to pay such Taxes of Citizens Capital or the Trust either (i) as
additional
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interest ("Additional Interest") on the Debentures, (ii) directly
to such taxing authority or (iii) to the Trust or Citizens Capital, as the
case may be, so that such Taxes are paid on or before any date of redemption
or the Stated Maturity, whichever comes first. To the extent that such
payments give rise to additional Taxes of Citizens Capital or the Trust, the
Company shall also make payment for such additional Taxes of Citizens
Capital or the Trust. The Company shall pay Additional Interest or make such
other payments in an amount and at such time so that the net amounts
received as interest or distribution payments by Citizens Capital and the
Trust, and distriubtable to the holders of the Partnerhsip Preferred
Securities and the Convertible Preferred Securities, respectively, after all
such Taxes have been paid will not be less than the amount that would have
been received and distributed by such entities had no such Taxes been imposed.
(18) The Debentures initially will not be issued in the form of a
registered global debenture. If Debentures are thereafter to be issued in
the form of one or more registered global debentures, such global securities
shall be governed by the appropriate provisions of Section 3.3 and 3.11 of
the Indenture.
ARTICLE 4
SUBORDINATION OF DEBENTURES
Section 4.1 Debentures Subordinate to Senior Indebtedness.
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The Company covenants and agrees, and each Holder of a Debenture, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article (subject to Article Four
of the Indenture), the payment of the principal of (and premium, if any) and
interest on each and all of the Debentures is hereby expressly made
subordinate and subject in right of payment to the prior payment in full in
cash of all Senior Indebtedness.
Article Four shall constitute a continuing offer to all Persons who become
holders of, or continue to hold, Senior Indebtedness, and such provisions are
made for the benefit of the holders of Senior Indebtedness and such holders
are made obligees hereunder and any one or more of them may enforce such
provisions. Holders of Senior Indebtedness need not prove reliance on the
subordination provisions hereof.
Section 4.2 Payment Over of Proceeds Upon Dissolution, etc.
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Upon any payment or distribution of assets of the Company to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors, marshalling of assets or liabilities or any bankruptcy,
insolvency or similar proceedings of the Company (each such event, if any,
herein sometimes referred to as a "Proceeding"):
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash of all amounts due on or to become due on or
in respect of all Senior
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Indebtedness, before the Holders of the Debentures are entitled to
receive any payment (including any payment to Holders of the Debentures
made in respect of any other Indebtedness of the Company subordinated to
the payment of the Debentures, such payment or distribution being
hereinafter referred to as a "Junior Subordinated Payment"), on account
of the principal of (and premium, if any) or interest on the Debentures
or on account of any purchase, redemption or other acquisition of
Debentures by the Company, any Subsidiary of the Company, the Trustee or
any Paying Agent (all such payments, distributions, purchases,
redemptions and acquisitions, whether or not in connection with a
Proceeding, herein referred to, individually and collectively, as a
"Debentures Payment"); and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders of the Debentures or the Trustee would
be entitled but for the provisions of this Article (including, without
limitation, any Junior Subordinated Payment) shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior
Indebtedness or their representative or representatives or to the
trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued,
ratably according to the aggregate amounts remaining unpaid on account
of the Senior Indebtedness held or represented by each, to the extent
necessary to make payment in full in cash of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment to the
holders of such Senior Indebtedness.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Debenture shall have received
in connection with any Proceeding any Debentures Payment before all
Senior Indebtedness is paid in full or payment thereof provided for in cash,
then and in such event such Debentures Payment shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full in cash after giving effect to any concurrent
payment to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "any payment or distribution
of any kind or character, whether in cash, property or securities" shall not
be deemed to include a payment or distribution of stock or securities of the
Company provided for by a plan of reorganization or readjustment authorized
by an order or decree of a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law or of any other
corporation provided for by such plan of reorganization or readjustment which
stock or securities are subordinated in right of payment to all then
outstanding Senior Indebtedness to substantially the same extent, or to a
greater extent than, the Debentures are so subordinated as provided in this
Article. The consolidation of the Company with, or the merger of the Company
into, another
15
Person or the liquidation or dissolution of the Company
following the conveyance or transfer of all or substantially all of its
properties and assets as an entirety to another Person upon the terms and
conditions set forth in Article Eight of the Indenture shall not be deemed
a Proceeding for the purposes of this Section if the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer such properties and assets as an entirety,
as the case may be, shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions set forth in Article Eight
of the Indenture.
Section 4.3 No Payment When Senior Indebtedness In Senior
Payment Default or Senior Indebtedness Accelerated.
--------------------------------------------------
In the event that (a) any Senior Payment Default (as defined below) shall
have occurred and such Senior Indebtedness shall have become, by reason
thereof, due and payable prior to the Stated Maturity thereof, then no
Debentures Payment shall be made (except that, so long as Citizens Capital
shall be the Holder of all of the Outstanding Debentures, payment may be made
in shares of capital stock), unless and until such Senior Payment Default
shall have been cured or waived in writing or shall have ceased to exist or
all amounts then due and payable in respect of such Senior Indebtedness
(including amounts that have become and remain due by acceleration) shall
have been paid in full in cash. "Senior Payment Default" means any default
(which default has continued beyond any applicable grace and/or cure period
(if any), in the payment of principal of (or premium, if any) or interest on
any Senior Indebtedness when due, whether at the stated maturity of any such
payment or by declaration of acceleration, call for redemption, mandatory
payment or prepayment or otherwise.
In the event that any Senior Nonmonetary Default (as defined below) shall
have occurred and be continuing, then, upon the receipt by the Company and
the Trustee of written notice of such Senior Nonmonetary Default from the
Designated Senior Holder of such certain Senior Indebtedness, no Debentures
Payment (except that, so long as Citizens Capital shall be the Holder of all
of the Outstanding Debentures, payment may be made in shares of capital
stock) shall be made, during the period (the "Payment Blockage Period")
commencing on the date of such receipt of such written notice and ending
(subject to any blockage of payments that may then or thereafter be in effect
as the result of any Senior Payment Default) on the earlier of (i) the date
on which the Senior Indebtedness to which such Senior Nonmonetary Default
relates is discharged or such Senior Nonmonetary Default shall have been
cured or waived in writing or shall have ceased to exist and any acceleration
of Senior Indebtedness to which such Senior Nonmonetary Default relates shall
have been rescinded or annulled or (ii) the 179th day after the date of such
receipt of such written notice. No more than one Payment Blockage Period may
be commenced with respect to the Debentures during any period of 360
consecutive days and there shall be a period of at least 181 consecutive days
in each period of 360 consecutive days when no Payment Blockage Period is in
effect. Following the commencement of any Payment Blockage Period, the
holders of the Senior Indebtedness will be precluded from commencing a
subsequent Payment Blockage Period until the conditions set forth in the
preceding sentence are satisfied. For all purposes of this paragraph, no
Senior Nonmonetary Default that existed or was continuing on the date of
commencement of any Payment Blockage
16
Period with respect to the Senior Indebtedness initiating such Payment
Blockage Period shall be, or be made, the basis for the commencement of a
subsequent Payment Blockage Period by holders of Senior Indebtedness or
their representatives unless such Senior Nonmonetary Default shall have been
cured for a period of not less than 90 consecutive days. "Senior Nonmonetary
Default" means any default (other than a Senior Payment Default) or any
event which, after notice or lapse of time (or both), would become an event
of default, under the terms of any instrument or agreement pursuant to which
any Senior Indebtedness is outstanding, permitting (after notice or lapse of
time or both) one or more holders of such Senior Indebtedness (or a
trustee or agent on behalf of the holders thereof) to declare such Senior
Indebtedness due and payable prior to the date on which it would otherwise
become due and payable.
In the event that, notwithstanding the foregoing, the Company shall make
any Debentures Payment to the Trustee or any Holder prohibited by the
foregoing provisions of this Section, then and in such event such Debentures
Payment shall be paid over and delivered forthwith to the Designated Senior
Holders under the Senior Indebtedness or, if such Senior Indebtedness has
been repaid in full, to the Company.
The provisions of this Section shall not apply to any Debentures Payment
with respect to which Section 4.2 hereof would be applicable.
Section 4.4 Payment Permitted If No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this First Supplemental
Indenture or in any of the Debentures shall prevent the Company, at any time
except during the pendency of any Proceeding referred to in Section 4.2 hereof
or under the conditions described in Section 4.3 hereof, from making
Debentures Payments.
Section 4.5 Subrogation To Rights Of Holders Of Senior Indebtedness.
-------------------------------------------------------
Subject to the payment in full in cash of all Senior Indebtedness, the
Holders of the Debentures shall be subrogated to the rights of the holders
of such Senior Indebtedness to receive payments and distributions of cash,
property and securities applicable to the Senior Indebtedness until the
principal of and interest on the Debentures shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of
the Senior Indebtedness of any cash, property or securities to which the
Holders of the Debentures or the Trustee would be entitled except for the
provisions of this Article, and no payments pursuant to the provisions of
this Article to the holders of Senior Indebtedness by Holders of the
Debentures or the Trustee, shall, as among the Company, its creditors other
than holders of Senior Indebtedness and the Holders of the Debentures, be
deemed to be a payment or distribution by the Company to or on account of the
Senior Indebtedness.
17
Section 4.6 Provisions Solely To Define Relative Rights.
-------------------------------------------
The provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this First Supplemental Indenture or in the
Debentures is intended to or shall (a) impair, as among the Company, its
creditors (other than holders of Senior Indebtedness) and the Holders of the
Debentures, the obligation of the Company, which is absolute and
unconditional (and which, subject to the rights under this Article of the
holders of Senior Indebtedness, is intended to rank equally with all other
general obligations of the Company), to pay to the Holders of the Debentures
the principal of and interest on the Debentures as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the Holders of the Debentures and
creditors of the Company, other than the holders of Senior Indebtedness; or
(c) prevent the Trustee or the Holder of any Debenture from exercising all
remedies otherwise permitted by applicable law upon default under this First
Supplemental Indenture or the Indenture, subject to the rights, if any,
under this Article of the holders of Senior Indebtedness to receive cash,
property and securities otherwise payable or deliverable to the Trustee or
such Holder or, under the conditions specified in Section 4.3, to prevent
any payment prohibited by such Section or enforce their rights pursuant to
the penultimate paragraph in Section 4.3.
Section 4.7 Trustee To Effectuate Subordination.
-----------------------------------
Each Holder of a Debenture by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid
balance of the Indebtedness of the Company owing to such Holder in the form
required in such proceedings and the causing of such claim to be approved.
If the Trustee does not file a proper claim at least 30 days before the
expiration of the time to file such claim, then the holders of the Senior
Indebtedness and their agents, trustees or other representatives are
authorized to do so (but shall in no event be liable for any failure to do
so) for and on behalf of the Holders of the Debentures.
Section 4.8 No Waiver Of Subordination Provisions.
-------------------------------------
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and
covenants of this First Supplemental Indenture or the Indenture, regardless
of any knowledge thereof any such holder may have or be otherwise charged
with.
18
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Debentures, without incurring responsibility to the Holders of the Debentures
and without impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Debentures to the holders
of the Senior Indebtedness, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time of payment of, or
renew or alter, Senior Indebtedness, or otherwise amend or supplement in any
manner Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (ii) permit the
Company to borrow, repay and then reborrow any or all of the Senior
Indebtedness; (iii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness; (iv)
release any Person liable in any manner for the collection of Senior
Indebtedness; (v) exercise or refrain from exercising any rights against the
Company and any other Person; and (vi) apply any sums received by them to
Senior Indebtedness.
Section 4.9 Notice To Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by
the Trustee in respect of the Debentures. Notwithstanding the provision of
this Article or any other provision of this First Supplemental Indenture or
the Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or
by the Trustee in respect of the Debentures, unless and until a Responsible
Officer of the Trustee shall have received written notice thereof from the
Company, any holder of Senior Indebtedness, any Designated Senior Holder or
from any trustee, fiduciary or agent therefore; and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Section
6.1 of the Indenture, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section at least three
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment
of the principal or interest on any Debenture), then, anything herein
contained to the contrary notwithstanding, but without limiting the rights
and remedies of the holders of Senior Indebtedness or any trustee, fiduciary
or agent therefor, the Trustee shall have full power and authority to receive
such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may
be received by it within three Business Days prior to such date. Any notice
required or permitted to be given to the Trustee by a holder of Senior
Indebtedness or by any Designated Senior Holder shall be in writing and shall
be sufficient for every purpose hereunder if in writing and either (i) sent
via facsimile to the Trustee, the receipt of which shall be confirmed via
telephone, or (ii) mailed, first class postage prepaid, or sent by overnight
carrier, to the Trustee addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any other
address furnished in writing to such holder of Senior Indebtedness by the
Trustee.
19
Subject to the provisions of Section 6.1 of the Indenture, the Trustee
shall be entitled to rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness or
Designated Senior Holder (or a trustee, fiduciary or agent therefor) to
establish that such notice has been given by a holder of Senior Indebtedness
or Designated Senior Holder (or a trustee, fiduciary or agent therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness or Designated Senior Holder to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Article, and
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to
receive such payment.
Notwithstanding anything else contained herein, no notice, request or other
communication to or with the Trustee shall be deemed given unless received
by a Responsible Officer at the Trustee's principal corporate trust office.
