<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-50075
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 23, 1998)
12,000,000 PREFERRED SECURITIES
COASTAL FINANCE I
[LOGO OF COASTAL CORPORATION APPEARS HERE]
8.375% TRUST ORIGINATED PREFERRED SECURITIES(SM) ("TOPrS(SM)")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
THE COASTAL CORPORATION
---------------
The 8.375% Trust Originated Preferred Securities (the "Preferred
Securities") offered hereby represent undivided preferred beneficial interests
in the assets of Coastal Finance I, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"). The Coastal Corporation, a
Delaware corporation (the "Company"), will directly or indirectly own all the
common securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities")
(continued on next page)
SEE "RISK FACTORS" COMMENCING ON PAGE S-9 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF
DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
The Preferred Securities are expected to be approved for listing, subject to
official notice of issuance, on the New York Stock Exchange, Inc. (the "New
York Stock Exchange"). Trading of the Preferred Securities on the New York
Stock Exchange is expected to commence within a 30-day period after the
initial delivery of the Preferred Securities. See "Underwriting."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) COMMISSION (2) TRUST (3)(4)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security.......... $25.00 (3) $25.00
- --------------------------------------------------------------------------------
Total........................... $300,000,000 (3) $300,000,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from May 13, 1998.
(2) The Company and the Trust have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in Subordinated Debt Securities, the Company
has agreed to pay to the Underwriters, as compensation for their arranging
the investment therein of such proceeds, $.7875 per Preferred Security (or
$9,450,000 in the aggregate); provided, that such compensation for sales
of 10,000 or more Preferred Securities to a single purchaser will be $.50
per Preferred Security. Therefore, to the extent of such sales, the actual
amount of Underwriters' compensation will be less than the aggregate
amount specified in the preceding sentence. See "Underwriting."
(4) Before deducting expenses of the offering payable by the Company estimated
at $400,000.
---------------
The 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 Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company on or about
May 13, 1998.
---------------
MERRILL LYNCH & CO. SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
A.G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
---------------
The date of this Prospectus Supplement is May 7, 1998.
(SM) "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
(continued from previous page)
representing common undivided beneficial interests in the assets of the Trust.
The Trust exists for the exclusive purposes of issuing and selling the Trust
Securities and investing the proceeds thereof in an equivalent principal
amount of 8.375% Subordinated Deferrable Interest Notes due June 30, 2038 of
the Company (for the purpose of this prospectus supplement, the "Subordinated
Debt Securities"). The Subordinated Debt Securities will be unsecured
obligations of the Company and will be subordinate and junior in right of
payment to certain other indebtedness of the Company, as described herein.
Upon an event of default under the Declaration (as defined herein), the
holders of the Preferred Securities will have a preference over the holder of
the Common Securities with respect to payments in respect of distributions and
payments upon liquidation, redemption and otherwise.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 8.375% of the liquidation amount of $25 per
Preferred Security, accruing from May 13, 1998 and payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing June 30, 1998 ("distributions"). The distribution payable on June
30, 1998, which will be calculated at the above rate and based on a period
that is shorter than a full quarter, will be in the amount of $.27335 per
Preferred Security. The distribution rate and the distribution and other
payment dates for the Preferred Securities will correspond to the interest
rate and interest and other payment dates on the Subordinated Debt Securities,
which will be the sole assets of the Trust. As a result, if principal or
interest is not paid on the Subordinated Debt Securities, no amounts will be
paid on the Preferred Securities. The payment of distributions out of moneys
held by the Trust, and payments on liquidation of the Trust or the redemption
of Preferred Securities, as set forth below, are guaranteed by the Company
(the "Preferred Securities Guarantee") if and to the extent the Trust has
funds available therefor. The Company's obligations under the Preferred
Securities Guarantee, taken together with its other obligations described
herein, constitute a full and unconditional guarantee by the Company of
payments due on the Preferred Securities. See "Effect of Obligations Under the
Subordinated Debt Securities and the Preferred Securities Guarantee" and
"Description of the Preferred Securities Guarantee." The obligations of the
Company under the Preferred Securities Guarantee are subordinate and junior in
right of payment to all other liabilities of the Company and will rank pari
passu with the most senior preferred stock issued by the Company from time to
time and with any guarantee that may be entered into by the Company in respect
of any preferred stock of any subsidiary or affiliate of the Company. If the
Company does not make principal or interest payments on the Subordinated Debt
Securities, the Trust will not have sufficient funds to redeem or make
distributions on the Preferred Securities, in which event the Preferred
Securities Guarantee will not apply to such redemptions or distributions until
the Trust has sufficient funds available therefor. The obligations of the
Company under the Subordinated Debt Securities are subordinate and junior in
right of payment to all present and future Senior Indebtedness (as defined
herein) of the Company. The Senior Indebtedness of the Company aggregated
approximately $2.5 billion at December 31, 1997. As of such date, there was no
indebtedness ranking pari passu with the Subordinated Debt Securities. In
addition, because the Company is a holding company, its obligations under the
Preferred Securities Guarantee and the Subordinated Debt Securities will be
effectively subordinated to all existing and future liabilities of the
Company's subsidiaries. At December 31, 1997, the subsidiaries of the Company
had total indebtedness outstanding of approximately $1.6 billion and other
liabilities of approximately $2.3 billion (excluding, in each case,
indebtedness and other liabilities owed to the Company and other affiliates,
guaranteed indebtedness of subsidiaries that is included in Senior
Indebtedness and deferred income taxes and other deferred credits).
The Company has the right to defer payments of interest on the Subordinated
Debt Securities by extending the interest payment period on the Subordinated
Debt Securities, at any time, for up to 20 consecutive quarters (each an
"Extension Period"), provided, however, that no Extension Period may extend
beyond the maturity of the Subordinated Debt Securities. If interest payments
are so deferred, distributions on the Preferred Securities will also be
deferred. Despite such deferral, during an Extension Period distributions will
continue to accrue with interest thereon at an annual rate of 8.375% per
annum, compounded quarterly (to the extent permitted by applicable law), and
holders of Preferred Securities will be required to include deferred interest
income in their gross income for United States federal income tax purposes in
advance of receipt of the cash interest payments attributable to such deferred
income. There could be multiple Extension Periods of varying lengths
throughout the term of the Subordinated Debt Securities. See "Description of
the Subordinated Debt Securities--Option to
S-2
<PAGE>
Extend Interest Payment Period," "Risk Factors--Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences--Original Issue
Discount, Premium and Market Discount." In the event of any such deferral, the
holders of the Preferred Securities do not have the right to appoint a special
representative or trustee or otherwise act to protect their interests.
The Subordinated Debt Securities are redeemable by the Company (in whole or
in part) from time to time, on or after May 13, 2003, or at any time in
certain circumstances upon the occurrence of a Tax Event (as defined herein)
at 100% of the principal amount of the Subordinated Debt Securities to be
redeemed plus accrued and unpaid interest thereon to the date fixed for
redemption. If the Company redeems Subordinated Debt Securities, the Trust
must redeem Trust Securities on a pro rata basis having an aggregate
liquidation amount equal to the aggregate principal amount of the Subordinated
Debt Securities so redeemed at $25 per Trust Security plus accrued and unpaid
distributions thereon (the "Redemption Price") to the date fixed for
redemption. See "Description of the Preferred Securities--Mandatory and
Optional Redemption." The Trust Securities will be redeemed at the Redemption
Price upon maturity of the Subordinated Debt Securities. The Subordinated Debt
Securities mature on June 30, 2038. In addition, upon the occurrence of a
Special Event (as defined herein) arising from a change in law or a change in
legal interpretation, unless the Subordinated Debt Securities are redeemed in
the limited circumstances described below, the Trust shall be terminated with
the result that the Subordinated Debt Securities will be distributed to the
holders of the Trust Securities, on a pro rata basis, in lieu of any cash
distribution. In the case of the occurrence of a Special Event that is a Tax
Event, the Company will have the right in certain circumstances to redeem the
Subordinated Debt Securities, which would result in the redemption by the
Trust of the Trust Securities in the same amount on a pro rata basis. If the
Subordinated Debt Securities are distributed to the holders of the Preferred
Securities, the Company will use its best efforts to have the Subordinated
Debt Securities listed on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed. See "Description of the
Preferred Securities--Special Event Redemption or Distribution" and
"Description of the Subordinated Debt Securities."
In the event of the voluntary or involuntary dissolution, winding-up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive, for each Preferred Security, a liquidation amount of $25
plus accrued and unpaid distributions thereon (including interest, if any,
thereon) to the date of payment, unless in connection with such dissolution,
winding-up or termination the Subordinated Debt Securities are distributed to
the holders of the Trust Securities. See "Description of the Preferred
Securities--Liquidation Distribution Upon Termination."
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Reference is made to "Definitions" on page S-45
for the location in this Prospectus Supplement of the definitions of certain
capitalized terms used herein.
THE COMPANY
The Company, acting through its subsidiaries, is a diversified energy holding
company with operations in natural gas gathering, marketing, processing,
storage and transmission; petroleum refining, marketing and distribution;
chemicals; gas and oil exploration and production; coal mining; and power.
Natural Gas Systems. The Company's natural gas pipelines are involved in the
transportation, storage and gathering of natural gas. The Company's major
natural gas pipeline subsidiaries include ANR Pipeline Company ("ANR Pipeline")
and Colorado Interstate Gas Company ("Colorado"). The Company has interests in
other pipeline systems including Wyoming Interstate Company Ltd., Alliance
Pipeline System, Great Lakes Gas Transmission L.P. and Empire State Pipeline
("Empire"). ANR Pipeline transports natural gas to the Midwest and the
Northeast from production areas in the central United States. ANR Pipeline's
principal pipeline facilities at December 31, 1997 consisted of 10,611 miles of
pipeline and 75 compressor stations. The design peak day delivery capacity of
the ANR Pipeline system is approximately 5.9 Bcf per day. ANR Pipeline also
operates two offshore pipelines in the Gulf of Mexico and Empire, an intrastate
pipeline in New York, in which it owns a 50% interest. Colorado's natural gas
transmission system extends from production areas in Texas, Oklahoma and Kansas
northwesterly through eastern Colorado to the Denver area, and from production
areas in Montana, Wyoming and Utah southeasterly to the Denver area. Colorado's
principal pipeline transmission and storage facilities at December 31, 1997
consisted of 4,160 miles of pipeline, 59 compressor stations and underground
storage facilities with a working capacity of 29 Bcf. The design peak day
delivery capacity of Colorado's transmission system is approximately 2.0 Bcf
per day. Colorado also owns over 2,300 miles of gathering facilities and five
gas processing plants in production areas adjacent to its transmission system.
The Company, primarily through two subsidiaries, Coastal Field Services Company
("CFSC") and Coastal Gas International Ltd. ("CGI"), operates an unregulated
natural gas business. CFSC owns or operates domestic gathering and processing
assets for various affiliates. CGI conducts the international unregulated
natural gas operations of the Company. In 1997, the Company and Westcoast
Energy Inc. ("Westcoast") jointly formed one of North America's largest
marketers of natural gas and electricity through the combination of the two
companies' related marketing and services businesses. The combination created
Engage Energy US, L.P. and Engage Energy Canada, L.P., in which the Company and
Westcoast each indirectly owns 50% interests.