Section 4.10 Reliance On Judicial Order Or Certificate Of Liquidating
Agent.
--------------------------------------------------------
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 6.1 of the
Indenture, and the Holders of the Debentures shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which
such Proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of
creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Debentures, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other Indebtedness
of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article, provided that the foregoing shall apply only if such court has been
apprised of the provisions of this Article.
Section 4.11 Trustee Not Fiduciary For Holders Of Senior Indebtedness.
--------------------------------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of
Debentures or to the Company or to any other Person cash, property or
securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article or otherwise.
20
Section 4.12 Rights of Trustee As Holder Of Senior Indebtedness;
Preservation Of Trustee's Rights.
--------------------------------------------------
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article with respect to any Senior Indebtedness which may
at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this First Supplemental Indenture shall deprive
the Trustee of any of its rights as a holder of Senior Indebtedness.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.7 of the Indenture.
Section 4.13 Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee;
provided, however, that Section 4.11 hereof shall not apply to the Company
or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
ARTICLE 5
CONVERSION OF DEBENTURES
Section 5.1 Conversion Privilege.
--------------------
Subject to and upon compliance with the provisions of this Article, at the
option of the Holder thereof, any Debenture may, at any time or from time to
time on any Business Day to and including, but not after, the close of
business on the day which is five Business Days prior to _______ 2036, be
converted, in whole, or, if the Debenture is in a principal amount in excess
of $50, in part, in integral multiples of $50 principal amount, into fully
paid and nonassessable shares of Common Stock Series A, at the Conversion
Price in effect on the date of conversion. In case a Debenture or a portion
thereof is called for redemption, such conversion right in respect of such
Debenture or the portion so called, shall expire at the close of business on
the day which is five Business Days prior to the Redemption Date, unless the
Company defaults in making the payment due upon redemption.
21
Section 5.2 Manner of Exercise of Conversion Privilege.
------------------------------------------
In order to exercise the conversion privilege, the Holder of any Debenture
to be converted in whole or in part shall surrender such Debenture to the
Conversion Agent at the office or agency to be maintained by the Company
pursuant to Section 10.2 of the Indenture for the conversion of Debentures,
with the fully completed Notice of Conversion set forth in the Debenture duly
completed and, if so required by the Company, accompanied by instruments of
transfer, in form satisfactory to the Company and to the Trustee, duly
executed by the Holder or his duly authorized attorney in writing. Said
notice shall state the name or names (with addresses), if other than the
Holder, in which the certificate or certificates for shares of Common Stock
Series A which shall be issuable on such conversion shall be issued. As
promptly as practicable after the surrender of such Debenture with the signed
and completed notice as aforesaid, the Company shall, subject to the
provisions of Section 5.8, issue and deliver at such office or agency to such
Holder, or on his written order, a certificate or certificates for the number
of shares of Common Stock Series A issuable on the principal amount of the
Debenture then surrendered for conversion, and cash, as provided in Section
5.3, in respect of any fraction of a share of Common Stock Series A otherwise
issuable upon such conversion, and the Company shall execute, and the Trustee
shall authenticate and deliver to such Holder without service charge,
a new Debenture or Debentures, of any authorized denomination as requested
by such Holder, in an aggregate principal amount equal to and in exchange for
the unconverted portion of the Debenture so surrendered. Such conversion
shall be deemed to have been effected immediately prior to the close of
business on the date (herein called the "Date of Conversion") on which such
Debenture containing a duly completed and executed Notice of Conversion
shall have been surrendered as aforesaid, and the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock
Series A shall be issuable upon such conversion shall be deemed to have
become on the Date of Conversion the holder or holders of record of the
shares represented thereby; provided, however, that any such surrender, on
any date when the stock transfer books of the Company shall be closed, shall
constitute the Person or Persons in whose name or names the certificate or
certificates for such shares are to be issued as the record holder or
holders thereof, for all purposes at the opening of business on the next
succeeding day on which such stock transfer books are open, but such
conversion shall nevertheless be at the Conversion Price in effect at the
close of business on the date when such Debenture shall have
been so surrendered. The Holder at the close of business on any Regular
Record Date for the payment of interest will be entitled to receive the
interest payable on his or her Debenture on the corresponding Cash Interest
Payment Date notwithstanding the conversion of such Debenture into Common
Stock Series A following such Regular Record Date. Subject to Sections 5.5
and 5.6 hereof, no payment or adjustment shall be made upon conversion on
account of any interest accrued or deferred or otherwise unpaid on the
principal of any Debenture or portion thereof so converted or for any
dividends or distributions on any shares of Common Stock Series A. Holders
of Common Stock Series A issued upon conversion prior to or on a record
date for any dividend or distribution on such shares shall be entitled to
receive the same dividend or distribution as other holders of record of
Common Stock Series A.
22
Section 5.3 Fractional Shares.
-----------------
No fractional shares of Common Stock Series A shall be issued upon
conversion of Debentures. If more than one Debenture shall be surrendered
for conversion at one time by the same Holder, the number of full shares
which shall be issuable upon conversion shall be computed on the basis of the
aggregate principal amount of the Debentures so surrendered. Instead of any
fractional interest in a share of Common Stock Series A which would otherwise
be issuable upon conversion of any Debenture or Debentures, the Company shall
pay a cash adjustment in respect of such fractional interest to the nearest
one-hundredth of a share in an amount equal to the Average Market Price of
such fractional interest on the Date of Conversion.
Section 5.4 Conversion Price.
----------------
The initial conversion price of the Debentures shall be $________ per share
of Common Stock Series A, subject to adjustment as provided in this Article
5 (the "Conversion Price").
Section 5.5 Adjustment of Conversion Price.
------------------------------
The Conversion Price for each series shall be adjusted from time to time
as follows:
(a) In case the Company shall, while any of the Debentures are
outstanding, (i) pay a dividend or make a distribution with respect to
its Common Stock Series A in shares of Common Stock Series A, (ii)
subdivide its outstanding shares of Common Stock Series A, (iii) combine
its outstanding shares of Common Stock Series A into a smaller number of
shares or (iv) issue by reclassification of its shares of Common Stock
Series A any shares of capital stock of the Company, the conversion
privilege and the Conversion Price for each series of Debentures in effect
immediately prior to such action shall be adjusted so that the Holder of
any Debenture thereafter surrendered for conversion shall be entitled to
receive the number of shares of capital stock of the Company which he
would have owned immediately following such action had such Debenture been
converted immediately prior thereto. An adjustment made pursuant to this
subsection (a) shall become effective immediately after the record date in
the case of a dividend or other distribution and shall become effective
immediately after the effective date in case of a subdivision, combination
or reclassification (or immediately after the record date if a record date
shall have been established for such event). If, as a result of an
adjustment made pursuant to this subsection (a), the Holder of any
Debenture thereafter surrendered for conversion shall become entitled
to receive shares of two or more classes or series of capital stock of
the Company, the Board of Directors (whose determination shall be
conclusive and shall be described in a Board Resolution filed with the
Trustee) shall determine the allocation of the adjusted Conversion
Price for each series of Debentures between or among shares of such
classes or series of capital stock.
23
(b) In case the Company shall, while any of the Debentures are
outstanding, issue rights or warrants to all holders of its Common
Stock Series A entitling them (for a period expiring within 45 days
after the record date mentioned below) to subscribe for or purchase
shares of Common Stock Series A at a price per share less than the
current market price per share of Common Stock Series A (as determined
pursuant to subsection (f) below) on the record date mentioned below,
the Conversion Price for the Debentures shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the date of issuance of such
rights or warrants by a fraction of which the numerator shall be the
number of shares of Common Stock Series A outstanding on the date of
issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered for
subscription or purchase would purchase at such current market price,
and of which the denominator shall be the number of shares of Common
Stock Series A outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock Series
A offered for subscription or purchase. Such adjustment shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. To the
extent that shares of Common Stock Series A are not so delivered after
the expiration of such rights or warrants, the Conversion Price shall
be readjusted to the Conversion Price which would then be in effect if
such date fixed for the determination of stockholders entitled to
receive such rights or warrants had not been fixed. For the purposes
of this subsection, the number of shares of Common Stock Series A at any
time outstanding shall not include shares held in the treasury of the
Company. The Company shall not issue any rights or warrants in respect of
shares of Common Stock Series A held in the treasury of the Company. In
case any rights or warrants referred to in this subsection in respect of
which an adjustment shall have been made shall expire unexercised within
45 days after the same shall have been distributed or issued by the
Company, the Conversion Price shall be readjusted at the time of such
expiration to the Conversion Price that would have been in effect if no
adjustment had been made on account of the distribution or issuance of
such expired rights or warrants.
(c) Subject to the last sentence of this subsection, in case the
Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock Series A evidences of its indebtedness, shares of any
class or series of capital stock (other than Common Stock Series A),
cash or assets (including securities, but excluding any rights or
warrants referred to in subsection (b), any dividend or distribution
paid exclusively in cash and any dividend or distribution referred
to in subsection (a) of this Section), the Conversion Price shall be
reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this
subsection (c) by a fraction of which the numerator shall be
24
the current market price per share (determined as provided in subsection
(f) below) of the Common Stock Series A on the date fixed for the
payment of such distribution (the "Reference Date") less the fair
market value (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a Board
Resolution), on the Reference Date, of the portion of the evidences of
indebtedness, shares of capital stock, cash and assets so distributed
applicable to one share of Common Stock Series A and the denominator
shall be such current market price per share of the Common Stock Series
A, such reduction to become effective immediately prior to the opening
of business on the day following the Reference Date. In the event that
such dividend or distribution is not so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price which would
then be in effect if such dividend or distribution had not occurred.
If the Board of Directors determines the fair market value of any
distribution for purposes of this subsection (c) by reference to the
actual or when issued trading market for any securities comprising such
distribution, it must in doing so consider the prices in such market
over the same period used in computing the current market price per
share of Common Stock Series A (determined as provided in subsection
(f)). For purposes of this subsection (c), any dividend or
distribution that includes shares of Common Stock Series A or rights
or warrants to subscribe for or purchase shares of Common Stock Series
A shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, shares of capital stock, cash or assets
other than such shares of Common Stock Series A or such rights or
warrants (making any Conversion Price reduction required by this
subsection (c)) immediately followed by (2) a dividend or distribution of
such shares of Common Stock Series A or such rights or warrants (making
any further Conversion Price reduction required by subsections (a) or
(b)), except (A) the Reference Date of such dividend or distribution as
defined in this subdivision shall be substituted as (i) "the record date
in the case of a dividend or other distribution" and (ii) "the record date
for the determination of stockholders entitled to receive such rights or
warrants" within the meaning of subsections (a) and (b) and (B) any shares
of Common Stock Series A included in such dividend or distribution shall
not be deemed outstanding for purposes of computing any adjustment of the
Conversion Price in subparagraph (a).
(d) In case the Company shall pay or make a dividend or other
distribution on its Common Stock Series A exclusively in cash
(excluding all regular cash dividends if the annualized amount thereof
per share of Common Stock Series A does not exceed 15% of the current
market price per share (determined as provided in subsection (f)) of
the Common Stock Series A on the Trading Day next preceding the date
of declaration of such dividend, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this subsection by a fraction
of which the numerator shall be the current market price per share
25
(determined as provided in subsection (f)) of the Common Stock Series A on
the date fixed for the payment of such distribution less the amount of cash
so distributed and not excluded as provided applicable to one share of
Common Stock Series A and the denominator shall be such current market
price per share of the Common Stock Series A, such reduction to become
effective immediately prior to the opening of business on the day following
the date fixed for the payment of such distribution; provided, however,
that in the event the portion of the -------- -------
cash so distributed applicable to one share of Common Stock Series A
is equal to or greater than the current market price per share
(determined as provided in subsection (f)) of the Common Stock Series
A on the record date mentioned above, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder of
Debentures shall have the right to receive upon conversion the amount
of cash such Holder would have received had such Holder converted such
Debentures immediately prior to the record date for the distribution
of the cash. In the event that such dividend or distribution is not
so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such record date had
not been fixed.
(e) In case a tender or exchange offer (other than an odd-lot offer)
made by the Company or any Subsidiary of the Company for all or any
portion of the Company's Common Stock Series A shall expire and such
tender or exchange offer shall involve the payment by the Company or
such Subsidiary of consideration per share of Common Stock Series A
having a fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a
Board Resolution) at the last time (the "Expiration Time") tenders or
exchanges may be made pursuant to such tender or exchange offer (as it
shall have been amended) that exceeds 110% of the current market price per
share (determined as provided in subsection (f)) of the Common Stock
Series A on the Trading Day next succeeding the Expiration Time, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction contemplated by
this subsection by a fraction of which the numerator shall be the number
of shares of Common Stock Series A outstanding (including any tendered or
exchanged shares) at the Expiration Time multiplied by the current market
price per share (determined as provided in subsection (f)) of the Common
Stock Series A on the Trading Day next succeeding the Expiration Time and
the denominator shall be the sum of (x) the fair market value (determined
as aforesaid) of the aggregate consideration payable to holders based
on the acceptance (up to any maximum specified in the terms of the
tender or exchange offer) of all shares validly tendered or exchanged
and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock
Series A outstanding (less any Purchased Shares) at the Expiration Time
and the current market price per share
26
(determined as provided in subsection (f)) of the Common Stock Series A on
the Trading Day next succeeding the Expiration Time, such reduction to
become effective immediately prior to the opening of business on the day
following the Expiration Time.
(f) For the purpose of any computation under subsections (b), (c), (d)
or (e), the current market price per share of Common Stock Series A on
any date in question shall be deemed to be the average of the daily
Average Market Prices for the five consecutive Trading Days selected
by the Company commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and, if
applicable, the day before the "ex" date with respect to the issuance
or distribution requiring such computation; provided, however, that if
-------- -------
another event occurs that would require an adjustment pursuant to
subsections (a) through (e), inclusive, the Board of Directors may make
such adjustments to the Average Market Prices during such five Trading
Day period as it deems appropriate to effectuate the intent of the
adjustments in this Section, in which case any such determination by
the Board of Directors shall be conclusive. For purposes of this
paragraph, the term "ex" date, (1) when used with respect to any
issuance or distribution, means the first date on which the Common
Stock Series A trades regular way on the NYSE or on such successor
securities exchange as the Common Stock Series A may be listed or in the
relevant market from which the Average Market Prices were obtained without
the right to receive such issuance or distribution, and (2) when used with
respect to any tender or exchange offer means the first date on which the
Common Stock Series A trades regular way on such securities exchange or in
such market after the Expiration Time of such offer.
(g) The Company may make such reductions in the Conversion Price, in
addition to those required by subsections (a) through (e) as it
considers to be advisable to avoid or diminish any income tax to
holders of Common Stock Series A or rights to purchase Common Stock
Series A resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income
tax purposes. The Company from time to time may reduce the Conversion
Price by any amount for any period of time if the period is at least
twenty (20) days, the reduction is irrevocable during the period, and
the Board of Directors of the Company shall have made a determination
that such reduction would be in the best interest of the Company, which
determination shall be conclusive. Whenever the Conversion Price is
reduced pursuant to the preceding sentence, the Company shall mail to
Holders of the Debentures a notice of the reduction at least fifteen
(15) days prior to the date the reduced Conversion Price takes effect,
and such notice shall state the reduced Conversion Price and the period
it will be in effect.
27
(h) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1%
in the Conversion Price; provided; however; that any adjustments which
-------- -------
by reason of this subparagraph (i) are not required to be made shall
be carried forward and taken into account in determining whether any
subsequent adjustment shall be required.
(i) Notwithstanding the foregoing provisions, the issuance of any
shares of Common Stock Series A pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities of the
Company and the investment of additional optional amounts in shares of
Common Stock Series A under any such plan, and the issuance of any
shares of Common Stock Series A or options or rights to purchase such
shares pursuant to any employee benefit plan or program of the Company
or pursuant to any option, warrant, right or exercisable, exchangeable
or convertible security outstanding on the date the Debentures are
first issued, shall not be deemed to constitute an issuance of Common
Stock Series A or exercisable, exchangeable or convertible securities
by the Company to which any of the adjustment provisions described
above applies. There shall also be no adjustment of the Conversion
Price in case of the issuance of any stock (or securities convertible
into or exchangeable for stock) of the Company except as specifically
described in this Article Five.
(j) If any action would require adjustment of the Conversion Price
pursuant to more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the Holder of the
Debentures.
Section 5.6 Reclassification, Consolidation, Merger or Sale of Assets.
---------------------------------------------------------
In the event that the Company shall be a party to any transaction
(including without limitation (a) any recapitalization or reclassification
of the Common Stock Series A (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of
a subdivision or combination of the Common Stock Series A), (b) any
consolidation of the Company with, or merger of the Company into, any other
Person, or any merger of another Person into the Company (other than a merger
which does not result in a reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock Series A of the Company),
(c) any sale or transfer of all or substantially all of the assets of the
Company or (d) any compulsory share exchange) pursuant to which the Common
Stock Series A is converted into the right to receive other securities, cash
or other property, then lawful provision shall be made as part of the terms
of such transaction whereby the Holder of each Debenture then outstanding
shall have the right thereafter to convert such Debenture only into the kind
and amount of securities, cash and other property receivable upon
consummation of such transaction by a holder of the number of
28
shares of Common Stock Series A of the Company into which such Debenture could
have been converted immediately prior to such transaction.
The Company or the Person formed by such consolidation or resulting from
such merger or which acquired such assets or which acquires the Company's
shares, as the case may be, shall make provision in its certificate or
articles of incorporation or other constituent document to establish such
right. Such certificate or articles of incorporation or other constituent
document shall provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Article Five. The above provisions
shall similarly apply to successive transactions of the foregoing type.
Section 5.7 Notice of Adjustments of Conversion Price.
-----------------------------------------
Whenever the Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price and shall
prepare a certificate signed by the Treasurer or Controller of the
Company setting forth the adjusted Conversion Price and showing in
reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed with the Trustee and the
Conversion Agent; and
(b) a notice stating the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall as soon as
practicable be mailed by the Company to all record holders of
Convertible Preferred Securities, Partnership Preferred Securities and
Debentures at their last addresses as they appear upon the transfer
books of the Company, the Trust or Citizens Capital, as the case may
be.
Section 5.8 Notices.
-------
In case, at any time while any of the Debentures are outstanding,
(a) the Company shall (i) declare a dividend (or any other
distribution) on its Common Stock Series A, excluding any cash
dividends that would not require adjustment pursuant to Section 5.5(d)
or dividends payable in shares of Common Stock Series A, or (ii)
authorize a tender or exchange offer that would require an adjustment
pursuant to Section 5.5(e); or
(b) the Company shall authorize the issuance to all holders of its
Common Stock Series A of rights or warrants to subscribe for or
purchase shares of its Common Stock Series A or of any other
subscription rights or warrants; or
29
(c) the Company shall authorize any reclassification of its Common
Stock Series A (other than a transaction or event referred to in
clauses (i), (ii), (iii) or (iv) of subsection (a) of Section 5.5) or
any consolidation or merger to which the Company is a party and for
which approval of any stockholders of the Company is required (except
for a merger of the Company into one of its subsidiaries solely for the
purpose of changing the corporate domicile of the Company to another
state of the United States and in connection with which there is no
substantive change in the rights or privileges of any securities of the
Company other than changes resulting from differences in the corporate
statutes of the then existing and the new state of domicile), or the
sale or transfer of all or substantially all of the assets of the
Company; or
(d) the voluntary or involuntary dissolution, liquidation or winding
up of the Company shall occur or be authorized;
then the Company shall cause to be filed at each office or agency maintained
by the Company for the purpose of conversion of the Debentures pursuant to
Section 10.2 of the Indenture, and shall cause to be mailed to the Holders
of Debentures and the holders of the Convertible Preferred Securities and the
Partnership Preferred Securities at their last addresses as they shall appear
on the Securities Register or the transfer books of the Trust or Citizens
Capital, as the case may be, at least 10 days before the date hereinafter
specified (or the earlier of the dates hereinafter specified, in the event
that more than one date is specified), a notice stating (i) the date on which
a record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of which
the holders of Common Stock Series A of record to be entitled to such
dividend, distribution, rights or warrants are to be determined or (ii) the
date on which any such reclassification, consolidation, merger, sale, share
exchange, transfer, dissolution, liquidation or winding up is expected that
holders of Common Stock Series A of record shall be entitled to exchange
their Common Stock Series A for securities or other property (including
cash), if any, deliverable upon such reclassification, consolidation, merger,
sale, share exchange, transfer, dissolution, liquidation or winding up. The
failure to give or receive the notice required by this Section 5.8 or any
defect therein shall not affect the legality or validity of any such dividend,
distribution, right or warrant or other action.
Section 5.9 Taxes on Conversion.
-------------------
The Company will pay any and all documentary, stamp or similar taxes
payable to the United States of America or any political subdivision or
taxing authority thereof or therein respect of the issue or delivery of
shares of Common Stock Series A on conversion of Debentures pursuant hereto;
provided, however, that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue
or delivery of shares of Common Stock Series A in a name other than that of
the Holder of the Debentures to be converted and no such issue or delivery
shall be made unless and until the Person requesting
30
such issue or delivery has paid to the Company the amount of any such tax or
has established, to the satisfaction of the Company, that such tax has been
paid.
Section 5.10 Company to Provide Stock.
------------------------
The Company covenants that there shall be reserved, from time to time, free
from preemptive rights, out of authorized but unissued shares of Common Stock
Series A, sufficient shares to provide for the conversion of the Debentures
from time to time as such Debentures are presented for conversion.
If any shares of Common Stock Series A to be reserved for the purpose of
conversion of Debentures hereunder require registration with or approval of,
or authorization by, any governmental authority under Federal or state law
before such shares may be validly issued or delivered upon conversion, then
the Company covenants that it will in good faith and as expeditiously as
possible endeavor to secure such registration, approval or authorization, as
the case may be.
Before any action which would cause an adjustment reducing the Conversion
Price for the Debentures below the then par value, if any, of the Common
Stock Series A, the Company covenants that there will be taken all corporate
action which may, in the opinion of its counsel, be necessary in order that
there may be validly and legally issued fully paid and non-assessable shares
of such Common Stock Series A at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock Series A which may
be issued upon conversion of Debentures will upon issue be duly authorized,
validly issued, fully paid and non-assessable and free from all liens and
charges with respect to the issue or delivery thereof. Such shares of
Common Stock Series A will, upon issue, be listed on the NYSE or any other
national securities exchange, NASDAQ or other quotation system on which
shares of Common Stock Series A may then be listed or quoted.
Section 5.11 Disclaimer of Responsibility for Certain Matters.
------------------------------------------------
Neither the Trustee nor any Conversion Agent shall at any time be under
any duty or responsibility to any Holder of Debentures to determine whether
any facts exist which may require any adjustment of the Conversion Price for
any series of Debentures, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed, or herein or
in any supplemental indenture provided to be employed, in making the same.
Neither the Trustee nor any Conversion Agent shall be accountable with
respect to the registration, validity or value (or the kind or amount) of any
shares of Common Stock Series A, or of any securities or property, which may
any time be issued or delivered upon the conversion of any Debenture; and
neither the Trustee nor any Conversion Agent makes any representation
with respect thereto. Neither the Trustee nor any Conversion Agent shall be
responsible for any failure of the Company to issue or deliver any shares of
Common Stock Series A or stock certificates or other securities, cash or
property upon the surrender of any Debenture for the
31
purpose of conversion, or, subject to Section 1.4 of the Indenture, to
comply with any of the covenants of the Company obtained in this Article 5.
Section 5.12 Return of Funds Deposited for Redemption of Converted
Debentures.
-----------------------------------------------------
Any funds which at any time shall have been deposited by the Company or on
its behalf with the Trustee or any other Paying Agent for the purpose of
paying the principal of, premium, if any, and interest, if any, on any of the
Debentures and which shall not be required for such purposes because of the
conversion of such Debentures, as provided in this Article 5, shall forthwith
after such conversion, upon Company Request, be repaid to the Company by the
Trustee or such other Paying Agent.
Section 5.13 Disposition of Converted Debentures.
-----------------------------------
All Debentures delivered to the Company or any Conversion Agent upon
conversion pursuant to this Article 5 shall be delivered to the Trustee for
cancellation.
ARTICLE 6
REDEMPTION OF DEBENTURES
Section 6.1 Redemption
----------
(a) Optional Redemption: At any time on or after ______________,
--------------------
1999, the Company, at its option, will have the right to prepay or
redeem the Debentures, in whole or in part, at 100% of the
principal amount being redeemed in cash (together with any accrued or
deferred but unpaid interest to the Redemption Date in cash or Common
Stock) (such amount and form of payment being the "Redemption Price").
(b) Accrued or Deferred Interest. The Company may not redeem any
----------------------------
outstanding Debentures unless on or before the Redemption Date all accrued
or deferred but unpaid interest has been paid in full on all Debentures for
all quarterly interest payment periods terminating on or before the date of
redemption.
Section 6.2 Applicability of Article.
------------------------
Redemption of Debentures at the election of the Company, as permitted by
Section 6.1, shall be made in accordance with such provision, this Article
and Article 11 of the Indenture, to the extent not inconsistent with this
Article 6.
Section 6.3 Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Debentures pursuant to Section
6.1 shall be evidenced by a Board Resolution. In the case of any redemption
at the election of the Company, the Company shall, at least 40 days and no
more than 60 days prior to the Redemption Date fixed by the Company, notify
the Trustee of such Redemption Date and of the principal amount of Debentures
to be redeemed and any accrued or deferred and unpaid interest thereon and
provide a copy of the notice of redemption given to Holders of Debentures to
be redeemed pursuant to Section 6.4. In the event that any date fixed for
redemption is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day,
except that, if such Business Day is in the next succeeding calendar year, such
payment will be made on the immediately preceding Business Day.
Section 6.4 Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Debentures to be Redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will become due
and payable upon each such Debenture to be redeemed and that interest
thereon will cease to accrue on and after said date,
(4) the place or places where such Debentures are to be surrendered
for payment of the Redemption Price,
(5) the date that the conversion right shall expire, and
(6) the Conversion Price.
33
Notice of redemption of Debentures to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
Section 6.5 Deposit of Redemption Price.
---------------------------
Prior to 10:00 a.m., New York City time, on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3 of the Indenture) an amount of money and Common Stock,
if any, sufficient to pay the Redemption Price of, and deferred interest on,
all the Debentures to be redeemed.