Refining, Marketing and Chemicals. The Company, through subsidiaries, has
operations involved in the purchase, transportation and sale of refined
products, crude oil, condensate and natural gas liquids; the operation of
refineries and chemical plants; the sale at retail of gasoline, petroleum
products and convenience items; petroleum product terminaling and marketing of
crude oil and refined products worldwide. The Company-owned refineries in
Aruba, Texas, Alabama and New Jersey have a combined refining capacity of
468,000 barrels per day and produce a full range of petroleum products. The
Company, through Coastal Mart, Inc. and branded marketers, conducts retail
marketing using the C-MART(R), C and Design and/or COASTAL(R) trademarks in 36
states and Aruba through approximately 1,731 Coastal branded outlets. Coastal's
subsidiaries operate plants in Nevada, Oregon, Texas and Wyoming producing
chemical products for the agriculture, refining and mining industries. Coastal
Chem, Inc. operates an integrated methyl teritiary butyl ether ("MTBE") plant
with a production capacity of 4,200 barrels per day. The Company's
petrochemical facility in Montreal East, Quebec, Canada, has the capacity to
produce 330,000 tons per year of paraxylene, a component used in the
manufacturing of polyester fibers and containers.
Exploration and Production. The Company has subsidiaries engaged in oil and
gas exploration, development and production operations in most major producing
regions of the United States and internationally
S-4
<PAGE>
in Australia, Colombia, Hungary, Indonesia and Peru. The Company's domestic
proved reserves of crude oil, condensate and natural gas liquids at December
31, 1997 were 40.1 million barrels and proved natural gas reserves were 1,752.5
Bcf. In 1997, natural gas production averaged 540 MMcf per day and crude oil
and liquids production averaged 13,736 barrels per day. Many of the Company's
domestic gas wells are located in areas near, and are connected to, its natural
gas systems. Generally, the Company's domestic production of crude oil,
condensate and natural gas liquids is purchased by marketing and refining
affiliates.
Other Operations. The Company, through the operations of ANR Coal Company,
LLC and its affiliates, produces and markets high quality bituminous coal from
reserves in the eastern United States. The Company, through Coastal Power
Company ("Coastal Power") and its affiliates, develop, operate and own various
equity interests in cogeneration and independent power projects. Coastal Power
has interests in four domestic cogeneration projects and five foreign operating
independent power projects as well as interests in other projects in various
stages of development and construction. The projects produce and sell
electrical and thermal energy.
RECENT DEVELOPMENTS
On April 23, 1998, the Company reported record first quarter 1998 earnings of
$122.9 million, or $1.10 diluted earnings per share, up 21 percent from first
quarter 1997 earnings of $101.2 million, or $0.90 diluted earnings per share,
before an extraordinary charge. Including the charge of $90.6 million, or $0.84
per share, related to the refinancing of $798 million of higher-cost debt, the
Company's net earnings for the first quarter 1997 were $10.6 million, or $0.06
per share. The Company's overall earnings before interest and income taxes
("EBIT") were $260.4 million for the first quarter of 1998 compared with $229.6
million for the first quarter of 1997. The increase over 1997 can primarily be
attributed to the Refining, Marketing and Chemicals segment which increased
EBIT by $94.9 million, after giving effect to $60.0 million of inventory losses
recorded in 1997 resulting from falling crude oil and product prices. The
Exploration and Production segment reported a $36.7 million decline in 1998
first quarter EBIT versus 1997 first quarter results due to substantially lower
prices realized for natural gas, crude oil, and condensate in 1998, partially
offset by an increase in production. The Natural Gas segment reported a $17.2
million decline in EBIT in the 1998 first quarter versus the 1997 first quarter
after giving effect to a $42.0 million non-recurring gain recorded in 1997
related to an equalization payment associated with the formation of Engage
Energy.
THE OFFERING
Preferred Securities Offered
8.375% Trust Originated Preferred Securities evidencing preferred undivided
beneficial interests in the assets of the Trust are offered hereby. Holders of
the Preferred Securities are entitled to receive cumulative cash distributions
at an annual rate of 8.375% of the liquidation amount of $25 per Preferred
Security, accruing from May 13, 1998 and payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, commencing on June 30,
1998. The distribution payable on June 30, 1998, which will be calculated at
the above rate and based on a period that is shorter than a full quarter, will
be in the amount of $.27335 per Preferred Security. The distribution rate and
the distribution and other payment dates for the Preferred Securities will
correspond to the interest rate and interest and other payment dates on the
Subordinated Debt Securities, which will be the sole assets of the Trust. As a
result, if principal or interest is not paid on the Subordinated Debt
Securities, no amounts will be paid on the Preferred Securities. See
"Description of the Preferred Securities."
Subordinated Debt Securities
The Trust will invest the proceeds from the issuance of the Preferred
Securities and Common Securities in an equivalent amount of 8.375% Subordinated
Deferrable Interest Notes due June 30, 2038 of the Company. The Subordinated
Debt Securities will be subordinate and junior in right of payment to all
Senior Indebtedness of the Company. See "Description of the Subordinated Debt
Securities--Subordination."
S-5
<PAGE>
Preferred Securities Guarantee
Payment of distributions out of moneys held by the Trust, and payments on
liquidation of the Trust or the redemption of Preferred Securities, are
guaranteed by the Company if and to the extent the Trust has funds available
therefor. If the Company does not make principal or interest payments on the
Subordinated Debt Securities, the Trust will not have sufficient funds to
redeem or make distributions on the Preferred Securities, in which event the
Preferred Securities Guarantee will not apply to such redemptions or
distributions until the Trust has sufficient funds available therefor. The
Company's obligations under the Preferred Securities Guarantee, taken together
with its other obligations described herein, constitute a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities. See "Effect of Obligations Under the Subordinated Debt Securities
and the Preferred Securities Guarantee" and "Description of the Preferred
Securities Guarantee." The obligations of the Company under the Preferred
Securities Guarantee are subordinate and junior in right of payment to all
other liabilities of the Company and will rank pari passu with the most senior
preferred stock issued by the Company from time to time and with any guarantee
that may be entered into by the Company in respect of any preferred stock of
any subsidiary or affiliate of the Company. See "Risk Factors--Ranking of
Obligations under Preferred Securities Guarantee and Subordinated Debt
Securities" and "--Rights under the Preferred Securities Guarantee" and
"Description of the Preferred Securities Guarantee."
Interest Deferral
The Company has the right to defer payments of interest on the Subordinated
Debt Securities by extending the interest payment period on the Subordinated
Debt Securities, at any time and from time to time, for up to 20 consecutive
quarters, provided that no Extension Period may extend beyond the maturity of
the Subordinated Debt Securities. If interest payments on the Subordinated Debt
Securities are so deferred, distributions on the Preferred Securities will also
be deferred. During any deferral, distributions will continue to accrue with
interest thereon compounded quarterly (to the extent permitted by law) as
described herein. There could be multiple Extension Periods of varying lengths
throughout the term of the Subordinated Debt Securities. During an Extension
Period, holders of Preferred Securities will be required to include deferred
interest income in their gross income in advance of receipt of the cash
interest payments attributable thereto. See "Description of the Preferred
Securities--Voting Rights," "Description of the Subordinated Debt Securities--
Option to Extend Interest Payment Period" and "Certain Federal Income Tax
Consequences--Original Issue Discount, Premium and Market Discount."
Mandatory Redemption of Capital Securities
Unless previously redeemed pursuant to the optional or special redemption
provisions described below, each of the outstanding Preferred Securities will
be redeemed by the Trust, in cash, on June 30, 2038, which is the maturity date
of the Subordinated Debt Securities, at the Mandatory Redemption Price, which
is equal to (a) $25 per Preferred Security plus (b) accrued and unpaid
distributions thereon to the date of redemption. See "Description of the
Preferred Securities--Mandatory and Optional Redemption."
Optional and Special Redemption
The Subordinated Debt Securities are redeemable by the Company, in whole or
in part, from time to time, on or after May 13, 2003, or at any time in certain
circumstances upon the occurrence of a Tax Event, in each case at a price equal
to (a) 100% of the principal amount of Subordinated Debt Securities to be
redeemed plus (b) accrued and unpaid interest thereon to the date of
redemption. If the Company redeems Subordinated Debt Securities, the Trust must
redeem Trust Securities on a pro rata basis having an aggregate liquidation
amount equal to the aggregate principal amount of the Subordinated Debt
Securities so redeemed at the Redemption Price. See "Description of the
Preferred Securities--Mandatory and Optional Redemption" and "--Special Event
Redemption or Distribution."
S-6
<PAGE>
Voting Rights
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, Company Trustees (as defined herein), which voting rights are
vested exclusively in the holder of the Common Securities. See "Description of
the Preferred Securities--Voting Rights."
Use of Proceeds
The Trust will invest the proceeds from the sale of the Preferred Securities
offered hereby in the Subordinated Debt Securities, the proceeds of which will
be used by the Company to refinance borrowings by the Company incurred to
finance the April 1998 redemption of certain preferred stock and to repay
certain outstanding subsidiary indebtedness. See "Use of Proceeds."
Listing
The Preferred Securities are expected to be approved for listing, subject to
official notice of issuance, on the New York Stock Exchange. Trading of the
Preferred Securities on the New York Stock Exchange is expected to commence
within a 30-day period after the initial delivery of the Preferred Securities.
See "Underwriting."
S-7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data (in millions of dollars
except per share amounts) is derived from the Consolidated Financial Statements
of the Company and Item 6 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, as adjusted for minor reclassifications.
The Notes to Consolidated Financial Statements of the Company contain other
information relating to this data.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997 1996(4) 1995 1994 1993
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues(1)...... $9,653.1 $12,166.9 $10,457.6 $10,226.2 $10,147.2
Earnings before
extraordinary items....... 392.1 500.2(2) 270.4 232.6 118.3
Net earnings............... 301.5 402.6(2) 270.4 232.6 115.8
Basic earnings per share
before extraordinary
items..................... 3.53 4.57(2) 2.41 2.06 1.02
Diluted earnings per share
before extraordinary
items..................... 3.49 4.52(2) 2.39 2.04 1.02
Cash dividends per common
share(3).................. .40 .40 .40 .40 .40
Total assets............... 11,625.2 11,613.1 10,658.8 10,534.6 10,227.1
Debt, excluding current
maturities................ 3,663.2 3,526.1 3,661.7 3,720.2 3,812.5
Preferred stock of
subsidiaries, excluding
current maturities........ 100.0 100.0 .6 .6 26.6
</TABLE>
- --------
(1) Amounts for 1997 include revenues for two months while other years include
twelve months of revenues from Coastal's gas marketing operations which
became a part of Engage Energy US, L.P. and Engage Energy Canada, L.P. in
February 1997 and are included in Other income--net on the equity method
thereafter.
(2) Amounts for 1996 include a gain of $272.3 million ($177 million net of
income taxes, or $1.67 per share-basic, $1.65 per share-diluted), related
to the sale of the Company's Utah coal mining operations. Excluding the
gain, earnings before extraordinary items for 1996 amounted to $323.2
million ($2.90 per share-basic, $2.87 per share-diluted).
(3) In addition, cash dividends of $0.36 per share were paid on the Company's
Class A Common Stock in 1997, 1996, 1995, 1994 and 1993.
(4) Effective November 1, 1996, the Company's interstate natural gas pipeline
and certain storage subsidiaries discontinued the application of FAS 71.
The accounting change resulted in a charge to earnings of $85.6 million,
net of related income taxes of $50 million, and is shown as an
extraordinary item. Additional information is set forth in Management's
Discussion and Analysis of Financial Condition and Results of Operations in
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997 and Note 13 of the Notes to Consolidated Financial Statements.
S-8
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained in other sections of this Prospectus Supplement and in
the accompanying Prospectus and should particularly consider the following
matters.
RANKING OF OBLIGATIONS UNDER PREFERRED SECURITIES GUARANTEE AND SUBORDINATED
DEBT SECURITIES
The Company's obligations under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all other liabilities of the
Company and will rank pari passu with the most senior preferred stock issued
by the Company from time to time and with any guarantee that may be entered
into by the Company in respect of any preferred stock of any subsidiary or
affiliate of the Company. The obligations of the Company under the
Subordinated Debt Securities are subordinate and junior in right of payment to
all present and future Senior Indebtedness (as defined herein) of the Company.