Section 6.6 Debentures Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Debentures so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in such payment) such Debentures shall cease to bear
interest. Upon surrender of any such Debenture for redemption in accordance
with said notice, such Debenture shall be paid by the Company at the
Redemption Price, provided, however, that installments of interest whose
Cash Interest Payment Date is prior to the Redemption Date shall be payable
to the Holders of such Debentures registered as such at the close of
business on the relevant Regular Record Dates subject to the provisions of
Section 3.7 of the Indenture and Article 3 of this First Supplemental
Indenture.
ARTICLE 7
AMENDMENTS TO INDENTURE FOR PURPOSES
OF FIRST SERIES OF DEBENTURES
Section 7.1 Amendment to Section 5.1 of Indenture
for Purposes of First Series of Debentures.
------------------------------------------
For all purposes of the Debentures and for no other purposes, Section 5.1
of the Indenture shall read (terms used but not defined in the Indenture
shall have the requisite meanings as used in this First Supplemental
Indenture):
"Section 5.1. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether
it shall be occasioned by the provisions of Article Four of the First
Supplemental Indenture or shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or
34
order of any court or any order, rule or regulation of any administrative or
governmental body):
(1) failure to pay any principal of the Debentures when due, and
such failure shall continue for 15 days; or
(2) failure to pay any interest on the Debentures, other than
Additional Interest, if any, when due and such failure continues for
a period of 60 days; provided, that a deferral of an interest payment
by the Company pursuant to the First Supplemental Indenture shall not
constitute a default in the payment of interest for this or any other
purpose and no interest payment which has been deferred shall be deemed
due or payable until the date specified as the date for payment of such
interest as provided in Section 3.7 of the Indenture; or
(3) failure by the Company to issue the Common Stock Series A (or
other securities) upon an election to convert the Debentures for Common
Stock Series A (or other securities), which failure shall continue for
five days; or
(4) failure by the Company to perform in any material respect any
other covenant herein (other than a covenant whose performance is
elsewhere in this Section specifically dealt with) for the benefit of
the holders of Debentures continued for a period of 90 days after
written notice, by registered or certified mail, (i) to the Company by
the Trustee or (ii) to the Company and the Trustee by the Holders of a
majority in aggregate principal amount of the Debentures or by the
holders of a majority in liquidation amount of Partnership Preferred
Securities or Convertible Preferred Securities; or
(5) the dissolution, winding-up, liquidation or termination of the
Partnership unless the same is a result of a Special Event or Rating
Agency Event; or
(6) the dissolution, winding-up, liquidation or termination of the
Trust unless the same is a result of a Special Event or Rating Agency
Event; or
(7) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Company, the Partnership
or the Trust in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company, the
Partnership or the Trust a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company, the
Partnership or the Trust under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company, the Partnership
or the Trust or of any substantial part
35
of the property of any of them, or ordering the winding-up or
liquidation of its affairs, and the continuance or any such decree
or order for relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
(8) the commencement by the Company, the Partnership or the Trust
of a voluntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by any of the Company, the Partnership or the Trust it to
the entry of a decree or order for relief in respect of itself in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
either the Company, the Partnership or the Trust, or the filing by any
of them of a petition or answer or consent seeking reorganization or
relief under any applicable federal or state law, or the consent by any
of the Company, the Partnership or the Trust to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company, the Partnership or the Trust or of any
substantial part of the property of any of them, or the making by any
of them of an assignment for the benefit of creditors, or the admission
by any of them in writing of its inability to pay its debts generally
as they become due, or the taking of corporate action by the Company,
the Partnership or the Trust in furtherance of any such action;
it being understood that (other than as described in paragraphs (1)
and (2) above to the extent the Trustee is the Paying Agent for the
Debentures) the Trustee shall not be deemed to have knowledge of an
Event of Default hereunder unless a Responsible Officer has received
written notice thereof."
"Section 7.2 Amendment to Section 5.13 of Indenture
for Purposes of First Series of Debentures.
------------------------------------------
For all purposes of the Debentures and for no other purposes,Section 5.13
of the Indenture shall read (terms used but not defined in the Indenture
shall have the requisite meanings as used in this First Supplemental Indenture):
"Section 5.13. Waiver of Past Defaults.
------------------------
The Holders of not less than a majority in principal amount of the
outstanding Debentures may on behalf of the Holders of all the Debentures
waive any past default hereunder with respect to such Debentures and its
consequences, except a default
(1) in the payment of the principal of (or premium, if any) or interest
on the Debentures, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder
of each outstanding Debenture affected;
provided, however, that if the Debentures are held by Citizens Capital or
-------- -------
the Trust, such waiver or modification to such wavier shall not be
effective until, in the case that the Debentures are held by Citizens
Capital, the holders of a majority in liquidation preference of the
Partnership Preferred Securities, or, in the case that the Debentures are
held by the Trust, the holders of a majority in liquidation preference of
the Trust Securities, as the case may be, shall have consented to such
waiver or modification to such waiver; provided, further, that if the
-------- -------
consent of the Holder of each Debenture is required and the Debentures
are held by Citizens Capital or the Trust, such waiver shall not be
effective until, in the case that the Debentures are held by Citizens
Capital, each holder of the Partnership Preferred Securities, or, in
the case that the Debentures are held by the Trust, each holder of the
Trust Securities, as the case may be, shall have consented to such waiver.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this First Supplemental Indenture; but no such waiver
shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon."
Section 7.3 Amendment to section 9.1 of Indenture
for Purposes of First Series of Debentures.
-------------------------------------------
For all purposes of the Debentures and for no other purposes,
subsection (10) of Section 9.1 of the Indenture shall read (terms used but
not defined in the indenture shall have the requisite meanings as used in
this First Supplemental Indenture):
"(10) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture or the First Supplemental
Indenture which shall not be inconsistent with the provisions of this
Indenture or the First Supplemental Indenture; provided that such
action pursuant to this clause (10) shall not adversely affect the
interests of the Holders in any material respect or, so long as any of
the Convertible Preferred Securities or Partnership Preferred
Securities shall remain
36
outstanding, the holders of the Convertible Preferred Securities or
Partnership Preferred Securities in any material respect."
Section 7.4 Amendment to Section 9.2 of Indenture
for Purposes of First Series of Debentures.
------------------------------------------
For all purposes of the Debentures and for no other purposes, there shall
be added a proviso following subsection (3) of Section 9.2 of the Indenture,
which shall read (terms used but not defined in the Indenture shall have the
requisite meanings as used in this First Supplemental Indenture):
"; provided, that, so long as any of the Convertible Preferred
Securities or Partnership Preferred Securities remains outstanding, no
such amendment shall be made that adversely affects the holders of the
Convertible Preferred Securities or Partnership Preferred Securities,
and no termination of this Indenture or the First Supplemental
Indenture shall occur, and no waiver of any Event of Default or
compliance with any covenant under this Indenture or the First
Supplemental Indenture shall be effective, without the prior consent
of the holders of at least 66-2/3% of the aggregate liquidation
preference of the outstanding Convertible Preferred Securities or
Partnership Preferred Securities unless and until the Debentures and
all accrued or deferred and unpaid interest thereon have been paid in
full."
ARTICLE 8
EXPENSES
Section 8.1 Payment and Expenses.
--------------------
In connection with the offering, sale and issuance of the Debentures to
Citizens Capital in connection with the issuance of the Partnership
Securities by Citizens Capital and the sale of the Trust Securities by the
Trust, the Company shall:
(a) pay for all costs and expenses relating to the offering, sale and
issuance of the Debentures, including commissions to the underwriters
payable pursuant to the Underwriting Agreement and compensation and
expenses of the Trustee under the Indenture in accordance with the
provisions of Section 6.7 of the Indenture;
(b) pay for all costs and expenses relating to the organization,
maintenance and dissolution of Citizens Capital and the Trust and the
retention of its regular trustees;
(c) pay for all costs and expenses of Citizens Capital and the Trust
(including but not limited to, costs and expenses relating to the
organization of Citizens Capital and the Trust, the issuance of the
Partnership Securities, the offering, sale and issuance of the Trust
Securities (including commissions to the underwriters in connection
therewith),
37
the fees and expenses of the Property Trustee and the Delaware
Trustee, the costs and expenses relating to the operation of Citizens
Capital and the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying
agent(s), registrar(s), transfer agent(s), duplicating, travel and
telephone and other telecommunications expenses and costs and expenses
incurred in connection with the acquisition, financing, and disposition of
Citizens Capital and Trust assets);
(d) pay for all costs and expenses relating to the enforcement by the
Property Trustee under the Trust of the rights of the holders of the
Convertible Preferred Securities; and
(e) to the extent contemplated by Section 3.1(17), pay Taxes of
Citizens Capital and the Trust and all liabilities, costs and expenses with
respect to such Taxes of Citizens Capital and the Trust, either by payment
of Additional Interest, by payment directly to the taxing authority or
by otherwise making funds available to Citizens Capital or the Trust, as
contemplated by Section 3.1(17).
ARTICLE 9
COVENANTS
Section 9.1 Covenants.
---------
(1) The Company agrees (i) that the Company will not declare or pay
any dividend or distribution (other than in shares of its capital stock)
on any of the Company's capital stock, (ii) that neither the Company nor
any of its Subsidiaries will redeem, purchase, acquire for value or make
a liquidation payment to any holder of, or with respect to, any of the
Company's capital stock or any of the Company's indebtedness for borrowed
money which by its terms expressly ranks junior in subordination to the
Debentures ("Other Subordinated Indebtedness") (other than (x) as an
issuance of capital stock upon conversion of a convertible security or in
payment of interest, premium or principal or in payment in redemption,
purchase or other acquisition or liquidation of capital stock or Other
Subordinated Indebtedness, (y) as a result of reclassification of such
capital stock or the exchange or conversion of one class or series of
capital stock for another class or series of capital stock, or (z) in
connection with the right of the Company to purchase or reacquire shares
of Common Stock Series A referred to in Section 3.1(5) of this First
Supplemental Indenture or under the provisions of the Declaration or the
Limited Partnership Agreement), (iii) that the Company will not make any
payment of principal, premium or interest (unless payable in shares of
capital stock) on Other Subordinated Indebtedness, and (iv) that neither
the Company nor any of its Subsidiaries will make any guarantee of payments
which would be prohibited or limited by the foregoing (other than payments
under the Guarantees, payments of
38
dividends by a Subsidiary, or guarantees of dividends or payments payable
to the Company), if at such time (a) there shall have occurred any event
that, with the giving of notice or the lapse of time or both, would
constitute an Event of Default hereunder or under the Debentures, (b) the
Company shall be in default with respect to its payment or other
obligations under the Guarantees or (c) the Company shall have given notice
of its election to defer an interest payment as provided herein and any
deferred interest payment remains unpaid. The term "Other Subordinated
Indebtedness" shall not include any indebtedness which is outstanding
under an instrument dated prior to the date of this First Supplemental
Indenture which does not expressly permit the deferral of payment or
extension of the time for payment of interest, premium or principal, or any
installment thereof.
(2) The Company also covenants (i) to remain the General Partner of
Citizens Capital; provided that any permitted successor of the Company
under the Limited Partnership Agreement may succeed to the Company's duties
as General Partner, (ii) to cause at least 3% of the total value of
Citizens Capital and at least 3% of all interests in the capital, income,
gain, loss, deduction and credit of Citizens Capital to be held by the
Company, as a General Partner of Citizens Capital, (iii) not to voluntarily
dissolve, wind-up or liquidate Citizens Capital, (iv) to perform timely all
of its duties as General Partner (including the duty to declare and pay
distributions on the Partnership Preferred Securities), (v) to maintain
direct ownership of all partnership interests of Citizens Capital other
than the Partnership Preferred Securities and any special partnership
interest, except as may be permitted by the Limited Partnership Agreement,
(vi) to use its reasonable efforts to cause Citizens Capital to remain a
limited partnership and otherwise to continue to be treated as a
partnership for United States federal income tax purposes; (vii) to issue
Common Stock Series A upon an election by Holders to convert the
Debentures; and (viii) to own Convertible Common Securities equal to
at least 3% of the total undivided beneficial interests in the assets of
the Trust.
(3) The Company also covenants that so long as any Debentures are held
by Citizens Capital, the General Partner shall not (i) exercise its option
to select the form of payment of interest in violation of instructions of
the Special Representative, (ii) direct the time, method and place of
conducting any proceeding for any remedy available to the Special
Representative, or exercising any trust or power conferred on the Special
Representative with respect to the Debentures, (iii) waive any past default
which is waivable under this First Supplemental Indenture, (iv) exercise
any right to rescind or annul a declaration that the principal of all the
Debentures shall be due and payable, (v) consent to any amendment,
modification or termination of the Debentures or of this First Supplemental
Indenture or the Indenture without, in each case, obtaining the prior
approval of the Property Trustee after having received the prior consent
of the holders of at least 66-2/3% or more of the aggregate liquidation
preference of the Convertible Preferred Securities then outstanding,
provided, however, that where a consent under the Debentures would require
the consent of each Holder affected thereby, no such consent shall be given
by the General Partner without the prior approval of such Property Trustee
39
after having received the prior consent from each holder of the Convertible
Preferred Securities. The General Partner shall not revoke any
action previously approved by the Property Trustee with the prior consent
or approval of the holders of the Convertible Preferred Securities, without
the approval of the Property Trustee after having received the prior
consent or approval of the holders of Convertible Preferred Securities
representing 66-2/3% or more (or 100% where the consent of each holder
affected thereby is required) of the aggregate liquidation preference of
the Convertible Preferred Securities.
(4) If the Trust or Citizens Capital shall notify the Company and the
Trustee in writing that either the Trust or Citizens Capital is giving
notice of the redemption of all or a portion of the Trust Securities or the
Partnership Preferred Securities and General Partnership Security, which
notice shall state an amount of liquidating value to be redeemed of each
security and the date of such redemption, the Company will promptly give
notice of redemption of the Debentures with the same principal amount
(without duplication) as the aggregate liquidating value of the Partnership
Preferred Securities and the General Partnership Security being redeemed
or, if the Debentures are held by the Trust, in the same aggregate
principal amount as the liquidating value of the Trust Securities being
redeemed. The redemption date specified in such notice of redemption
of Debentures shall be the same redemption date as is specified by the
Trust or Citizens Capital.
(5) If Debentures are to be distributed to the holders of the
Convertible Preferred Securities upon a liquidation of the Trust, the
Company will use its best efforts to list the Debentures on the NYSE or on
such other exchange as the Convertible Preferred Securities are then
listed.
(6) The Company expressly acknowledges that, under the terms of the
Convertible Preferred Securities, the trustee for the holders of
outstanding Convertible Preferred Securities shall have the right to
appoint a Special Representative, which Special Representative shall be
authorized to exercise the right of the Trustee or the Holders of not less
than a majority in principal amount of the outstanding Debentures to
accelerate the principal amount of the Debentures and to enforce the
Holders' other rights hereunder or under the Debentures.
(7) At the time of any Special Event, the Company has a Ministerial
Action Obligation.
40
ARTICLE 10
MISCELLANEOUS
Section 10.1 Benefits of Indenture.
---------------------
The Company's obligations under the Indenture and this First Supplemental
Indenture and the Debentures will also be for the benefit of the holders from
time to time of the Partnership Preferred Securities, Convertible Preferred
Securities and Convertible Common Securities. Nothing in the Indenture or
this First Supplemental Indenture or in the Debentures, express or implied,
shall give any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness, the holders of Convertible
Preferred Securities and Convertible Common Securities, the holders of
Partnership Preferred Securities and the Holders of Debentures, any benefit
or any legal or equitable right, remedy or claim under the Indenture and this
First Supplemental Indenture.
Section 10.2 Incorporation of Indenture
--------------------------
From and after the date hereof, the Indenture, as supplemented by this
First Supplemental Indenture, shall be read, taken and construed as one and
the same instrument with respect to the Debentures.
Section 10.3 Acceptance of Trust.
-------------------
The Trustee accepts the trusts created by the Indenture, as hereby
supplemented by this First Supplemental Indenture, and agrees to perform the
same upon the terms and conditions in the Indenture, as so supplemented.
Section 10.4 Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act that is required under such Act to be a part of and
govern this First Supplemental Indenture, such provision of the Act shall
control. If any provision of this First Supplemental Indenture modifies or
excludes any provision of the Trust Indenture Act that may be so modified or
excluded, such provision of the Act shall be deemed to apply to this First
Supplemental Indenture only as so modified and if not so excluded, as the
case may be.
Section 10.5 Governing Law.
-------------
This First Supplemental Indenture, and the Debentures, shall be governed
by and construed in accordance with the laws of the State of New York.
41
Section 10.6 Recitals.
--------
The recitals contained in the Indenture, this First Supplemental Indenture
and the Debentures, except the Trustee's certificate of authentication, shall
be taken as statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of the Indenture, as supplemented by this
First Supplemental Indenture.
Section 10.7 Amendments.
----------
Notwithstanding any other provisions hereof, all amendments to the
Indenture made hereby shall have effect only with respect to the Debentures,
and not with respect to the Securities of any other series created subsequent
to the date hereof.
Section 10.8 Counterparts.
------------
This First Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
42
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the date first above written.
CITIZENS UTILITIES COMPANY
By:______________________________
Title: Vice President and
Treasurer
Attest:
________________________________
Secretary
CHEMICAL BANK, as Trustee
By:______________________________
Title: Vice President
Attest:
_______________________________
Assistant Vice President
43
County of Fairfield )
) ss.:
State of Connecticut )
On the day of __________, 1996, before me personally came Robert
J. DeSantis, to me known, who, being by me duly sworn, did depose and say that
he is Vice President and Treasurer of CITIZENS UTILITIES COMPANY, one of
the corporations described in and which executed the foregoing instrument;
that he knows the seal of said corporations; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his name thereto
by like authority.
__________________________________
Notary Public, State of Connecticut
44
County of New York )
) ss.:
State of New York )
On this day of ___________ in the year of 1996 before me
personally came _____________________________________________, to me
personally known, who being by me duly sworn did depose and say that he
resides at _________________________________________________________, that
he is Vice President of CHEMICAL BANK, one of the corporations described in
and which executed the foregoing indenture; that he knows the seal of said
corporation; that the seal affixed to said instrument opposite the execution
thereof on behalf of said corporation is the corporate seal of said
corporation; that said instrument was signed and said corporate seal was so
affixed on behalf of said corporation by authority and order of its board of
directors; that he signed his name thereto by like authority; and he
acknowledged said instrument to be his free act and deed and the free act and
deed of said Chemical Bank.
IN WITNESS WHEREOF I have hereunder set my hand and affixed my official
seal, at New York in said State of New York, the day and year first above
written.
__________________________________
Notary Public, State of New York
45
ANNEX A
Initial Regular Record Dates,
Distribution Declaration Dates and Share Transfer and Valuation Dates
Distribution Regular Share Transfer Related Cash
Declaration Date Record Date and Valuation Date Interest Payment Date
- ---------------- ----------- ------------------ ---------------------
December 9 December 19 January 18 January 31
March 13 March 23 April 17 April 30
June 13 June 23 July 18 July 31
September 12 September 22 October 18 October 31
If the scheduled Distribution Declaration Date or Share Transfer and
Valuation Date falls on a day which is not a Business Day, the Distribution
Declaration Date or Share Transfer and Valuation Date, as the case may be,
shall be the next succeeding day that is a Business Day except that, if such
Business Day is in the next succeeding calendar year, the Distribution
Declaration Date or Share Transfer and Valuation Date, as the case may be,
shall be the immediately preceding Business Day.
46
EXHIBIT A
to
First Supplemental Indenture
(FORM OF DEBENTURE)
REGISTERED REGISTERED
R- ________ $___________
CITIZENS UTILITIES COMPANY
_____% CONVERTIBLE SUBORDINATED DEBENTURE DUE ____________, 2036
CITIZENS UTILITIES COMPANY, a Delaware corporation (hereinafter called the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
-------------------------------------
or registered assigns, the principal sum of _________________________________
($_______________) DOLLARS on __________, 2036, and to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) thereon from
__________, 1996 or from the most recent Cash Interest Payment Date to which
interest has been paid or duly provided for, quarterly (subject to deferral
as set forth herein) in arrears on (or, if interest is paid in shares of
Common Stock Series A, as provided in the Indenture, computed as of) January
31, April 30, July 31 and October 31 of each year (each such date, a "Cash
Interest Payment Date"), commencing on __________, 1996, at the rate per annum
specified in the title of this Debenture, until the principal hereof is paid
or made available for payment and on any overdue principal and (without
duplication and to the extent that payment of such interest is enforceable
under applicable law) on any overdue installment of interest at the same rate
per annum compounded quarterly. Unless deferred by the Company as provided
in the Indenture, the interest so payable, and punctually paid or duly
provided for, on or before any Cash Interest Payment Date will, as provided
in the Indenture, be paid to the Person in whose name this Debenture (or one
or more Predecessor Securities) is registered at the close of business on the
Regular Record Date next preceding such interest payment, which is a date to
be established by the Company by written notice to the Trustee and the
Holders prior to such Cash Interest Payment Date. Any such interest not so
punctually paid or duly provided for (including any deferred interest
referred to on the reverse hereof) shall forthwith cease to be payable to
the registered Holder on such Regular Record Date and may
1
be paid to the Person in whose name this Debenture is registered
at the close of business on a Special Record Date for the payment of such
deferred interest to be fixed by the Company as provided in the Indenture.
Subject to the requirements of any book-entry security system applicable to
this Debenture, payment of principal and interest of this Debenture will be
made at maturity or redemption against presentation of the Debenture by the
Holder or the duly authorized agent of the Holder at the office or agency
of the Trustee maintained for that purpose in the Borough of Manhattan,
The City of New York, unless otherwise specified in notice of redemption.
Payment of principal (and interest, to the extent that interest is payable
in cash) will be made in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
As more fully provided in the Indenture, so long as the Holder of the
Debentures is Citizens Utilities Capital L.P., the Company will have the
option to pay the interest becoming due on the quarterly Cash Interest
Payment Dates either by delivery of an Equivalent Value of shares of its
Common Stock Series A (as described in the Indenture) (which delivery shall
be made on the Share Transfer and Valuation Date), or in cash. Interest paid
in cash will be paid by check mailed to the address of the Holder as such
address shall appear on the Security Register or by wire transfer in
immediately available funds at such place and to such account as may be
designated by the Holder upon application to the Security Registrar as
provided in the Indenture.
The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior
payment in full in cash of all Senior Indebtedness (as defined in the
Indenture), and this Debenture is issued subject to the provisions of the
Indenture with respect thereto. Each Holder of this Debenture, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his or her attorney-in-fact for any and
all such purposes. Each Holder hereof, by his or her acceptance hereof,
hereby waives all notice of the acceptance of the subordination provisions
contained herein and in the Indenture by each holder of Senior Indebtedness,
whether now outstanding or hereafter incurred, and waives reliance by each
such holder upon said provisions.
Additional provisions of the Indenture under which this Debenture is issued
and to the terms of which it is subject are summarized on the reverse hereof,
but the provisions set forth in the Indenture alone shall be definitive as
to the respective rights, duties, obligations and covenants of the Company,
the Trustee and the Holder of this Debenture.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee for the Debentures by manual signature, this Debenture
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
2
IN WITNESS WHEREOF, CITIZENS UTILITIES COMPANY has caused this Instrument
to be duly executed under its corporate seal.
Dated:
CERTIFICATE OF AUTHENTICATION CITIZENS UTILITIES COMPANY
THIS IS ONE OF THE SECURITIES OF
THE SERIES DESIGNATED THEREIN
REFERRED TO IN THE WITHIN-MENTIONED
INDENTURE. By: ____________________________
VICE PRESIDENT AND TREASURER
CHEMICAL BANK, TRUSTEE
Attest: __________________________
ASSISTANT SECRETARY
By: ____________________________
AUTHORIZED OFFICER
[FORM OF REVERSE OF DEBENTURE]
------------------------------
This Debenture is one of a duly authorized series of Securities of the
Company (herein sometimes referred to as the "Debentures"), specified in the
Indenture, all issued or to be issued in one or more series under and
pursuant to an Indenture dated as of __________, 1996, duly executed and
delivered between the Company and Chemical Bank, as Trustee (the "Trustee"),
as supplemented by the First Supplemental Indenture dated as of __________,
1996, between the Company and the Trustee (the Indenture as so supplemented,
the "Indenture"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the Holders of the Debentures. By the terms of the Indenture,
the Securities are issuable in series that may vary as to amount, date of
maturity, rate of interest and in other respects as provided in the
Indenture. This series of Debentures is limited in aggregate principal
amount as specified in said First Supplemental Indenture.
Deferred Interest. As provided in the Indenture, the Company shall have the
- -----------------
right, at any time and from time to time during the term of the Debentures,
upon notice delivered to the Holders and the Trustee no later than the
Distribution Declaration Date (as defined in the Indenture), to defer the date
on which one or more of the quarterly interest payments would otherwise
become due and payable; provided that (a) no deferred quarterly interest
payment, including any extension of deferral, shall remain unpaid for more than
20 consecutive quarters or be deferred beyond the Stated Maturity of the
Debentures, (b) no Event of Default under the Indenture has occurred and is
3
continuing and (c), so long as any deferred interest has not been paid, the
Company shall not take certain actions prohibited by the Indenture. In the
event of any deferral, any interest payment shall be deemed not due or
payable until the date specified for payment in a deferred distribution
notice given by the Company to the Trustee and to the Holder. Upon the
deferral of any interest payment, interest on such deferred interest
payment will be compounded and accrued on each Cash Interest Payment Date at
the rate specified in the title of this Debenture until the amount of such
deferred interest (including compounded interest thereon) is paid in full.