No payment of principal of (including redemption payments), or interest on,
the Subordinated Debt Securities may be made if (a) any Senior Indebtedness of
the Company is not paid when due and any applicable grace period with respect
to such default has ended with such default not being cured or waived or
ceasing to exist, or (b) the maturity of any Senior Indebtedness has been
accelerated because of a default. At December 31, 1997, Senior Indebtedness of
the Company aggregated approximately $2.5 billion. In addition, because the
Company is a holding company, its obligations under the Preferred Securities
Guarantee and the Subordinated Debt Securities will be effectively
subordinated to all existing and future liabilities of its subsidiaries. At
December 31, 1997, the subsidiaries of the Company had total indebtedness
outstanding of approximately $1.6 billion and other liabilities of
approximately $2.3 billion (excluding, in each case, indebtedness and other
liabilities owed to the Company and other affiliates, guaranteed indebtedness
of subsidiaries that is included in Senior Indebtedness and deferred income
taxes and other deferred credits). There are no terms in the Preferred
Securities, the Subordinated Debt Securities or the Preferred Securities
Guarantee that limit the Company's ability to incur additional indebtedness,
including indebtedness that ranks senior to the Subordinated Debt Securities
or the Preferred Securities Guarantee, and there are no limitations on the
ability of its subsidiaries to issue additional indebtedness. See "Description
of the Preferred Securities Guarantee" and "Description of the Subordinated
Debt Securities--Subordination."
RIGHTS UNDER THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee guarantees to the holders of the
Preferred Securities the payment of (i) any accrued and unpaid distributions
which are required to be paid on the Preferred Securities, to the extent the
Trust shall have funds available therefor, (ii) the Redemption Price, which
includes all accrued and unpaid distributions to the date of the redemption,
to the extent the Trust has funds available therefor, with respect to any
Preferred Securities called for redemption by the Trust and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Subordinated Debt
Securities to the holders of Preferred Securities), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid distributions
on the Preferred Securities to the date of payment thereof, to the extent the
Trust has funds available therefor, and (b) the amount of assets of the Trust
remaining available for distribution to holders of Preferred Securities in
liquidation of the Trust. Holders of the Preferred Securities have the right
to proceed directly against the Company to enforce the Company's obligations
to make payments under the Preferred Securities Guarantee, without first
instituting a legal proceeding against the Trust, the Preferred Guarantee
Trustee (as defined herein) or any other person or entity. If the Company were
to default in its obligation to pay amounts payable on the Subordinated Debt
Securities, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and in such event holders of the Preferred Securities would not be
able to rely upon the Preferred Securities Guarantee for payment of such
amounts. Instead, holders of the Preferred Securities (i) would be able to
proceed directly against the Company to the extent described under
"Enforcement of Certain Rights by Holders of Preferred Securities" below or
(ii) would rely on the enforcement by the Property Trustee (as defined herein)
of its rights as registered holder of the Subordinated Debt Securities against
the Company, pursuant to the terms of the Subordinated Debt Securities. See
"Description of the Preferred Securities Guarantee--Status of the Preferred
S-9
<PAGE>
Securities Guarantee" and "Description of the Subordinated Debt Securities--
Subordination." The Declaration (as defined herein) provides that each holder
of Preferred Securities by acceptance thereof agrees to the provisions of the
Preferred Securities Guarantee and the Indenture (as defined herein).
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as the holder of the
Subordinated Debt Securities against the Company. In addition, the holders of
a majority in aggregate liquidation amount of the 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, including the right to direct the Property Trustee to exercise
the remedies available to it as a holder of the Subordinated Debt Securities.
If a Declaration Event of Default occurs that results from the failure of the
Company to pay principal of or interest on the Subordinated Debt Securities
when due, during the continuance of such an event of default a holder of
Preferred Securities may institute a legal proceeding directly against the
Company to obtain payment of such principal or interest on Subordinated Debt
Securities having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities owned of record by such holder. The holders of
Preferred Securities will not be able to exercise directly against the Company
any other remedy available to the Property Trustee unless the Property Trustee
first fails to do so. See "Description of the Preferred Securities--Voting
Rights."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debt Securities by extending the interest payment period
at any time, and from time to time, on the Subordinated Debt Securities. As a
consequence of such an extension, quarterly distributions on the Preferred
Securities would be deferred (but despite such deferral would continue to
accrue with interest thereon compounded quarterly) by the Trust during any
such extended interest payment period. Such right to extend the interest
payment period for the Subordinated Debt Securities is limited to a period not
exceeding 20 consecutive quarters for any such extension. In the event that
the Company exercises this right to defer payments of interest, then during
the term of such deferral (a) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase or
make a liquidation payment with respect to, any of its capital stock, (b) the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by the Company
which rank pari passu with or junior to the Subordinated Debt Securities and
(c) the Company shall not make any guarantee payments (other than pursuant to
the Preferred Securities Guarantee) with respect to the foregoing; provided,
however, that the foregoing restrictions do not apply to any dividend,
redemption, interest, principal or guarantee payments by the Company where the
payment is made by way of securities (including capital stock) that rank
junior to the securities on which such dividend, redemption, interest,
principal or guarantee payment is being made. Prior to the termination of any
such Extension Period, the Company may further defer payments of interest by
further extending the interest payment period; provided, however, that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
of the Subordinated Debt Securities. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may select a new
Extension Period, as if no Extension Period had previously been declared,
subject to the above requirements. See "Description of the Preferred
Securities--Distributions" and "--Voting Rights" and "Description of the
Subordinated Debt Securities--Option to Extend Interest Payment Period."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities
will be required to accrue income (as original issue discount) for United
States federal income tax purposes in respect of the deferred interest
allocable to such holder's Preferred Securities, which will be allocated, but
not distributed, to holders of record of Preferred Securities. As a result,
holders of Preferred Securities will recognize income for United States
federal income tax purposes in advance of the receipt of cash and will not
receive cash from the Trust related to such income if such holder disposes of
S-10
<PAGE>
such holder's Preferred Securities prior to the record date for the date on
which distributions of such amounts are made. The Company has no current
intention of exercising its right to defer payments of interest by extending
the interest payment period on the Subordinated Debt Securities. However,
should the Company determine to exercise such right in the future, the market
price of the Preferred Securities is likely to be affected. A holder that
disposes of its Preferred Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that continues
to hold its Preferred Securities. In addition, as a result of the existence of
the Company's right to defer interest payments, the market price of the
Preferred Securities (which represent a preferred undivided beneficial
interest in the Subordinated Debt Securities) may be more volatile than other
securities on which original issue discount accrues that are not subject to
such right. See "Certain Federal Income Tax Consequences--Original Issue
Discount, Premium and Market Discount."
SPECIAL EVENT DISTRIBUTION
Upon the occurrence of a Special Event, the Trust will be terminated, except
in the limited circumstances described below, with the result that the
Subordinated Debt Securities would be distributed to the holders of the Trust
Securities in connection with the liquidation of the Trust. In the case of a
Special Event that is a Tax Event, the Company shall have the right to redeem
the Subordinated Debt Securities, in whole but not in part, in which event the
Trust will redeem the Trust Securities. See "Description of the Preferred
Securities--Special Event Redemption or Distribution" and "Certain Federal
Income Tax Consequences."
Under current United States federal income tax law, a distribution of the
Subordinated Debt Securities upon the termination of the Trust would not be a
taxable event to holders of the Preferred Securities. Upon occurrence of a Tax
Event, however, a termination of the Trust in which holders of the Preferred
Securities receive cash would be a taxable event to such holders. See "Certain
Federal Income Tax Consequences--Receipt of Subordinated Debt Securities or
Cash upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Preferred
Securities, or the Subordinated Debt Securities that may be distributed in
exchange for Preferred Securities if a termination of the Trust were to occur.
Accordingly, the Preferred Securities that an investor may purchase, or the
Subordinated Debt Securities that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby. Because
holders of Preferred Securities may receive Subordinated Debt Securities upon
the occurrence of a Special Event, prospective purchasers of Preferred
Securities are also making an investment decision with regard to the
Subordinated Debt Securities and should carefully review all the information
regarding the Subordinated Debt Securities contained herein. See "Description
of the Preferred Securities--Special Event Redemption or Distribution" and
"Description of the Subordinated Debt Securities."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights, primarily
in connection with directing the activities of the Property Trustee as the
holder of the Subordinated Debt Securities. Such holders will not be entitled
to vote to appoint, remove or replace, or to increase or decrease the number
of, Company Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities. See "Description of the
Preferred Securities--Voting Rights."
TRADING PRICE OF PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debt Securities. A holder who disposes of his Preferred
Securities between record dates for payments of distributions thereon will be
required to include (to the extent not previously included in income) accrued
but unpaid interest on the Subordinated Debt Securities through the date of
disposition in income as ordinary income, and the amount realized on
disposition excludes the portion of the sale price treated as interest. To the
extent the amount realized on disposition is less than the holder's adjusted
tax basis, 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
Consequences--Original Issue Discount, Premium and Market Discount" and "--
Sale of Preferred Securities."
S-11
<PAGE>
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State
on April 8, 1998. The Trust's business is defined in a Declaration of Trust,
dated as of April 8, 1998, executed by the Company, as sponsor (the
"Sponsor"), and the Company Trustees as of that date. The Declaration of Trust
will be amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part. The Declaration has been qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the purchasers
thereof will own all of the Preferred Securities. See "Description of the
Preferred Securities--Book-Entry Issuance Only--The Depository Trust Company."
The Company will directly or indirectly acquire all of the Common Securities
in an aggregate liquidation amount equal to at least 3% of the total capital
of the Trust. The Trust exists for the exclusive purposes of (i) issuing and
selling the Trust Securities, representing undivided beneficial interests in
the assets of the Trust, (ii) investing the gross proceeds of the Trust
Securities in the Subordinated Debt Securities and the Preferred Securities
Guarantee and (iii) engaging in only those other activities necessary or
incidental thereto. The Trust has a term of approximately 55 years, but may
terminate earlier as provided in the Declaration.
The Trust's business and affairs will be conducted by the trustees (the
"Company Trustees") appointed by the Company, as holder of the Common
Securities. The duties and obligations of the Company Trustees shall be
governed by the Declaration, the Trust Indenture Act and the Delaware Business
Trust Act, as amended (the "Trust Act"). Pursuant to the Declaration, the
number of Company Trustees will initially be five. Three of the Company
Trustees (the "Regular Trustees") will be persons who are employees or
officers of, or affiliated with, the Company. A fourth trustee will be a
financial institution unaffiliated with the Company that will serve as
property trustee (the "Property Trustee") under the Declaration and as
indenture trustee for purposes of the Trust Indenture Act. The Bank of New
York will act as the Property Trustee until removed or replaced by the holder
of the Common Securities. The Bank of New York will also act as indenture
trustee under the Preferred Securities Guarantee (the "Preferred Guarantee
Trustee"). See "Description of the Preferred Securities Guarantee." The fifth
trustee will be a financial institution or an affiliate thereof which
maintains a principal place of business in the State of Delaware (the
"Delaware Trustee") and meets any other requirements of applicable law. The
Bank of New York (Delaware) will initially act as the Delaware Trustee.
The Property Trustee will hold title to the Subordinated Debt Securities for
the benefit of the Trust and holders of the Trust Securities and will have the
power to exercise all rights, powers and privileges under the Indenture (as
defined herein) as the holder of the Subordinated Debt 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 respect of the Subordinated Debt Securities for the benefit
of the Trust and 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 Trust Securities out of funds from the
Property Account. The Preferred Guarantee Trustee will hold the Preferred
Securities Guarantee for the benefit of the holders of the Preferred
Securities. The Company, as the holder of all the Common Securities, will have
the right to appoint, remove or replace any Company Trustee and to increase or
decrease the number of Company Trustees, provided that the number of Company
Trustees shall be at least three, a majority of which shall be Regular
Trustees. The Company will pay all fees, expenses, debts and obligations
(other than the Trust Securities) related to the Trust and the offering of the
Trust Securities. The Company has agreed that the Property Trustee and any
person to whom such fees, expenses, debts and obligations are owed will have
the right to enforce the Company's obligations in respect of such fees,
expenses, debts and obligations directly against the Company without first
proceeding against the Trust. See "Description of the Preferred Securities--
Expenses and Taxes."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the
Declaration, the Trust Act, and the Trust Indenture Act. See "Description of
the Preferred Securities."
The principal place of business of the Trust shall be c/o The Coastal
Corporation, Coastal Tower, Nine Greenway Plaza, Houston, Texas 77046-0995;
telephone (713) 877-1400.
S-12
<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with the
Company's financial statements, with the Preferred Securities shown on the
Company's consolidated financial statements as Company-obligated mandatorily
redeemable preferred securities of the Trust. The sole asset of the Trust will
be the 8.375% Subordinated Deferrable Interest Notes due June 30, 2038 in the
principal amount of $300,000,000, which will eliminate upon consolidation of
the Trust.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of the Company's earnings to
combined fixed charges and preferred stock dividends, on a consolidated basis,
for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1994 1995 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratio.......................................... 1.35x 1.63x 1.58x 2.43x 2.22x
</TABLE>
For purposes of calculating the ratio of earnings to fixed charges,
"earnings" are computed by adding to net earnings (loss) from continuing
operations the provision for income taxes and fixed charges net of interest
capitalized. "Combined Fixed Charges and Preferred Stock Dividends" consist of
interest plus interest capitalized, amortization of debt expense, subsidiary
preferred stock dividends, that portion of the Company's earnings (losses)
that represent the amount of pretax earnings that would be required to cover
preferred stock dividend requirements of the Company and a portion of
operating lease rent expense deemed to be representative of interest.
USE OF PROCEEDS
The proceeds of the sale of the Preferred Securities will be invested by the
Trust in the Subordinated Debt Securities of the Company. The Company will use
the net proceeds from the sale of such Subordinated Debt Securities to
refinance $200.0 million of borrowings incurred by the Company to finance the
April 1998 redemption of its $2.125 Cumulative Preferred Stock, Series H (the
"Series H Preferred") and to repay certain outstanding subsidiary indebtedness
incurred under such subsidiary's revolving credit agreement. The Series H
Preferred had an after-tax dividend rate of 8.5% per annum. Borrowings under
the subsidiary's revolving credit agreement had a weighted average interest
rate of 6.06% per annum as of December 31, 1997.
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<PAGE>
CAPITALIZATION
The following table sets forth the audited consolidated short-term debt and
capitalization of Coastal and its consolidated subsidiaries as of December 31,
1997, and as adjusted to give effect to the sale of $300.0 million of the
Preferred Securities and the application of the proceeds therefrom. See "Use
of Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(DOLLAR AMOUNTS
IN MILLIONS)
<S> <C> <C>
Short-term debt:
Notes payable........................................ $ 114.0 $ 114.0
Current maturities on long-term debt................. 42.0 42.0
-------- --------
Total short-term debt............................ $ 156.0 $ 156.0
======== ========
Long-term debt(2):
The Coastal Corporation:
Notes payable (revolving credit agreements)(3)....... $ 125.0 $ 125.0
Senior notes:
10.375%, due 2000.................................. 121.3 121.3
10%, due 2001...................................... 83.9 83.9
8.75%, due 1999.................................... 150.0 150.0
8.125%, due 2002................................... 249.6 249.6
Senior debentures:
10.25%, due 2004................................... 37.7 37.7
10.75%, due 2010................................... 56.4 56.4
9.75%, due 2003.................................... 102.1 102.1
9.625%, due 2012................................... 149.3 149.3
7.75%, due 2035.................................... 149.9 149.9
7.42%, due 2037.................................... 200.0 200.0
6.7%, due 2027..................................... 200.0 200.0
-------- --------
1,625.2 1,625.2
-------- --------
Subsidiary companies(2):
Notes payable (term credit facilities)................. 244.3 244.3
Notes payable (revolving credit agreements)(3)......... 682.6 582.6
Notes payable (project financing), due 2006(4)......... 51.0 51.0
Debentures, 6.85% to 10%, due 2005-2037................ 777.4 777.4
Other, due 2003-2028................................... 74.7 74.7
-------- --------
1,830.0 1,730.0
-------- --------
Amount reclassified from short-term debt............... 250.0 250.0
-------- --------
Total long-term debt................................... 3,705.2 3,605.2
Less current maturities................................ 42.0 42.0
-------- --------
Total long-term debt............................. 3,663.2 3,563.2
-------- --------
Preferred stock issued by subsidiaries................. 100.0 100.0
-------- --------
Company-obligated mandatorily redeemable preferred
securities of Coastal Finance I....................... -- 300.0
-------- --------
Common stock and other stockholders' equity(5):
Cumulative preferred stock........................... 2.6 --
Class A common stock................................. .1 .1
Common stock......................................... 36.7 36.7
Additional paid-in capital........................... 1,243.6 1,046.2
Retained earnings.................................... 2,131.9 2,131.9
-------- --------
3,414.9 3,214.9
Less common stock in treasury--at cost............... 132.5 132.5
-------- --------
Total common stock and other stockholders'
equity.......................................... 3,282.4 3,082.4
-------- --------
Total capitalization............................. $7,045.6 $7,045.6
======== ========
</TABLE>
- --------
(1) Adjusted to give effect to the sale of the Preferred Securities, the
application of the proceeds therefrom to repay certain long-term debt and
the redemption of the Series H Preferred.
(2) Various agreements contain restrictive covenants which, among other
things, limit dividends by certain subsidiaries and additional
indebtedness of certain subsidiaries. At December 31, 1997, net assets of
consolidated subsidiaries amounted to approximately $6.0 billion, of
which approximately $632.3 million was restricted by such provisions.
(3) Loans under these agreements bear interest at money market related rates
(weighted average 6.04% at December 31, 1997).
(4) The subsidiary project financing bears interest at a money market related
rate.
(5) Under the most restrictive of the Company's financing agreements,
approximately $648.2 million was available for the payment of dividends
on the Company's common and preferred stock as of December 31, 1997.
S-14
<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration has been qualified as an indenture under the
Trust Indenture Act. The Property Trustee will act as the indenture trustee
for purposes of compliance with the provisions of the Trust Indenture Act. The
terms of the Preferred Securities will include those stated in the Declaration
and those made part of the Declaration by the Trust Act and the Trust
Indenture Act. The following summary of the principal terms and provisions of
the Preferred Securities does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the Declaration (the form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and the accompanying Prospectus are a part), the Trust
Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees, on behalf of the Trust, to
issue the Preferred Securities, which represent preferred undivided beneficial
interests in the assets of the Trust, and the Common Securities, which
represent common undivided beneficial interests in the assets of the Trust.
All of the Common Securities will be owned directly or indirectly by the
Company. The Common Securities rank pari passu, and payments will be made
thereon on a pro rata basis, with the Preferred Securities, except that upon
the occurrence and during the continuation of a Declaration Event of Default,
the rights of the holders of the Common Securities to receive payment of
periodic distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights to payment of the holders of the Preferred
Securities. 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 and hold the Subordinated Debt Securities for the benefit of the
Trust and the holders of the Trust Securities. The payment of distributions
out of money held by the Trust, and payments upon redemption of the Preferred
Securities or liquidation of the Trust, are guaranteed by the Company as
described under "Description of the Preferred Securities Guarantee."
The Preferred Guarantee Trustee will hold the Preferred Securities Guarantee
for the benefit of the holders of the Preferred Securities. The Preferred
Securities Guarantee does not cover payment of distributions on the Preferred
Securities when the Trust does not have sufficient available funds in the
Property Account to make such distributions.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 8.375% of the liquidation amount of $25 per Preferred Security (equivalent
to $2.09375 per Preferred Security). Distributions in arrears for more than
one quarter will bear interest at the rate of 8.375% per annum compounded
quarterly (to the extent permitted by applicable law). The term
"distributions" as used herein includes any such interest payable unless
otherwise stated.
Distributions on the Preferred Securities will be cumulative, will accrue
from May 13, 1998, and will be payable quarterly in arrears on March 31, June
30, September 30 and December 31 of each year to the holders of record on the
applicable record date, commencing June 30, 1998, when, as and if available
for payment by the Property Trustee, except as otherwise described below. The
amount of distributions payable for any full quarterly period will be computed
on the basis of a 360-day year of twelve 30-day months, and for any period
shorter than a full quarter, on the basis of the actual number of days elapsed
in such a 90-day quarter. The initial distribution, payable on June 30, 1998,
will be based on a period shorter than a full quarter (May 13 to June 30,
1998) and will be in the amount of $.27335 per Preferred Security.
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debt Securities by extending the interest payment period
from time to time on the Subordinated Debt Securities which, if exercised,
would defer quarterly distributions on the Preferred Securities (though such
distributions would continue to accrue interest since interest would continue
to accrue on the Subordinated Debt Securities) during any such extended
interest payment period. In the event that the Company exercises this right,
then during the term of such deferral (a) the Company shall not declare or pay
any dividend on, make any distributions with respect to, or
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<PAGE>
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock, (b) the Company shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Company which rank pari passu with or junior to the
Subordinated Debt Securities, and (c) the Company shall not make any guarantee
payments (other than pursuant to the Preferred Securities Guarantee) with
respect to the foregoing; provided, however, that the foregoing restrictions
do not apply to any dividend, redemption, liquidation, interest, principal or
guarantee payments by the Company where the payment is made by way of
securities (including capital stock) that rank junior to the securities on
which such dividend, redemption, interest, principal or guarantee payment is
being made. Prior to the termination of any such Extension Period, the Company
may further extend the interest payment period; provided, however, that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
of the Subordinated Debt Securities. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may select a new
Extension Period as if no Extension Period had previously been declared,
subject to the above requirements. See "--Voting Rights" below and
"Description of the Subordinated Debt Securities--Interest" and "--Option to
Extend Interest Payment Period." If distributions are deferred, the deferred
distributions and accrued interest thereon shall be paid to holders of record
of the Preferred Securities, if funds are available therefor, as they appear
on the books and records of the Trust on the record date immediately following
the termination of such Extension Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received under the Subordinated Debt Securities. See "Description of
the Subordinated Debt Securities." The payment of distributions out of moneys
held by the Trust is guaranteed by the Company as described under "Description
of the Preferred Securities Guarantee."
Distributions on the 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, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day (as defined herein) prior to the relevant
payment dates, which payment dates correspond to the interest payment dates on
the Subordinated Debt Securities. Such distributions will be paid through the
Property Trustee, who will hold amounts received in respect of the
Subordinated Debt Securities in the Property Account for the benefit of the
Trust and the holders of the Trust Securities. Subject to any applicable laws
and regulations and the provisions of the Declaration, each such payment will
be made as described under "--Book-Entry Only Issuance--The Depository Trust
Company" below. In the event the Preferred Securities shall not continue to
remain in book-entry only form, the Regular Trustees shall have the right to
select relevant record dates which shall be at least one Business Day, but
less than 60 Business Days, prior to the relevant payment dates. In the event
that any date on which distributions are to be made on the Preferred
Securities is not a Business Day, then payment of the distributions 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 such date. A "Business Day" shall
mean any day other than a Saturday, Sunday or other day on which banking
institutions in New York, New York are authorized or required by law to close.