Conversion of Debentures. At the option of the Holder, this Debenture may,
- ------------------------
at any time or from time to time on any Business Day to and including, but
not after, the close of business on the day which is five Business Days prior
to _______, 2036, be converted, in whole, or, if the Debenture is in a
principal amount in excess of $50, in part in integral multiples of $50
principal amount, into fully paid and nonassessable shares of Common Stock
Series A of the Company, at the Conversion Price in effect at the Date of
Conversion. In case a Debenture or a portion thereof is called for
redemption, such conversion right in respect of such Debenture or the portion
so called, shall expire at the close of business on the day which is five
Business Days prior to the Redemption Date, unless the Company defaults in
making the payment due upon redemption. If this Debenture is to be converted
only in part, it shall be surrendered at any office or agency of the Company
designated for that purpose pursuant to the Indenture, and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder hereof
without service charge, a new Debenture or Debentures, of any authorized
denomination as requested by the Holder, in an aggregate principal amount
equal to and in exchange for the unconverted portion of this Debenture so
surrendered. In order to exercise the conversion privilege, the Holder shall
surrender this Debenture to the Conversion Agent at the office or agency to
be maintained by the Company pursuant to the Indenture for the conversion of
Debentures with the Notice of Conversion set forth below in this Debenture
duly completed and, if so required by the Company, accompanied by instruments
of transfer, in form satisfactory to the Company and to the Trustee, duly
executed by the Holder or his duly authorized attorney in writing. As
promptly as practicable after the surrender of this Debenture with the notice
duly completed as aforesaid, the Company shall then issue and deliver at such
office or agency to the Holder, or on his written order, a certificate or
certificates for the number of the shares of Common Stock Series A then
issuable in accordance with the provisions of the Indenture and cash in
respect of any fraction of a share of Common Stock Series A otherwise
issuable upon such conversion. Any such conversion shall be deemed to have
been effected at the time and on the date as specified in the Indenture. The
Holder of this Debenture at the close of business on any Regular Record Date
for the payment of interest will be entitled to receive the interest payable
hereon on the corresponding Cash Interest Payment Date notwithstanding the
conversion of such Debenture following such Regular Record Date. Subject to
provisions of Sections 5.5 and 5.6 of the First Supplemental Indenture, no
payment or
4
adjustment shall be made upon conversion on account of any interest accrued
or deferred or otherwise unpaid on the principal or any portion thereof of
this Debenture so converted or for any dividends or distributions on any
shares of Common Stock Series A. The initial Conversion Price of the
Debentures, as of the date of issuance, is $________per share of Common
Stock Series A, which Conversion Price is subject to adjustment as
provided in the Indenture.
Optional Redemption. At any time on or after __________, 1999, the Company,
- -------------------
at its option, will have the right to prepay or redeem the Debentures, in
whole or in part, at 100% of the principal amount being redeemed (together
with any accrued or deferred but unpaid interest on the portion being so
redeemed) (the "Redemption Price") upon notice and in the manner provided in
the Indenture. The Company may not redeem any outstanding Debentures unless
all accrued or deferred but unpaid interest has been paid on all Debentures
to be redeemed for all quarterly interest payment periods terminating on or
before the date of redemption.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures under the Indenture
at any time by the Company and the Trustee with the consent of the Holders
of at least 66 2/3% in aggregate principal amount of the Debentures
outstanding. The Indenture also contains provisions permitting the Holders
of specified percentages in aggregate principal amount of the Debentures at
the time Outstanding, or voting at a meeting of Holders, on behalf of the
Holders of all the Debentures, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder
of this Debenture shall be conclusive and binding upon such Holder and upon
all future Holders of this Debenture and of any Debenture issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not notation of such consent or waiver is made upon this
Debenture.
No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on this
Debenture at the time, place and rate, and in the coin or currency, herein
prescribed, or to exchange this Debenture for Common Stock
5
In the event of the merger or consolidation of the obligor on the Debentures
into, or of the transfer of its assets substantially as an entirety to, a
successor corporation, such successor corporation shall assume payment of the
Debentures and performance of every covenant of the Indenture on the part of
the predecessor corporation to be performed, and shall be substituted for the
predecessor corporation under the Indenture; and in the event of any such
transfer, such predecessor corporation shall be discharged from all
obligations and covenants under the Indenture and the Debentures and may be
dissolved and liquidated, all as more fully set forth in the Indenture.
If an Event of Default, as defined in the Indenture, with respect to the
Debentures shall occur and be continuing, the principal of all the Debentures
may be declared due and payable at the time, in the manner and with the
effect provided in the Indenture.
As provided in the Indenture and subject to certain limitations therein and
herein set forth, this Debenture is transferable on the Security Register of
the Company, upon surrender of this Debenture for registration of transfer
at the office or agency of the Company in any place where principal and
interest on the Debentures are payable, or at any other office or agency of
the Company maintained for that purpose, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Debentures, of
authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
The Debentures are issuable only in registered form without coupons in
denominations of $50 and any multiple of $50. As provided in the Indenture
and subject to certain limitations therein set forth, Debentures are
exchangeable for a like aggregate principal amount of Debentures of a like
tenor and of different authorized denominations, as requested by the Holder
surrendering the same. No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection with such registration of transfer or exchange, other then certain
exchanges not involving any transfer. Prior to due presentment of this
Debenture for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name this
Debenture is registered as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this
Debenture shall be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.
This Debenture shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.
6
Certain terms used in this Debenture which are defined in the Indenture have
the meanings set forth therein.
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY NUMBER OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
__________________________________
|_________________________________|_____________________________________
(Name and address of Assignee, including zip code, must be printed or
typewritten)
_________________________________________________________________________
__________________________________________________________________________
the within Debenture, and all rights thereunder, hereby irrevocably,
constituting and appointing
_________________________________________________________________Attorney
to transfer the said Debenture on the books of Citizens Utilities Company
with full power of substitution in the premises.
Dated:_______________ ________________________________________
NOTICE: The signature of this assignment must
correspond with the name as it appears upon the
face of the within Debenture in every particular,
without alteration or enlargement or any change
whatever.
7
FORM OF CONVERSION NOTICE
To Citizens Utility Company:
The undersigned Holder of this Debenture hereby irrevocably exercises the
option to convert this Debenture (or a portion thereof, which is $50.00 or
an integral multiple thereof, designated below), into shares of Common Stock
Series A of the Company or other securities or other property or cash in
accordance with the terms of the Indenture referred to in this Debenture, and
directs that the shares, other securities, other property or cash issuable
and deliverable upon the conversion, together with any check in payment for
fractional shares and any Debentures representing any unconverted principal
amount hereof, be issued and delivered to the undersigned unless a different
name has been indicated below. If shares are to be issued in the name of a
Person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto.
Dated:
------------------------------
Signature (for exchange only)
------------------------------
(Name)
------------------------------
(Address)
------------------------------
Please print name and address
(including zip code or similar
number)
Fill in for registration of shares Principal Amount of Debentures
or other securities and/or Debentures to be converted in an integral
if to be issued otherwise than to the multiple of $50.00, if less
Holder: than all:
- -------------------------------------
(Name) $ _____________________________
- -------------------------------------
(Address)
- -------------------------------------
Please print name and address
(including zip code or similar number)
8
Statement of Common Definitions
Exhibit B
"Additional Interest" is defined in Section 3.1(17) of the First
Supplemental Indenture.
"Average Market Price" for Common Stock on any day will be determined by
averaging the high and low sales prices of Common Stock for such day as
reported in The Wall Street Journal, under "New York Stock Exchange Composite
-----------------------
Transactions" or any successor market transaction report on the day in
question (the "Date"). If the Common Stock is not listed on the NYSE but is
quoted or admitted to trading on another national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc., the Average Market Price shall be determined by reference to the
average of the high and low reported sales prices on such exchange if
available or, if not so available, the high and low sales prices reported by
such National Market System if available, or, if not so available, the high
and low bid and asked prices in the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated or a
similarly generally accepted reporting service if available, or if not so
available, in such manner, as otherwise determined in good faith by the Board
of Directors of the Company. If no trading occurs on the NYSE (or such other
market for which sales prices or quotations are regularly available) in the
Common Stock on the Date, the Average Market Price will be determined by
averaging the high and low sales prices per share of Common Stock on the
Trading Day immediately preceding the Date.
"Base Indenture" means the Indenture between Citizens and Chemical Bank, as
Indenture Trustee, dated as of ____________, 1996.
"Business Day" means any day other than a Saturday or a Sunday or a day on
which banking institutions in The City of New York are authorized or
obligated by law or executive order to close.
"Cash Interest Payment Date" is defined in Section 3.1(4) of the First
Supplemental Indenture.
"Change in 1940 Act Law" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislature body, court, governmental agency or regulatory
authority with respect to the 1940 Act.
"Change in Tax Law" means (a) any change or prospective change which is
announced or publicly stated in the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or
therein, (b) any change or prospective change in an interpretation or
application of any such laws or regulations by any legislative body, court,
governmental agency or regulatory authority (including the enactment of any
9
legislation and the publication of any judicial decision or regulatory
determination), (c) any interpretation or pronouncement that provides for a
position with respect to such laws or regulations that differs from the
generally accepted position or (d) any action by any governmental
agency or body or regulatory authority, which, assuming such change is
enacted, promulgated, issued or effective or such interpretation or
pronouncement is issued or announced or becomes effective or such action is
taken, in each case on or after the date of the Prospectus, would have the
result specified.
"Citizens" or the "Company" means Citizens Utilities Company, a Delaware
corporation.
"Citizens Capital" means Citizens Utilities Capital L.P., a special purpose
Delaware limited partnership of which the Company is the general partner,
also sometimes referred to as the "Partnership."
"Clearing Agency" means an organization registered as a "Cleaning Agency"
pursuant to Section 17A of the Exchange Act that is acting as depository for
the Convertible Preferred Securities or the Partnership Preferred Securities,
as the case may be, and in whose name (or nominee's name) shall be registered
a Global Certificate or one or more global L.P. Certificates, as the case may
be, and which shall undertake to effect book-entry transfers and pledges of
beneficial interests in the Convertible Preferred Securities or the
Partnership Preferred Securities, as the case may be.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency
effects book-entry transfers and pledges of interest in securities deposited
with the Clearing Agency.
"Closing Date" means the Closing Date as defined in the Underwriting
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date
of the issuance of the Convertible Preferred Securities. A reference to a
specific section (Section) of the Code refers not only to such specific
section but also to any corresponding provision of any federal tax statute
enacted after the date of the issuance of the Convertible Preferred Securities,
as such specific section or corresponding provision is in effect on the date
of application of the provisions of the Declaration or the Limited Partnership
Agreement containing such reference.
"Common Stock" or "Common Stock Series A" means shares of the Common Stock
Series A of the Company, par value $.25 per share, and (i) for the purposes
of the making of distributions in shares of capital stock, any successor
capital stock of the Company, and (ii) for the purposes of Article 5 of the
First Supplemental Indenture, any successor security or property (including
cash) into which the Debentures issued under the First Supplemental Indenture
may be convertible in accordance with said Article 5.
"Company Tax Event" means that the Company shall have obtained a Tax Event
Opinion to the effect that, as a result of a Change in Tax Law, there is more
than an insubstantial risk that interest payable to the holders of the
Convertible Debentures would not be deductible by Citizens for United States
federal income tax purposes.
"Compound Interest" means, upon any deferral of interest payments permitted
by the Indenture, the interest which will be compounded on each Cash Interest
Payment Date and accrued until paid at the rate per annum specified in the
designation of the Convertible Debentures on any interest so deferred until
the amount of such deferred interest (including Compound Interest thereon)
is paid in full.
"Conversion Agent" means the Person appointed under the Limited Partnership
Agreement, the Declaration or the Indenture to act on behalf of the holders
of Convertible Preferred Securities, the Partnership Preferred Securities or
the Convertible Debentures, as the case may be, in effecting the conversion
of Convertible Preferred Securities, the Partnership Preferred Securities or
the Convertible Debentures, as the case may be, as and in the manner set
forth in the Limited Partnership Agreement, the Declaration or the Indenture,
as the case may be. Initially, Chemical Bank shall act as Conversion Agent
with respect to the Convertible Preferred Securities and the Company shall
act as Conversion Agent with respect to the Partnership Preferred Securities
and the Convertible Debentures.
"Convertible Common Securities" means common undivided beneficial interests
in the assets of Citizens Utilities Trust.
"Convertible Debentures" means $___________ aggregate principal amount of
the __% Convertible Subordinated Debentures Due 2036, issued pursuant to the
Indenture.
"Convertible Preferred Securities" means the ___% Citizens Utilities
Convertible Preferred Securities, each with a liquidation value of $50,
representing preferred undivided beneficial interests in the assets of the
Trust.
"Date" shall have the meaning as specified in the definition of "Average
Market Price" contained in this Statement of Common Definitions.
"Debenture Issuer" means Citizens in its capacity as issuer of the
Convertible Debentures.
"Declaration" means the declaration of trust dated October 13, 1995, as
amended by the amended and restated declaration of trust dated __________,
1996, by Citizens, as sponsor, and the trustees named therein, establishing
the Trust under the Trust Act, as such declaration of trust may be further
amended or supplemented.
"Declaration Event of Default" means a Partnership Event of Default.
"Delaware Trustee" means a trustee under the Declaration which will have
a principal place of business or reside in the State of Delaware. Initially,
Chemical Bank Delaware will act as Delaware Trustee.
3
"Distribution Declaration Date" is defined in Section 3.1(4) of the First
Supplemental Indenture.
"Distribution Declaration Notice" is defined in Section 3.1(4) of the First
Supplemental Indenture.
"Distribution Payment Date" means January 31, April 30, July 31 and October
31 of each year or if any such date is not a Business Day, the next succeeding
Business Day except that, if such Business Day is in the next succeeding
calendar year, the Distribution Payment Date shall be the immediately
preceding Business Day.