MANDATORY AND OPTIONAL REDEMPTION
The Subordinated Debt Securities will mature on June 30, 2038 and may be
redeemed, in whole or in part, at any time on or after May 13, 2003, or at any
time in certain circumstances upon the occurrence of a Tax Event, in each case
at a price equal to the sum of (i) 100% of the principal amount of the
Subordinated Debt Securities to be redeemed and (ii) accrued and unpaid
interest thereon to the date fixed for redemption. Upon the repayment of the
Subordinated Debt Securities, whether at maturity or upon acceleration,
redemption or otherwise, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Trust Securities on a pro rata basis
having an aggregate liquidation amount equal to the aggregate principal amount
of the Subordinated Debt Securities so repaid or redeemed at the Redemption
Price; provided, however, that except
S-16
<PAGE>
in the case of payments upon maturity, holders of Trust Securities shall be
given not less than 30 nor more than 60 days notice of such redemption. See
"--Redemption Procedures" and "Description of the Subordinated Debt
Securities." In the event that fewer than all of the outstanding Preferred
Securities are to be redeemed, the Preferred Securities will be redeemed as
described under "--Book-Entry Only Issuance--The Depository Trust Company"
below.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Distribution Upon the Occurrence of a Special Event. If, at any time, a Tax
Event or an Investment Company Event (each, as defined below, a "Special
Event") shall occur and be continuing, the Trust shall, except in the
circumstances described below under "Redemption Upon the Occurrence of a Tax
Event," be dissolved with the result that, after satisfaction of liabilities
to creditors, Subordinated Debt Securities, with an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal
to accrued and unpaid distributions on, the Trust Securities, would be
distributed to the holders of the Trust Securities, in liquidation of such
holders' interests in the Trust on a pro rata basis, within 90 days following
the occurrence of such Special Event; provided, however, that in the case of
the occurrence of a Tax Event, as a condition of such termination, dissolution
and distribution, the Regular Trustees shall have received an opinion from a
nationally recognized independent tax counsel experienced in such matters (a
"No Recognition Opinion"), which opinion may rely on published revenue rulings
of the Internal Revenue Service, to the effect that neither the Trust nor the
holders of the Trust Securities will recognize any gain or loss for United
States federal income tax purposes as a result of such termination and
dissolution of the Trust and the distribution of the Subordinated Debt
Securities; and, provided, further, that, if there is available to the Trust
the opportunity to eliminate, within such 90-day period, the Special Event by
taking some ministerial action, such as filing a form or making an election,
or pursuing some other similar reasonable measure, which has no adverse effect
on the Trust, the Company or the holders of the Trust Securities, the Trust
will pursue such measure in lieu of dissolution.
If Subordinated Debt Securities are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the
Subordinated Debt Securities listed on the New York Stock Exchange or on such
other exchanges as the Preferred Securities are then listed.
After the date for any distribution of Subordinated Debt Securities upon
termination of the Trust, (i) the Preferred Securities and Preferred
Securities Guarantee will no longer be deemed to be outstanding, (ii) the
depositary or its nominee, as the record holder of the Preferred Securities,
will receive a registered global certificate or certificates representing the
Subordinated Debt Securities to be delivered upon such distribution and (iii)
any certificates representing Preferred Securities not held by the depositary
or its nominee will be deemed to represent Subordinated Debt Securities 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
and unpaid interest equal to accrued and unpaid distributions on, such
Preferred Securities, until such certificates are presented to the Company or
its agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debt Securities that may be distributed in
exchange for the Preferred Securities if a termination and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor
may purchase, whether pursuant to the offer hereby or in the secondary market,
or the Subordinated Debt Securities that the investor may receive on
termination and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities.
Redemption Upon the Occurrence of a Tax Event If, in the case of the
occurrence and continuation of a Tax Event, (i) the Company has received an
opinion (a "Redemption Tax Opinion") from a nationally recognized independent
tax counsel experienced in such matters that, as a result of a Tax Event,
there is more than an insubstantial risk that the Company would be precluded
from deducting the interest on the Subordinated Debt Securities for United
States federal income tax purposes even after the Subordinated Debt Securities
were distributed to the holders of Trust Securities in liquidation of such
holders' interests in the Trust as described
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above under "Distribution Upon the Occurrence of a Special Event" or (ii) the
Regular Trustees shall have been informed by such tax counsel that a No
Recognition Opinion cannot be delivered, the Company shall have the right,
upon not less than 30 nor more than 60 days' notice, to redeem the
Subordinated Debt Securities in whole or in part for cash within 90 days
following the occurrence of such Tax Event at a price equal to the sum of (x)
100% of the principal amount of the Subordinated Debt Securities to be
redeemed and (y) accrued and unpaid interest thereon to the date fixed for
redemption, and, following such redemption, Trust Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Subordinated
Debt Securities so redeemed shall be redeemed by the Trust at the Redemption
Price on a pro rata basis; provided, however, that, if there is available to
the Company or the Trust the opportunity to eliminate, within such 90-day
period, the Tax Event by taking some ministerial action, such as filing a form
or making an election, or pursuing some other similar reasonable measure which
has no adverse effect on the Trust, the Company or the holders of the Trust
Securities, the Company or the Trust will pursue such measure in lieu of
redemption.
It has recently been reported that the Internal Revenue Service challenged
the deductibility, for U.S. federal income tax purposes, of interest payments
pursuant to instruments analogous to the Subordinated Debt Securities, held by
an entity similar in certain respects to the Trust. Based on the information
available to it, the Company does not believe that deductibility of interest
pursuant to the Subordinated Debt Securities is jeopardized by the position
reported to have been taken by the Internal Revenue Service, and the Company
intends to take the position that the interest payments pursuant to the
Subordinated Debt Securities will be deductible by the Company for federal
income tax purposes. See "Certain Federal Income Tax Consequences--
Classification of the Subordinated Debt Securities." Adverse developments in
respect of the reported proceeding, or otherwise, could give rise to a Tax
Event.
Definitions. As used herein the following terms have the meanings specified
below:
"Investment Company Event" means that the Company has provided the Regular
Trustees with an opinion from a nationally recognized independent counsel
experienced in practice under the 1940 Act (as hereinafter defined) to the
effect 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 more than an insubstantial risk that the
Trust is or will be considered an "investment company" which is required to be
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), which Change in 1940 Act Law becomes effective on or after the date of
this Prospectus Supplement.
"Tax Event" means that the Company has provided the Regular Trustees with an
opinion from a nationally recognized independent tax counsel experienced in
such matters (a "Dissolution Tax Opinion") to the effect that, on or after the
date of this Prospectus Supplement, as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein or (b) any interpretation or application
of such laws or regulations by any court, governmental agency or regulatory
authority, in each case which amendment or change is enacted, promulgated,
issued or announced or which interpretation is issued or announced or which
action is taken, on or after the date of this Prospectus Supplement, there is
more than an insubstantial risk that (i) the Trust is, or will be within 90
days of the date thereof, subject to United States federal income tax with
respect to interest accrued or received on the Subordinated Debt Securities,
(ii) interest payable to the Trust on the Subordinated Debt Securities is not,
or will not be within 90 days of the date thereof, deductible in whole or in
part by the Company for United States federal income tax purposes or (iii) the
Trust is, or will be within 90 days of the date thereof, subject to more than
a de minimis amount of other taxes, duties or other governmental charges.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Trust Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
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If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time,
on the redemption date, provided that the Company has paid to the Property
Trustee a sufficient amount of cash in connection with the related redemption
or maturity of the Subordinated Debt Securities, the Trust will irrevocably
deposit with the depositary funds sufficient to pay the applicable Redemption
Price and will give the depositary irrevocable instructions and authority to
pay the Redemption Price to the holders of the Preferred Securities. See
"--Book-Entry Only Issuance--The Depository Trust Company." If notice of
redemption shall have been given and funds deposited as required, then
immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of such Preferred
Securities so called for redemption will cease, except the right of the holders
of such Preferred Securities to receive the Redemption Price, but without
interest on such Redemption Price. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day. In
the event that payment of the Redemption Price in respect of Preferred
Securities is improperly withheld or refused and not paid either by the Trust or
by the Company pursuant to the Preferred Securities Guarantee, distributions on
such Preferred Securities will continue to accrue, from the original redemption
date to the actual date of payment, in which case the actual payment date will
be considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed as described under
"--Book-Entry Only Issuance--The Depository Trust Company" below.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON TERMINATION
In the event of any voluntary or involuntary termination, dissolution or
winding-up of the Trust, the holders of the Preferred Securities at that time
will be entitled to receive out of the assets of the Trust, after satisfaction
of liabilities to creditors, distributions in an amount equal to the aggregate
liquidation amount of $25 per Preferred Security plus accrued and unpaid
distributions thereon to the date of payment (the "Liquidation Distribution"),
unless in connection with such termination, dissolution or winding-up
Subordinated Debt Securities in an aggregate principal amount equal to the
aggregate liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on, the Preferred Securities have been distributed on a
pro rata basis to the holders of Preferred Securities in exchange for such
Preferred Securities.
If, upon any such termination, dissolution or winding-up, 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 Preferred Securities shall be
paid on a pro rata basis. The holders of the Common Securities will be
entitled to receive distributions upon any such dissolution pro rata with the
holders of the Preferred Securities, except that if a Declaration Event of
Default has occurred and is continuing, the Preferred Securities shall have a
preference over the Common Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on June 30, 2053,
the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company or the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the Company or
the holder of the Common Securities, the filing of a certificate of
cancellation with respect to the Trust, or the revocation of the charter of
the Company or the holder of the Common Securities and the expiration of 90
days after the date of revocation without a reinstatement thereof, (iv) upon
the distribution of the Subordinated Debt Securities following the occurrence
of a Special Event, (v) upon the entry of a decree of a judicial dissolution
of the Company or the holder of the Common Securities or the Trust or (vi)
upon the redemption of all of the Trust Securities.
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DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
(see "Description of the Subordinated Debt Securities--Indenture Events of
Default") constitutes an event of default under the Declaration with respect
to the Trust Securities (a "Declaration Event of Default"); provided, however,
that pursuant to the Declaration, the holder of the Common Securities will be
deemed to have waived any Declaration Event of Default with respect to the
Common Securities or its consequences until all Declaration Events of Default
with respect to the Preferred Securities have been cured, waived or otherwise
eliminated. Until such Declaration Events of Default with respect to the
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 Preferred Securities and only the holders of the Preferred Securities
will have the right to direct the Property Trustee with respect to certain
matters under the Declaration, and therefore the Indenture. If a Declaration
Event of Default with respect to the Preferred Securities is waived by holders
of Preferred Securities, such waiver will also constitute the waiver of such
Declaration Event of Default with respect to the Common Securities for all
purposes under the Declaration, without any further act, vote or consent of
the holders of the Common Securities.
During the existence of a Declaration Event of Default, the Property
Trustee, as the sole holder of the Subordinated Debt Securities, will have the
right under the Indenture to declare the principal of, and interest on, the
Subordinated Debt Securities to be immediately due and payable.
If a Declaration Event of Default occurs that results from the failure of
the Company to pay principal of or interest on the Subordinated Debt
Securities when due, during the continuance of such an event of default a
holder of Preferred Securities may institute a legal proceeding directly
against the Company to obtain payment of such principal or interest on
Subordinated Debt Securities having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities owned of record by such holder.
The holders of Preferred Securities will not be able to exercise directly
against the Company any other remedy available to the Property Trustee unless
the Property Trustee first fails to do so. See "--Voting Rights."
VOTING RIGHTS
Except as provided below and except as provided under the Trust Act, the
Trust Indenture Act and under "Description of the Preferred Securities
Guarantee--Amendments and Assignment" below, and except as otherwise required
by law and the Declaration, the holders of the Preferred Securities will have
no voting rights. In the event that the Company elects to defer payments of
interest on the Subordinated Debt Securities as described above under
"--Distributions," the holders of the Preferred Securities do not have the right
to appoint a special representative or trustee or otherwise act to protect their
interests.
Subject to the requirement of the Property Trustee obtaining a tax opinion
as set forth in the last sentence of this paragraph, the holders of a majority
in aggregate liquidation amount of the Preferred Securities 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, including the
right to direct the Property Trustee, as the holder of the Subordinated Debt
Securities, to (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Subordinated Debt Trustee (as
hereinafter defined) under the Indenture with respect to the Subordinated Debt
Securities, (ii) waive any past Indenture Event of Default which is waivable
under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Subordinated Debt Securities shall
be due and payable, or (iv) consent to any amendment, modification or
termination of the Indenture or the Subordinated Debt Securities, where such
consent shall be required, provided that where a consent under the Indenture
would require the consent of the holders of greater than a majority in
principal amount of Subordinated Debt Securities affected thereby (a "Super-
Majority"), only the holders of at least the proportion in liquidation amount
of the Preferred Securities which the relevant Super-Majority represents of
the aggregate principal amount of the Subordinated Debt Securities may direct
the Property Trustee to give such consent. If the Property Trustee fails to
enforce its rights under the Declaration (including, without limitation, its
rights, powers and privileges as the holder of the Subordinated Debt
Securities under the Indenture), a holder of Preferred Securities may to the
extent permitted
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by applicable law institute a legal proceeding directly against any person to
enforce the Property Trustee's rights under the Declaration without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. Following and during the continuance of a Declaration Event
of Default that results from the failure of the Company to pay principal of or
interest on the Subordinated Debt Securities when due, a holder of Preferred
Securities may also proceed directly against the Company, without first
waiting to determine if the Property Trustee has enforced its rights under the
Declaration, to obtain payment of such principal or interest on Subordinated
Debt Securities having a principal amount equal to the aggregate liquidation
amount of the Preferred Securities owned of record by such holder. The
Property Trustee shall notify all holders of the Preferred Securities of any
notice of default received from the Subordinated Debt Trustee with respect to
the Subordinated Debt Securities. Such notice shall state that such Indenture
Event of Default also constitutes a Declaration Event of Default. The Property
Trustee shall not take any action described in clauses (i), (ii), (iii) or
(iv) above unless the Property Trustee has obtained an opinion of independent
tax counsel to the effect that, as a result of such action, the Trust will not
be classified as other than a grantor trust for United States federal income
tax purposes and each holder of Trust Securities will be treated as owning an
undivided beneficial interest in the Subordinated Debt Securities.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debt Securities, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture, the Property
Trustee shall request the direction of the holders of the Trust Securities
with respect to such amendment, modification or termination. The Property
Trustee shall vote with respect to such amendment, modification or termination
as directed by a majority in liquidation amount of the Preferred Securities
and, if no Declaration Event of Default has occurred and is continuing, a
majority in liquidation amount of the Common Securities, voting together as a
single class, provided that where a consent under the Indenture would require
the consent of a Super-Majority, the Property Trustee may only give such
consent at the direction of the holders of at least the proportion in
liquidation amount of the Preferred Securities and Common Securities,
respectively, which the relevant Super-Majority represents of the aggregate
principal amount of the Subordinated Debt Securities outstanding. The Property
Trustee shall not take any such action in accordance with the directions of
the holders of the Trust Securities unless the Property Trustee has obtained
an opinion of independent tax counsel to the effect that, as a result of such
action, the Trust will not be classified as other than a grantor trust for
United States federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth (i) the date of such
meeting or the date by which such action is to be taken, (ii) a description of
any resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for the Trust to
redeem and cancel Preferred Securities or distribute Subordinated Debt
Securities in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Book-Entry Only Issuance--The
Depository Trust Company."
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Holders of the Preferred Securities will have no rights to appoint or remove
the Company Trustees, who may be appointed, removed or replaced solely by the
Company, as the direct or indirect holder of all the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be amended or modified if approved and executed by a
majority of the Regular Trustees (or if there are two or fewer Regular
Trustees, by all of the Regular Trustees), provided that if any proposed
amendment provides for (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 the holders of the Trust Securities as a single class will
be entitled to vote on such amendment or proposal and such amendment or
proposal shall not be effective except with the approval of a majority in
liquidation amount of the Trust Securities affected thereby, provided that a
reduction of the principal amount or the distribution rate, or a change in the
payment dates or maturity of the Preferred Securities, shall not be permitted
without the consent of each holder of Preferred Securities. In the event any
amendment or proposal referred to in clause (i) above would adversely affect
only the Preferred Securities or the Common Securities, then only the affected
class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
majority in liquidation amount of such class of Trust Securities. In addition,
if any such proposed amendment or modification affects the rights, powers,
duties, obligations or immunities of the Property Trustee or the Delaware
Trustee such amendment or modification shall also require the written approval
of the Property Trustee or the Delaware Trustee, as the case may be.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification 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 in contravention of the Trust Indenture Act or (iii)
cause the Trust to be deemed to be an "investment company" which is required
to be registered under the 1940 Act.
EXPENSES AND TAXES
In the Declaration, the Company has agreed to pay for all debts and other
obligations (other than with respect to the Trust Securities) and all costs
and expenses of the Trust (including costs and expenses relating to the
organization of the Trust, the fees and expenses of the Company Trustees and
the costs and expenses relating to the operation of the Trust) and to pay any
and all taxes and all costs and expenses with respect thereto (other than
United States withholding taxes) to which the Trust might become subject. The
foregoing obligations of the Trust under the Declaration are for the benefit
of, and shall be enforceable by, the Property Trustee and any person to whom
any such debts, obligations, costs, expenses and taxes are owed (a "Creditor")
whether or not such Creditor has received notice thereof. The Property Trustee
and any such Creditor may enforce such obligations of the Trust directly
against the Company, and the Company has irrevocably waived any right or
remedy to require that the Property Trustee or any such Creditor take any
action against the Trust or any other person before proceeding against the
Company. The Company has also agreed in the Declaration to execute such
additional agreements as may be necessary or desirable to give full effect to
the foregoing agreement of the Company.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
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 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 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 either (x) expressly assumes
all of the obligations of the Trust with respect to the Trust Securities
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or (y) substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Securities rank in priority with respect to distributions and payments upon
termination, liquidation, redemption, maturity and otherwise, (ii) the Company
expressly acknowledges a trustee of such successor entity which possesses the
same powers and duties as the Property Trustee as the holder of the
Subordinated Debt Securities, (iii) if the Preferred Securities are at such
time listed on any national securities exchange or with another organization,
the Successor Securities will be listed, upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed, (iv) such merger, consolidation, amalgamation or
replacement does not cause the 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 Trust Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the holders' interest in
the successor entity), (vi) such successor entity has a purpose identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation or
replacement, the Company has received an opinion from independent counsel to
the Trust experienced in such matters to the effect that (A) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the successor entity), and
(B) following such merger, consolidation, amalgamation or replacement, neither
the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (viii) the Company guarantees the
obligations of such successor entity under the Successor Securities at least
to the extent provided by the Preferred Securities Guarantee. Notwithstanding
the foregoing, the Trust shall not, except with the consent of 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, amalgamation, merger or replacement would cause the Trust or
the successor entity to be classified for United States federal income tax
purposes as other than a grantor trust for United States federal income tax
purposes and any holder of Trust Securities not to be treated as owning an
undivided beneficial interest in the Subordinated Debt Securities.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully registered global Preferred Securities
certificates will be issued, representing in the aggregate the total number of
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 a global Preferred Security.
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 Securities
Exchange Act of 1934, as amended (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 a
number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
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Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of Preferred Securities ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the 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 Preferred Securities,
except in the event that use of the book-entry system for the Preferred
Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of 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 Preferred Securities. DTC's
records reflect only the identity of the Direct Participants to whose accounts
such 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 shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce by lot the amount of
the interest of each Direct Participant in the Preferred Securities to be
redeemed.
Although voting with respect to the 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 Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy 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 Preferred
Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
Distribution payments on the 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 in 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 or any trustee or the Company, 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 Preferred Security
will not be entitled to receive physical delivery of Preferred Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the 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, Preferred Securities certificates are required to
be printed and delivered. Additionally, the Regular Trustees (after
consultation with the Company) may decide to discontinue use of the
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system of book-entry transfers through DTC (or a successor depositary) with
respect to the Preferred Securities. In that event, certificates for the
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 the Company and the Trust believe to be
reliable, but the Company and the Trust take no 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 and after the curing of all such defaults that may have
occurred, 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 under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby; but the foregoing shall not relieve the Property
Trustee, upon the occurrence of a Declaration Event of Default, from
exercising the rights and powers vested in it by the Declaration. The Property
Trustee also serves as the Subordinated Debt Trustee under the Indenture and
as the Preferred Guarantee Trustee under the Preferred Securities Guarantee.
REGISTRAR AND TRANSFER AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the Property Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time. Registration of transfers
of 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 Regular
Trustees may require) in respect of any tax or other government charges which
may be imposed in relation to it. The Trust will not be required to register
or cause to be registered the transfer of Preferred Securities after such
Preferred Securities have been called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or characterized for United
States federal income tax purposes as other than a grantor trust. The Company
is authorized and directed to conduct its affairs so that the Subordinated
Debt Securities will be treated as indebtedness of the Company for United
States federal income tax purposes. In this connection, the Regular Trustees
and the Company are authorized to take any action, not inconsistent with
applicable law, the Declaration or the Restated Certificate of Incorporation
of the Company, that each of the Regular Trustees and the Company determines
in their discretion to be necessary or desirable for such purposes, as long as
such action does not materially and adversely affect the interests of the
holders of the Preferred Securities.
Holders of the Preferred Securities will have no preemptive rights.
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DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Preferred
Securities Guarantee that will be executed and delivered by the Company for
the benefit of the holders from time to time of the Preferred Securities. The
Preferred Securities Guarantee has been qualified as an indenture under the
Trust Indenture Act. The Bank of New York will act as the Preferred Guarantee
Trustee. The terms of the Preferred Securities Guarantee will be those set
forth therein and those made part thereof by the Trust Indenture Act. The
following summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the Preferred Securities Guarantee (the form of which is filed as an
exhibit to the Registration Statement of which this Prospectus Supplement and
the accompanying Prospectus form a part) and the Trust Indenture Act. The
Preferred Securities will be held by the Preferred Guarantee Trustee for the
benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to the Preferred Securities Guarantee, the Company will irrevocably
and unconditionally agree to pay in full to the holders of the Preferred
Securities the Guarantee Payments (as defined herein) (without duplication of
amounts theretofore paid by the Trust), to the extent not paid by the Trust,
regardless of any defense, right of set-off or counterclaim that the Trust may
have or assert. The following payments or distributions with respect to the
Preferred Securities to the extent not paid or made by the Trust (the
"Guarantee Payments") will be subject to the Preferred Securities Guarantee
(without duplication): (i) any accrued and unpaid distributions that are
required to be paid on the Preferred Securities, to the extent the Trust has
funds available therefor, (ii) the Redemption Price, which includes all
accrued and unpaid distributions to the date of the redemption, to the extent
the Trust has funds available therefor, with respect to any Preferred
Securities called for redemption by the Trust and (iii) upon a voluntary or
involuntary termination, dissolution or winding-up of the Trust (other than in
connection with the distribution of Subordinated Debt Securities to the
holders of Preferred Securities in exchange for Preferred Securities), the
lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on the Preferred Securities to the date of payment, to
the extent the Trust has funds available therefor, and (b) the amount of
assets of the Trust remaining available for distribution to holders of
Preferred Securities in liquidation of the Trust. The Company's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of Preferred Securities or by causing
the Trust to pay such amounts to such holders.