"Election Period" means the period of ten Business Days in each year
specified in the Distribution Declaration Notice relating to the January 31
Distribution Payment Date, as provided in paragraph (4) of Section 3.1 of the
First Supplemental Indenture.
"Equivalent Value" means the shares of Common Stock Series A
with a fair market value on the Share Transfer and Valuation Date
equivalent to the interest payment due on the next scheduled interest
payment date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Time" is defined in Section 5.5(e) of the First Supplemental
Indenture.
"First Supplemental Indenture" means the First Supplemental Indenture dated
as of _____________, 1996 to the Indenture, as amended or supplemented.
"General Partner" means Citizens, as general partner of Citizens Capital,
or any successor general partner of Citizens Capital.
"General Partnership Security" means the general partnership interest of
Citizens in Citizens Capital.
"Guarantee Agreements" means the Convertible Common Securities Guarantee
Agreement and the Convertible Preferred Securities Guarantee Agreement, each
with respect to the Trust, and the Partnership Preferred Securities
Guarantee Agreement with respect to Citizens Capital, each dated
______________, 1996, and each as amended or supplemented from time to time.
"Indenture" means the Base Indenture, as it may from time to time be
supplemented or amended by one or more indentures supplemental thereto,
including the First Supplemental Indenture.
"Indenture Event of Default" means an Event of Default as defined in Section
5.1 of the Base Indenture, as supplemented by the First Supplemental Indenture.
"Indenture Trustee" means Chemical Bank, as trustee under the Indenture,
or any successor trustee under the Indenture.
4
"Investment Company Act Opinion" means an opinion of a nationally
recognized independent counsel experienced in practice under the 1940 Act.
"Limited Partnership Agreement" means the amended and restated limited
partnership agreement of Citizens Capital dated as of ______________, 1996,
as amended or supplemented.
"Ministerial Action Obligation" shall have the meaning set forth in the
following sentence. If at the time of any Special Event, Citizens, Citizens
Capital or the Trust is actually aware of an opportunity to eliminate the
adverse effect of the Special Event on the Trust, Citizens or Citizens
Capital by taking some ministerial action (such as filing a form or making
an election or pursuing some other similar reasonable measure) where the
taking of such action does not involve a material cost, then neither
Citizens, Citizens Capital nor the Trust shall liquidate Citizens Capital
or the Trust by reason of such Special Event without first having pursued
such ministerial action.
"NASDAQ" means The Nasdaq Stock Market, Inc.
"1940 Act" means the Investment Company Act of 1940, as amended.
"NYSE" means the New York Stock Exchange.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two authorized officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided
for in the applicable agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has read
the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
5
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Partnership Event" means a Partnership Tax Event or a Partnership
Investment Company Act Event.
"Partnership Event of Default" means an Indenture Event of Default, as
defined in the Indenture.
"Partnership Investment Company Act Event" means that the General Partner
shall have received an Investment Company Act Opinion that as a result of the
occurrence of a Change in 1940 Act Law, there is more than an insubstantial
risk that the Partnership is or will be considered an Investment Company
which is required to be registered under the 1940 Act, which Change in 1940
Act Law becomes effective on or after the first date of issuance of the
Partnership Preferred Securities.
"Partnership Preferred Securities" means the __% Partnership Preferred
Securities, issued by Citizens Capital pursuant to the Limited Partnership
Agreement, representing limited partnership interests in Citizens Capital.
"Partnership Securities" means the Partnership Preferred Securities and the
General Partnership Security.
"Partnership Tax Event" means that the General Partner shall have obtained
a Tax Event Opinion to the effect that, as a result of a Change in Tax Law,
there is more than an insubstantial risk that (i) Citizens Capital is subject
to United States federal income tax with respect to interest accrued or
received on the Convertible Debentures or (ii) Citizens Capital is subject
to more than a de minimis amount of taxes, duties or other governmental
charges.
Paying Agent" means the Person appointed under and authorized pursuant to the
Limited Partnership Agreement, the Declaration or the Indenture to act on
behalf of the holders of Convertible Preferred Securities, the Partnership
Preferred Securities or the Convertible Debentures, as the case may be, in
effecting the payment of principal, disributions or interest, as the case may
be, redemption payments and liquidation payments, as and in the manner set
forth in the Limited Partnerhsip Agreement, the Declaration or the Indenture,
as the case may be. Initally, Chemical Bank shall act as Paying Agent with
respect to the Convertible Preferred Securities and the Company shall act as
Paying Agent with respect to the Partnership Preferred Securities and the
Convertible Debentures.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated association or government or any agency or political
subdivision thereof.
"Property Trustee" means the property trustee of the Trust under the
Declaration. Initially, Chemical Bank will act as Property Trustee.
6
"Prospectus" shall mean the prospectus dated _____________, 1996 of the
Trust, relating to the offering to the public 3,500,000 Convertible
Preferred Securities.
"Rate" means __% per annum.
"Rating Agency Event" shall occur when, and if, (i) any nationally
recognized securities rating agency lowers its rating of the Company's
senior, unsecured long-term debt to a rating less than the
rating in effect on the date of the issuance of the Convertible
Preferred Securities and (ii) the Company has elected to transmit notice
thereof to the Trust.
"Regular Trustees" means the Regular Trustees of the Trust as defined in
the Declaration. Initially, Robert J. DeSantis and Edward O. Kipperman will
act as Regular Trustees.
"Share Transfer and Valuation Date" means the day on which shares of Common
Stock are transferred to the holders of Convertible Debentures pursuant to
Section 3.1(5) of the First Supplemental Indenture. On the Closing Date, the
Share Transfer and Valuation Date will be at least nine Business Days before the
Distribution Payment Date, subject to change to reflect evolving market
practices and settlement procedures.
"Special Event" means a Partnership Event, a Trust Event or a Company Tax
Event.
"Special Representative" means the Person appointed (i) to enforce
Partnership Preferred Security holders' rights under the Partnership
Guarantee, (ii) to enforce Citizens Capital's rights against the Company
under the Convertible Debentures or (iii) to exercise rights otherwise
exercisable by the General Partner to declare and pay distributions on the
Partnership Preferred Securities as provided in Section 6.2(h) of the Limited
Partnership Agreement.
"Sponsor" means Citizens in its capacity as trust sponsor of the Trust
pursuant to the Declaration.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person
and one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries of such Person or
such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the
policies, management and affairs thereof.
"Taxes" means any taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the United States
or any other domestic taxing authority upon either the Trust or Citizens
Capital.
"Tax Event Opinion" shall mean an opinion of a nationally recognized tax
counsel experienced in such matters.
"Trading Day" means any day on which the NYSE (or any other market used for
the determination of Average Market Price) is open for the trading of
securities.
7
"Treasury Regulations" means the income tax regulations, including temporary
and proposed regulations, promulgated under the Code by the United States
Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trust" means Citizens Utilities Trust, a statutory business trust created
under the Trust Act pursuant to the Declaration.
"Trust Act" means the Delaware Business Trust Act, Chapter 38 of Title 12
of the Delaware Code, 12 Del. Code Sec. 3801 et seq., as it may be
------------ ---- ----
amended from time to time.
"Trust Event" means a Trust Tax Event or a Trust Investment Company Act
Event.
"Trust Investment Company Act Event" means that Citizens shall have (i)
requested and received and (ii) delivered to the Regular Trustees, an
Investment Company Act Opinion to the effect that there has occurred a Change
in 1940 Act Law such that there is a more than an insubstantial risk that the
Trust is or will be considered an investment company which is required to be
registered under the 1940 Act.
"Trust Tax Event" means that Citizens shall have (i) requested and
received, and (ii) delivered to the Regular Trustees, a Tax Event Opinion to
the effect that there has occurred a Change in Tax Law such that there is
more than an insubstantial risk that (i) the Trust may be subject to United
States federal income tax with respect to distributions accrued or received
on the Partnership Preferred Securities or (ii) the Trust is subject to more
than a de minimis amount of taxes, duties or other governmental charges.
"Underwriting Agreement" means the agreement dated ____________, 1996,
among the Company, Citizens Capital and the Trust and the underwriters named
therein relating to the issuance and sale by the Trust to such underwriters
of the Convertible Preferred Securities.
"Voting Stock" of any Person means capital stock of such Person which
ordinarily has voting power for the election of directors (or Persons
performing similar functions) of such Person, whether at all times or only
so long as no senior class of securities has such voting power by reason of
any contingency.
8
Exhibit No. 5.1
Boulanger, Hicks & Churchill, P.C.
135 East 57th Street
10th Floor
New York, New York 10022
(212) 838-5600
December 22, 1995
Citizens Utilities Company
Citizens Utilities Trust
Citizens Utilities Capital L.P.
c/o Citizens Utilities Company
High Ridge Park
Stamford, Connecticut 06905
Re: Citizens Utilities Company
Citizens Utilities Capital L.P.
Citizens Utilities Trust
Registration Statement on Form S-3
(Registration Nos. 33-63615-00,
33-63615-01 and 33-63615-02)
------------------------------------
Gentlemen:
We are acting as special counsel to Citizens Utilities Company, a Delaware
corporation (the "Company" or "Citizens"), in connection with the preparation
of the above Registration Statement filed with the Securities and Exchange
Commission ("Commission") under the Securities Act of 1933 (the "Act"), of
up to $201,250,000 Convertible Preferred Securities ("Convertible Preferred
Securities") of Citizens Utilities Trust (the "Trust"), Partnership Preferred
Securities ("Partnership Preferred Securities") of Citizens Utilities Capital
L.P., ("Citizens Capital"), Convertible Subordinated Debentures ("Convertible
Debentures") of Citizens, Common Stock of Citizens ("Common Stock") to be
issued upon conversion of the Convertible Debentures ("Conversion Common
Stock"), Common Stock of Citizens to be issued in payment of dividend or
distribution requirements ("Distribution Common Stock"), the Guarantee by
Citizens with respect to Convertible Preferred Securities ("Trust
Guarantee"), and the Guarantee by Citizens with respect to Partnership
Preferred Securities ("Partnership Guarantee") to be issued and sold from
time to time under the Act. The Conversion Common Stock, Distribution Common
Stock, Trust Guarantee, Partnership Guarantee and Convertible Debentures are
herein referred to as the "Citizens Securities". The Convertible Preferred
Securities, Partnership Preferred Securities, Limited Partnership Agreement
of Citizens Capital, Declaration of Trust of the Trust, Convertible
Debentures, Trust Guarantee and Partnership Guarantee, taken as a whole,
constitute a full and unconditional guarantee of amounts due under the
Convertible Preferred Securities, and the opinions of our firm and of
Skadden, Arps, Slate, Meagher & Flom as to the components of such full and
unconditional guarantee constitute an opinion as to such guarantee. With
respect to matters relating to the Convertible Preferred Securities,
Partnership Preferred Securities, Declaration of Trust of the Trust and
Limited Partnership Agreement of the Partnership we are relying on the
opinion of even date of Skadden, Arps, Slate, Meagher & Flom being filed as
Exhibit 5.2 to the Registration Statement which covers the Trust, the Trust
Securities, the Partnership and the Partnership Preferred Securities.
In this connection, we have examined the registration statement on Form S-3
(the "Registration Statement") filed on October 23, 1995 and Amendment No.
1 thereto filed on November 30, 1995 under the Act, including the prospectus
which is a part thereof, the exhibits filed therewith and such other
documents as we have considered necessary for the purposes of this opinion.
Based upon such examination and subject to the foregoing and other
qualifications and limitations expressed herein. In our examination, we have
assumed the legal capacity of all natural persons, the genuiness of all
signatures, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the originals of such
copies. In addition, we have assumed that the Underwriting
2
Agreement, Indenture and Guaranties as executed will be in the form reviewed by
us as of the date hereof. As to any facts material to the opinions expressed
herein which were not independently established or verified, we have relied
upon oral or written statements and representations of officers, trustees and
other representatives of the Company, the Trust, the Partnership and others.
We hereby advise you that:
(1) We are of the opinion that the Company is a corporation validly
organized and duly existing under the laws of the State of Delaware. We are
further of the opinion that, if and when an offering of Company Securities
shall be made from time to time in accordance with the Registration
Statement, as amended and supplemented from time to time, and when the steps
enumerated in Paragraph (2) hereof shall have been taken and the conditions
satisfied as of the date of issuance, the Company Securities (other than the
Distribution Common Stock as to which we are opining separately) will, when
sold, be, (a) if such securities are shares, legally issued, fully paid and
non-assessable shares of Common Stock, and, (b) if such securities are debt
securities, validly issued and binding obligations of the Company.
(2) The steps which are referred to in the foregoing Paragraph (1)
hereof are:
(a) It shall be determined that the Arizona Corporation Commission
shall be without jurisdiction, or shall have declined to exercise
jurisdiction, over the issuance of the Company Securities or the
Arizona Corporation Commission shall have issued an appropriate
order approving and authorizing the issuance of the Company
Securities and such order shall be in full force and effect; and the
order of the Arizona Corporation Commission waiving jurisdiction
over the affiliated transactions aspects of the
3
issuance of the Company Securities and related matters shall be in
full force and effect; (which order has been issued as of the date
hereof);
(b) The exemption of the Company Securities from the jurisdiction
of the Colorado Public Utilities Commission shall be available to
the Company at the time of the issuance and sale of any Company
Securities or, in the absence of the availability of such exemption,
an appropriate order of the Colorado Public Utilities Commission
with respect to the issuance and sale of Company Securities shall
have been issued and shall be in full force and effect;
(c) It shall be determined that the Hawaii Public Utilities
Commission shall be without jurisdiction, or shall have declined to
exercise jurisdiction, over the issuance of the Company Securities
or the Hawaii Corporation Commission shall have issued an appro
priate order approving and authorizing the issuance of the Company
Securities and such order shall be in full force and effect;
(d) The exemption of the Company Securities from the jurisdiction
of the Louisiana Public Service Commission and any other
governmental regulatory authority in the State of Louisiana having
jurisdiction over the issuance or sale of securities shall be
available to the Company at the time of the issuance and sale of any
Offered Securities, or, in the absence of the availability of such
exemption, an appropriate order of the Louisiana Public Service
Commission and any other governmental regulatory authority in the
State of Louisiana with respect to the issuance and sale of Offered
Securities shall have been issued and shall be in full force and
effect at the time of such issuance and sale of the Company
Securities;
4
(e) An appropriate order of the Tennessee Public Service Commission
with respect to the issuance and sale of the Company Securities by
the Company shall have been issued (which order has been issued as
of the date hereof) and shall be in full force and effect at the
time of such issuance and sale of the Company Securities, or it
shall be determined that the Tennessee Public Service Commission
shall be without jurisdiction;
(f) An appropriate order of the Vermont Public Service Board with
respect to the issuance and sale of the Company Securities by the
Company shall have been issued (which order has been issued as of
the date hereof) and shall be in full force and effect at the time
of such issuance and sale of the Company Securities, or it shall be
determined that the Vermont Public Service Board shall be without
jurisdiction;
(g) An appropriate order of the West Virginia Public Service
Commission with respect to the issuance and sale of the Company
Securities by the Company shall have been issued (which order has
been issued as of the date hereof) and shall be in full force and
effect at the time of such issuance and sale of the Company
Securities, or it shall be determined that the West Virginia
5
Public Service Commission shall be without jurisdiction;
(h) An appropriate order of the Federal Energy Regulatory Commission
with respect to the issuance and sale of the Company Securities
shall have been issued (which order has been obtained as of the date
hereof) and shall be in full force and effect;
(i) An appropriate order of, or exemption from the jurisdiction of,
any other regulatory body which in the future may assert
jurisdiction over the Company securities shall be in existence;
(j) The applicable provisions of the Act shall have been complied
with;
(k) The Company and reserved for issuance Securities shall have been
duly authorized by the Board of Directors, and duly executed and
delivered by the Company, and with respect to Common Stock, all
steps necessary to reserve adequate authorized shares for issuance
shall have been taken;
(l) The Indenture relating to the Convertible Debentures shall have
been duly authorized by the Board of Directors, executed and
delivered; and a supplemental indenture thereto shall have been duly
authorized by the Board of Directors and duly executed and delivered
in accordance with the terms of said Indenture;
(m) The Indenture (as supplemented), the
6
Trust Guarantee, Partnership Guarantee and the Convertible Preferred
Securities shall have been qualified under the Trust Indenture Act
of 1939;
(n) The Convertible Debentures shall have been duly authenticated
in accordance with terms of said Indenture, as supplemented; and
(o) The Company Securities shall have been duly issued and paid for.
With respect to the Distribution Common Stock, we are of the opinion that,
(a) subject to the satisfaction of each of the foregoing conditions with
respect to the Distribution Common Stock at the time of each issuance of
Distribution Common Stock and (b) the corporate authorization of additional
shares of Common Stock under the Company's Certificate of Incorporation, as
required, and (c) with respect to Distribution Common Stock to be issued more
than two years after the date hereof compliance with the registration
requirements of the Act and appropriate orders of the regulatory bodies
referred to above (which have not been sought or obtained as of the date
hereof), such Company securities will be legally issued, fully paid and
nonassessable Common Stock of the Company.
In rendering the foregoing opinion we express no opinion as to laws other
than the laws of the State of New York, the corporation laws of the State of
Delaware and the Federal laws of the United States, and to a limited extent
the laws of the States mentioned below. To the extent that the foregoing
opinions relate to the laws of the State of Delaware as applied to the Trust,
the Convertible Preferred Securities, the Partnership and the Partnership
Preferred Securities we have relied on the opinion of even date of Skadden,
Arps, Slate, Meagher & Flom. To the extent that the foregoing relates to the
laws of the States of Arizona, Colorado, Hawaii, Louisiana, Tennessee,
Vermont and West Virginia with respect to regulatory
7
matters, we are relying upon advice of Brown & Bain, P.A., Phoenix, Arizona;
LeBouef, Lamb, Greene & MacRae, Denver, Colorado; Cades Schutte Fleming &
Wright, Honolulu, Hawaii; Marshall Ordemann, Corporate Counsel-Gas to the
Louisiana Gas Division of the Company, Harvey, Louisiana; Stokes &
Bartholomew, Nashville, Tennessee; Miller, Eggleston, & Rosenberg, Ltd.,
Burlington, Vermont; and Jackson & Kelly, Charleston, West Virginia.
We are not experts on the laws of such States; however, we have consulted
with the attorneys mentioned above to the extent we deem necessary in the
circumstances.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference made to our firm under "Legal
Opinions" in the prospectus constituting part of the Registration Statement.
This opinion is furnished to you solely for your benefit in connection with
the filing of the Registration Statement and, except as set forth in the
preceding paragraph sentence, is not to be used, circulated, quoted or
otherwise referred to for any other purpose or relied upon by any other
person for any purpose without our prior written consent. This opinion is
expressed as of the date hereof unless otherwise expressly stated and we
disclaim any undertaking to advise you of any subsequent changes of the facts
stated or assumed herein or any subsequent changes in applicable law.
Very truly yours,
BOULANGER, HICKS & CHURCHILL P.C.
By /s/Jonathan H. Churchill
-------------------------
December 22, 1995
Citizens Utilities Company
High Ridge Park, Bldg. No. 3
P.O. Box 3801
Stamford, Connecticut 06920
Citizens Utilities Capital L.P.
c/o Citizens Utilities Company
High Ridge Park, Bldg. No. 3
P.O. Box 3801
Stamford, Connecticut 06920
Citizens Utilities Trust
c/o Citizens Utilities Company
High Ridge Park, Bldg. No. 3
P.O. Box 3801
Stamford, Connecticut 06920
Re: Citizens Utilities Company
Citizens Utilities Capital L.P.
Citizens Utilities Trust
Registration Statement on Form S-3
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(Registration No. 33-63615)
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Ladies and Gentlemen:
We have acted as special counsel to (1) Citizens Utilities
Trust (the "Trust"), a statutory business trust formed under the
laws of the State of Delaware, (2) Citizens Utilities Capital, L.P.
(the "Partnership"), a limited partnership formed under the laws of
the State of Delaware, and (3) Citizens Utilities Company (the
"Company"), a corporation organized under the laws of the State of
Delaware, in connection with the preparation of a Registration
Statement on Form S-3, which was filed by the Company, the Trust and
the Partnership with the Securities and Exchange Commission (the
"Commission") on
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October 23, 1995 under the Securities Act of 1933, as amended (the "Act"),
Amendment No. 1 thereto, filed with the Commission on November 17, 1995,
and Amendment No. 2 thereto, filed with the Commission on December 22, 1995
(such Registration Statement, as so amended, being hereinafter referred to as
the "Registration Statement") relating to the registration under the Act of
preferred securities (the "Trust Preferred Securities") of the Trust,
preferred securities (the "Partnership Preferred Securities") of the
Partnership, and certain other securities.
The Trust Preferred Securities are to be issued pursuant
to the Amended and Restated Declaration of Trust (a "Declaration"),
among the Company, as sponsor, Chemical Bank, N.A., as the property
trustee (the "Property Trustee"), Chemical Bank (Delaware), as Delaware
trustee (the "Delaware Trustee"), and Robert J. DeSantis and Edward Kipperman
as regular trustees (together, the "Regular Trustees").
The Partnership Preferred Securities are to be issued
pursuant to the Amended and Restated Agreement of Limited Partnership
(the "Partnership Agreement"), between the Company, as general
partner (the "General Partner"), and CU Capital Corp., a corporation
formed under the laws of the State of Delaware, as the initial
limited partner. Capitalized terms used but not otherwise defined
herein have the meanings ascribed to them in the Registration Statement.
This opinion is being delivered in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Act.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
certificate of trust of the Trust (the "Certificate of Trust") filed with the
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Secretary of State of the State of Delaware on October 13, 1995; (ii) the
form of the Declaration (including the form of the designations of the terms
of the Trust Preferred Securities annexed thereto); (iii) the form of the
Trust Preferred Securities; (iv) the certificate of limited partnership (the
"Certificate of Limited Partnership") filed by the General Partner with
the Secretary of State of the State of Delaware on October 13, 1995;
(v) the form of the Partnership Agreement; and (vi) the form of the
Partnership Preferred Securities; (vii) the form of Prospectus (the
"Prospectus") included in the Registration Statement; and (viii) the
form of Underwriting Agreement (the "Underwriting Agreement"), among
the Company, the Trust, and the several Underwriters (the "Underwriters")
set forth therein. We have also examined originals or copies, certified or
otherwise identified to our satisfaction, of such other documents,
certificates and records as we have deemed necessary or appropriate as a
basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of
all natural persons, the genuineness of all signatures, the authen-
ticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such
copies. In making our examination of documents executed by parties
other than the Trust and the Partnership, we have assumed that such
parties had the power, corporate or other, to enter into and perform
all obligations thereunder and have also assumed the due authoriza-
tion by all requisite action, corporate or other, and execution and
delivery by such parties of such documents and that such documents
constitute valid and binding obligations of such parties. In
addition, we have assumed that the Declaration, the Partnership
Agreement and the Underwriting Agreement when executed will be in
substantially the form reviewed by us. As to any facts material to
the opinions expressed herein which were not independently estab-
lished or verified, we have relied upon oral or written statements
and representations of officers, trustees and other representatives
of the Company, the Trust, the Partnership and others.
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Members of our firm are admitted to the bar in the State
of Delaware, and we express no opinion as to the laws of any other
jurisdiction.
Based on and subject to the foregoing and to the other
qualifications and limitations set forth herein, we are of the
opinion that:
1. The Trust Preferred Securities, when the Declaration
is executed and delivered and the terms of the Trust Preferred Securities
are established in accordance with the terms of the Declaration, will be
duly authorized for issuance and, when issued and executed in accordance with
such Declaration and delivered and paid in accordance with the Underwriting
Agreement, will be validly issued, fully paid and nonassessable, representing
undivided beneficial interests in the assets of the Trust; and the holders of
the Trust Preferred Securities will be entitled to the same limitation of
personal liability extended to stockholders of private corporations for
profit organized under the General Corporation Law of the State of Delaware.
We bring to your attention, however, that the holders of Trust Preferred
Securities may be obligated, pursuant to the Declaration, to (i) provide
indemnity and/or security in connection with and pay taxes or governmental
charges arising from transfers of Trust Preferred Securities and (ii) provide
security and indemnity in connection with the requests of or directions to
the Property Trustee to exercise its rights and powers under the Declaration.
2. The holders of Partnership Preferred Securities, as
limited partners of the Partnership, will not be liable to third
parties for the obligations of the Partnership, assuming that,
except for the exercise of the rights and powers expressly permitted
by the Partnership Agreement, such holders do not participate in the
control of the business of the Partnership. There are no provisions
in the Partnership Agreement the inclusion of which, subject to the
terms and conditions therein, or, assuming that the holders of the
Partnership Preferred Securities, as limited partners of the Partnership,
take no action other than actions permitted by the Partnership
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Agreement, the exercise of which, in accordance with the terms and conditions
therein, would cause the holders of Partnership Preferred Securities, as
limited partners of the Partnership, to be deemed to be participating in the
control of the business of the Partnership.
This opinion is furnished to you solely for your benefit
in connection with the filing of the Registration Statement and,
except as set forth in the next sentence, is not to be used, circu-
lated, quoted or otherwise referred to for any other purpose or
relied upon by any other person for any purpose without our prior
written consent. We hereby consent to the filing of this opinion
with the Commission as an exhibit to the Registration Statement. We
also consent to the use of our name under the heading "Legal Opin-
ions" in the Prospectus. In giving this consent, we do not thereby
admit that we are within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of
the Commission promulgated thereunder. This opinion is expressed as
of the date hereof unless otherwise expressly stated and we disclaim
any undertaking to advise you of any subsequent changes of the facts
stated or assumed herein or any subsequent changes in applicable
law.
Very truly yours,
SKADDEN ARPS SLATE MEAGHER & FLOM
By /s/ Wayne Rapozo
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EXHIBIT 23.1
The Board of Directors
Citizens Utilities Company:
We consent to the use of our report incorporated by reference and to
the reference to our firm under the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
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New York, New York
December 22, 1995
EXHIBIT 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our reports included in
Citizens Utilities Company's Form 8-K, and to all references to our firm
included in this Registration Statement.
/s/ Arthur Andersen LLP
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Little Rock, Arkansas
December 22, 1995