The Preferred Securities Guarantee will be a full and unconditional
guarantee of the Guarantee Payments with respect to the Preferred Securities
from the time of issuance of the Preferred Securities, but will not apply to
the payment of distributions and other payments on the Preferred Securities
when the Property Trustee does not have sufficient funds in the Property
Account to make such distributions or other payments. If the Company does not
make interest payments on the Subordinated Debt Securities held by the
Property Trustee, the Trust will not make distributions on the Preferred
Securities issued by the Trust and will not have funds available therefor. See
"Risk Factors--Rights under the Preferred Securities Guarantee" and
"Description of the Subordinated Debt Securities--Certain Covenants."
The Company has also agreed separately to guarantee the obligations of the
Trust with respect to the Common Securities (the "Common Securities
Guarantee") to the same extent as the Preferred Securities Guarantee, except
that upon the occurrence and during the continuation of an Indenture Event of
Default, holders of Preferred Securities shall have priority over holders of
Common Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Preferred Securities Guarantee, the Company will covenant that, so
long as the Preferred Securities remain outstanding, if there shall have
occurred and is continuing any event that constitutes an event of default
under the Preferred Securities Guarantee or the Declaration, then (a) the
Company shall not declare or pay any
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dividend on, or make any distribution with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital
stock, (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued
by the Company which rank pari passu with or junior to the Subordinated Debt
Securities and (c) the Company shall not make any guarantee payments (other
than pursuant to the Preferred Securities Guarantee) with respect to the
foregoing. However, the foregoing restriction will not apply to any dividend,
redemption, liquidation, interest, principal or guarantee payments by the
Company where the payment is made by way of securities (including capital
stock) that rank junior to the securities on which such dividend, redemption,
interest, principal or guarantee payment is being made.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of Preferred Securities (in which case no consent will
be required), the Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than a majority in liquidation
amount of the outstanding Preferred Securities. The manner of obtaining any
such approval of holders of the Preferred Securities is set forth under
"Description of the Preferred Securities--Voting Rights." All guarantees and
agreements contained in the Preferred Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the Preferred Guarantee Trustee and the
holders of the Preferred Securities then outstanding.
TERMINATION OF THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will terminate and be of no further force
and effect as to the Preferred Securities upon full payment of the Redemption
Price of all Preferred Securities, or upon distribution of the Subordinated
Debt Securities to the holders of the Preferred Securities, and will terminate
completely upon full payment of the amounts payable upon liquidation of the
Trust. The Preferred Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities must repay to the Trust or the Company, or their successors, any
sums paid to them under such Preferred Securities or the Preferred Securities
Guarantee.
EVENTS OF DEFAULT
An event of default under the Preferred Securities Guarantee will occur upon
the failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of the Preferred Securities Guarantee or to direct the exercise of any
trust or power conferred upon the Preferred Guarantee Trustee under the
Preferred Securities Guarantee. If the Preferred Guarantee Trustee fails to
enforce the Preferred Securities Guarantee, any holder of Preferred Securities
may institute a legal proceeding directly against the Company to enforce the
Preferred Guarantee Trustee's rights under the Preferred Securities Guarantee,
without first instituting a legal proceeding against the Trust, the Preferred
Guarantee Trustee or any other person or entity. In addition, any record
holder of Preferred Securities shall have the right, which is absolute and
unconditional, to proceed directly against the Company to obtain Guarantee
Payments, without first waiting to determine if the Preferred Guarantee
Trustee has enforced the Preferred Security Guarantee or instituting a legal
proceeding against the Trust, the Preferred Guarantee Trustee or any other
person or entity.
STATUS OF THE PREFERRED SECURITIES GUARANTEE
The Company's obligations under the Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, including the Subordinated Debt Securities, except
those liabilities of the
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Company made pari passu or subordinate by their terms, (ii) pari passu with
the most senior preferred stock issued from time to time by the Company and
with any guarantee now or hereafter entered into by the Company in respect of
any preferred stock of any subsidiary or affiliate of the Company and (iii)
senior to the Company's common stock. The terms of the Preferred Securities
provide that each holder of Preferred Securities by acceptance thereof agrees
to the subordination provisions and other terms of the Preferred Securities
Guarantee.
The Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity). The Preferred Securities Guarantee will be deposited with the
Preferred Guarantee Trustee to be held for the benefit of the holders of the
Preferred Securities. Except as otherwise noted herein, the Preferred
Guarantee Trustee has the right to enforce the Preferred Securities Guarantee
on behalf of the holders of the Preferred Securities. The Preferred Securities
Guarantee will not be discharged except by payment of the Guarantee Payments
in full (without duplication of amounts theretofore paid by the Trust).
The Company's obligations under the Preferred Securities Guarantee, taken
together with its obligations under the Declaration, the Subordinated Debt
Securities and the Indenture, in the aggregate provide a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities.
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to the Preferred Securities Guarantee and after the curing of all such
defaults that may have occurred, undertakes to perform only such duties as are
specifically set forth in the Preferred Securities Guarantee 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 Preferred Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the Preferred Securities Guarantee at the request of
any holder of Preferred Securities, unless offered reasonable indemnity
against the costs, expenses and liabilities which might be incurred thereby;
but the foregoing shall not relieve the Preferred Guarantee Trustee, upon the
occurrence of an event of default under the Preferred Securities Guarantee,
from exercising the rights and powers vested in it by the Preferred Securities
Guarantee. The Preferred Guarantee Trustee also serves as Property Trustee
under the Declaration and as Subordinated Debt Trustee under the Indenture.
GOVERNING LAW
The Preferred Securities Guarantee will be governed by, and construed in
accordance with, the internal laws of the State of New York.
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DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Set forth below is a description of the terms of the Subordinated Debt
Securities. The following description does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Indenture,
to be dated as of May 13, 1998, as supplemented by a First Supplemental
Indenture (as so supplemented, the "Indenture"), between the Company and The
Bank of New York, as Trustee (the "Subordinated Debt Trustee"), which (or the
form of which) are filed as exhibits to the Registration Statement of which
this Prospectus Supplement and the accompanying Prospectus form a part. The
terms of the Subordinated Debt Securities will include those stated in the
Indenture (which has been qualified under the Trust Indenture Act) and those
made a part of the Indenture by reference to the Trust Indenture Act. Certain
capitalized terms used herein are defined in the Indenture.
Under certain circumstances involving the termination of the Trust following
the occurrence of a Special Event, Subordinated Debt Securities may be
distributed to the holders of Trust Securities in liquidation of the Trust.
See "Description of the Preferred Securities--Special Event Redemption or
Distribution."
If the Subordinated Debt Securities are distributed to the holders of the
Trust Securities, the Company will use its best efforts to have the
Subordinated Debt Securities listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities are then listed.
GENERAL
The Subordinated Debt Securities will be issued as unsecured subordinated
debt securities under the Indenture. The Subordinated Debt Securities will be
limited in aggregate principal amount to $300,000,000, such amount being the
sum of the aggregate liquidation amount of the Preferred Securities and the
capital contributed by the Company in exchange for the Common Securities.
The Subordinated Debt Securities are not subject to any sinking fund
provision. The entire principal amount of the Subordinated Debt Securities
will mature and become due and payable, together with any accrued and unpaid
interest thereon, on June 30, 2038.
If Subordinated Debt Securities are distributed to holders of the Trust
Securities in liquidation of such holders' interests in the Trust, such
Subordinated Debt Securities will initially be issued as a Global Security (as
defined below). As described herein, under certain limited circumstances,
Subordinated Debt Securities may be issued in certificated form in exchange
for a Global Security. See "--Book Entry and Settlement" below. In the event
Subordinated Debt Securities are issued in certificated form, such
Subordinated Debt Securities will be in denominations of $1,000 and integral
multiples thereof and may be transferred or exchanged at the offices described
below. Payments on Subordinated Debt Securities issued as a Global Security
will be made to the depositary for the Subordinated Debt Securities. In the
event Subordinated Debt Securities are issued in certificated form, principal
and interest will be payable, the transfer of the Subordinated Debt Securities
will be registrable and Subordinated Debt Securities will be exchangeable for
Subordinated Debt Securities of other denominations of a like aggregate
principal amount at the corporate trust office of the Subordinated Debt
Trustee in New York, New York; provided, however, that payment of interest may
be made at the option of the Company by check mailed to the address of the
persons entitled thereto.
The Indenture does not contain provisions that afford holders of the
Subordinated Debt Securities protection in the event of a highly leveraged
transaction involving the Company or a decline in the credit quality of the
Company resulting from a change of control transaction.
SUBORDINATION
The Indenture provides that the Subordinated Debt Securities are
subordinated and junior in right of payment to all Senior Indebtedness of the
Company, whether now existing or hereafter incurred. No payment of
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principal of (including redemption payments, if any), or interest on, the
Subordinated Debt Securities may be made if (a) any Senior Indebtedness of the
Company is not paid when due and any applicable grace period with respect to
such default has ended with such default not being cured or waived or ceasing
to exist, or (b) the maturity of any Senior Indebtedness has been accelerated
because of a default. Upon any distribution of assets of the Company to
creditors upon any dissolution, winding-up, liquidation or reorganization,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership
or other proceedings, all principal of, premium, if any, and interest due or
to become due on, all Senior Indebtedness must be paid in full before the
holders of the Subordinated Debt Securities are entitled to receive or retain
any payment. The rights of the holders of the Subordinated Debt Securities
will be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions applicable to such Senior Indebtedness until
all amounts owing on the Subordinated Debt Securities are paid in full.
The term "Senior Indebtedness" means: (i) any payment in respect of (a)
indebtedness of the Company for money borrowed and (b) indebtedness evidenced
by securities, debentures, bonds, notes or other similar instruments issued by
the Company, including all indebtedness currently outstanding under indentures
with various trustees; (ii) all capital lease obligations of the Company;
(iii) all obligations of the Company issued or assumed as the deferred
purchase price of property, all conditional sale obligations of the Company
and all obligations of the Company under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(iv) all obligations of the Company for the reimbursement on any letter of
credit, banker's acceptance, security purchase facility or similar credit
transaction; (v) all obligations of the type referred to in clauses (i)
through (iv) above of other persons for the payment of which the Company is
responsible or liable as obligor, guarantor or otherwise; and (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of the Company (whether
or not such obligation is assumed by the Company), except for any such
indebtedness that is by its terms subordinated to or pari passu with the
Subordinated Debt Securities, as the case may be. Such Senior Indebtedness
shall continue to be Senior Indebtedness and be entitled to the benefits of
the subordination provisions irrespective of any amendment, modification or
waiver of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued by the Company. As of December 31, 1997, Senior
Indebtedness of the Company aggregated approximately $2.5 billion.
CERTAIN COVENANTS
If (i) there shall have occurred and be continuing any event that
constitutes an Indenture Event of Default or (ii) the Company shall be in
default with respect to its payment of any obligations under the Preferred
Securities Guarantee or the Common Securities Guarantee, and such default
shall be continuing then (a) the Company shall not declare or pay any dividend
on, make any distributions with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of its capital stock, (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by the Company which
rank pari passu with or junior to the Subordinated Debt Securities and (c) the
Company shall not make any guarantee payments (other than pursuant to the
Preferred Securities Guarantee) with respect to the foregoing.
If the Company shall have given notice of its election of an Extension
Period as provided in the Indenture and such period, or any extension thereof,
shall be continuing, then during the term of such Extension Period (a) the
Company shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with respect to,
any of its capital stock, (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company which rank pari passu with or junior to
the Subordinated Debt Securities and (c) the Company shall not make any
guarantee payments (other than pursuant to the Preferred Securities Guarantee)
with respect to the foregoing.
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Notwithstanding the foregoing restrictions, the Company will be permitted,
in any event, to make dividend, redemption, liquidation and guarantee payments
on capital stock, and interest, principal, redemption and guarantee payments
on debt securities issued by the Company ranking pari passu with or junior to
Subordinated Debt Securities, where the payment is made by way of securities
(including capital stock) that rank junior to the securities on which such
payment is being made.
For so long as the Trust Securities remain outstanding, the Company will
covenant (i) to directly or indirectly maintain 100% direct or indirect
ownership of the Common Securities of the Trust; provided, however, that any
permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Common Securities, (ii) not to cause, as sponsor
of the Trust, or to permit, as holder of the Common Securities, the
termination, dissolution or winding-up of the Trust, except in connection with
a distribution of the Subordinated Debt Securities as provided in the
Declaration and in connection with certain mergers, consolidations or
amalgamations, (iii) to use its reasonable efforts to cause the Trust (a) to
remain a statutory business trust, except in connection with the distribution
of Subordinated Debt Securities to the holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust Securities of the
Trust, or certain mergers, consolidations or amalgamations, each as permitted
by the Declaration, and (b) to otherwise continue to be classified as a
grantor trust for United States federal income purposes and (iv) to use
reasonable efforts to cause each holder of Trust Securities to be treated as
owning an undivided beneficial interest in the Subordinated Debt Securities.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Subordinated Debt Securities,
in whole or in part, from time to time, on or after May 13, 2003, or at any
time in certain circumstances upon the occurrence of a Tax Event as described
under "Description of the Preferred Securities--Special Event Redemption or
Distribution," upon not less than 30 nor more than 60 days' notice, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest to the redemption date. If a partial redemption of
the Preferred Securities resulting from a partial redemption of the
Subordinated Debt Securities would result in the delisting of the Preferred
Securities, the Company may only redeem the Subordinated Debt Securities in
whole.
INTEREST
Each Subordinated Debt Security shall bear interest at the rate of 8.375%
per annum from May 13, 1998, payable quarterly in arrears on March 31, June
30, September 30 and December 31 of each year (each, an "Interest Payment
Date"), commencing June 30, 1998, to the person in whose name such
Subordinated Debt Security is registered, subject to certain exceptions, at
the close of business on the Business Day next preceding such Interest Payment
Date. The distribution payable on June 30, 1998, which will be calculated at
the above rate and based on a period that is shorter than a full quarter, will
be in the amount of $.27335 per Preferred Security. In the event the
Subordinated Debt Securities are distributed to holders of the Trust
Securities in liquidation of such holders' interests in the Trust and such
Subordinated Debt Securities shall not thereafter continue to remain in book-
entry only form, the Company shall have the right to select record dates which
shall be not less than fifteen days prior to each Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period will be computed on the basis
of the actual number of days elapsed in such 90-day quarter. In the event that
any date on which interest is payable on the Subordinated Debt Securities 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 such date.
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OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, during
the term of the Subordinated Debt Securities to defer payments of interest by
extending the interest payment period for a period not exceeding 20
consecutive quarters, at the end of which Extension Period the Company shall
pay all interest then accrued and unpaid (including any Additional Interest),
together with interest thereon at the rate specified for the Subordinated Debt
Securities to the extent permitted by applicable law; provided, however, that,
during any such Extension Period, (a) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase or
make a liquidation payment with respect to, any of its capital stock, (b) the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by the Company
which rank pari passu with or junior to the Subordinated Debt Securities and
(c) the Company shall not make any guarantee payments (other than pursuant to
the Preferred Securities Guarantee) with respect to the foregoing; provided,
however, the foregoing restriction will not apply to any dividend, redemption,
liquidation, interest, principal or guarantee payments by the Company where
the payment is made by way of securities (including capital stock) that rank
junior to the securities on which such dividend, redemption, interest,
principal or guarantee payment is being made. Prior to the termination of any
such Extension Period, the Company may further defer payments of interest by
extending the interest payment period, provided that such Extension Period
together with all such previous and further extensions thereof may not exceed
20 consecutive quarters or extend beyond the maturity of the Subordinated Debt
Securities. Upon the termination of any Extension Period and the payment of
all amounts then due, the Company may select a new Extension Period, as if no
Extension Period had previously been declared, subject to the above
requirements. No interest during an Extension Period, except at the end
thereof, shall be due and payable. The Company has no present intention of
exercising its rights to defer payments of interest by extending the interest
payment period on the Subordinated Debt Securities. If the Property Trustee
shall be the sole holder of the Subordinated Debt Securities, the Company
shall give the Regular Trustees and the Property Trustee notice of its
selection of an Extension Period one Business Day prior to the earlier of (i)
the next succeeding date on which distributions on the Preferred Securities
are payable or (ii) the date the Trust is required to give notice to any
national securities exchange or other applicable self-regulatory organization
or to holders of the Preferred Securities of the record date or the date such
distribution is payable, but in any event not less than one Business Day prior
to such record date. The Regular Trustees shall give notice of the Company's
selection of such Extension Period to the holders of the Preferred Securities.
If the Property Trustee shall not be the sole holder of the Subordinated Debt
Securities, the Company shall give the holders of the Subordinated Debt
Securities notice of its selection of such Extension Period ten Business Days
prior to the earlier of (i) the relevant Interest Payment Date or (ii) the
date the Company is required to give notice to any national securities
exchange or other applicable self-regulatory organization or to holders of the
Subordinated Debt Securities of the record or payment date of such related
interest payment, but in any event at least two Business Days before such
record date.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, the Company will pay as additional interest ("Additional
Interest") such additional amounts as shall be required so that the net
amounts received and retained by the Trust after paying any such taxes,
duties, assessments or other governmental charges will be equal to the amounts
the Trust would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
In case any Indenture Event of Default shall occur and be continuing, the
Property Trustee, as the holder of the Subordinated Debt Securities, will have
the right to declare the principal of and the interest on the Subordinated
Debt Securities (including Additional Interest, if any) and any other amounts
payable under the Indenture to be forthwith due and payable and to enforce its
other rights as a creditor with respect to the Subordinated Debt Securities.
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The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of
Default" with respect to the Subordinated Debt Securities:
(a) failure for 30 days to pay interest on the Subordinated Debt
Securities, including any Additional Interest in respect thereof, when due;
provided, however, that a valid extension of the interest payment period by
the Company shall not constitute a default in the payment of interest for
this purpose; or
(b) failure to pay principal or premium, if any, on the Subordinated Debt
Securities when due whether at maturity, upon earlier redemption or
otherwise; or
(c) failure to observe or perform any other covenant (other than those
specifically relating to another series of subordinated debt securities)
contained in the Indenture for 90 days after written notice to the Company
from the Subordinated Debt Trustee or the holders of at least 25% in
principal amount of the outstanding Subordinated Debt Securities; or
(d) certain events of bankruptcy, insolvency or reorganization of the
Company; or
(e) the voluntary or involuntary termination, dissolution or winding-up
of the Trust, except in connection with the distribution of Subordinated
Debt Securities to the holders of Preferred Securities in liquidation of
the Trust, the redemption of all outstanding Trust Securities of the Trust
and certain mergers, consolidations or amalgamations permitted by the
Declaration.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debt Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
Subordinated Debt Trustee. The Subordinated Debt Trustee or the holders of not
less than 25% in aggregate outstanding principal amount of the Subordinated
Debt Securities may declare the principal due and payable immediately on
default, but the holders of a majority in aggregate outstanding principal
amount may annul such declaration and waive the default if the default has
been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Subordinated Debt Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debt Securities affected thereby may, on behalf of the holders of
all the Subordinated Debt Securities, waive any past default, except (i) a
default in the payment of principal or interest, including Additional Interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration and
any applicable premium has been deposited with the Subordinated Debt Trustee),
or (ii) a default in the covenant of the Company not to declare or pay
dividends on, or make distributions with respect to, or redeem, purchase or
acquire any of its capital stock during an Extension Period. An Indenture
Event of Default also constitutes a Declaration Event of Default. The holders
of Preferred Securities in certain circumstances have the right to direct the
Property Trustee to exercise its rights as the holder of the Subordinated Debt
Securities. See "Description of the Preferred Securities--Declaration Events
of Default" and "--Voting Rights."
In addition, if an Indenture Event of Default results from the failure of
the Company to pay principal of or interest on the Subordinated Debt
Securities when due, during the continuance of such an event of default a
holder of Preferred Securities may immediately institute a legal proceeding
directly against the Company to obtain payment of such principal or interest
on Subordinated Debt Securities having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities owned of record by
such holder.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
voluntary or involuntary termination, dissolution or winding-up of the Trust
as a result of the occurrence of a Special Event, the Subordinated Debt
Securities will be issued in the form of one or more global certificates
(each, a "Global Security") registered in the name of the depositary or its
nominee. Except under the limited circumstances described below, Subordinated
Debt Securities represented by the Global Security will not be exchangeable
for, and will not otherwise be issuable as, Subordinated Debt Securities in
definitive form. The Global Securities described above may not be
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transferred except by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the
depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Debt Securities in definitive form and will not be considered the Holders (as
defined in the Indenture) thereof for any purpose under the Indenture, and no
Global Security representing Subordinated Debt Securities shall be
exchangeable, except for another Global Security of like denomination and
tenor to be registered in the name of the depositary or its nominee or to a
successor depositary or its nominee. Accordingly, each beneficial owner must
rely on the procedures of the depositary and, if such person is not a
Participant, on the procedures of the Participant through which such person
owns its interest, to exercise any rights of a Holder under the Indenture.
If Subordinated Debt Securities are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, DTC will
act as securities depositary for the Subordinated Debt Securities. For a
description of DTC and the specific terms of the depository arrangements, see
"Description of the Preferred Securities--Book-Entry Only Issuance--The
Depository Trust Company." The description therein of DTC's book-entry system
and DTC's practices as they relate to purchases, transfers, notices and
payments with respect to the Preferred Securities apply in all material
respects to any debt obligations represented by one or more Global Securities
held by DTC. The Company may appoint a successor to DTC or any successor
depositary in the event DTC or such successor depositary is unable or
unwilling to continue as depositary.
None of the Company, the Trust, the Subordinated Debt Trustee, any paying
agent and any other agent of the Company or the Subordinated Debt Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in a Global
Security for such Subordinated Debt Securities or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
A Global Security shall be exchangeable for Subordinated Debt Securities
registered in the names of persons other than the depositary or its nominee
only if (i) the depositary notifies the Company that it is unwilling or unable
to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, or if at any time the depositary ceases
to be registered or in good standing under the Exchange Act (or other
applicable statute or regulation) at a time when the depositary is required to
be so registered to act as such depositary and no successor depositary shall
have been appointed by the Company within 90 days after the Company receives
such notice or becomes aware of such condition, (ii) the Company in its sole
discretion determines that such Global Security shall be so exchangeable or
(iii) there shall have occurred an Indenture Event of Default with respect to
such Subordinated Debt Securities. Any Global Security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for Subordinated Debt
Securities registered in such names as the depositary shall direct. It is
expected that such instructions will be based upon directions received by the
depositary from its Participants with respect to ownership of beneficial
interests in such Global Security.
In the event the Subordinated Debt Securities are not represented by one or
more Global Securities, certificates evidencing Subordinated Debt Securities
may be presented for registration of transfer (with the form of transfer
endorsed thereon duly executed) or exchange, at the office of the Debt
Registrar (as defined in the Indenture) or at the office of any transfer agent
designated by the Company for such purpose with respect to the Subordinated
Debt Securities, without service charge and upon payment of any taxes and
other governmental charges as described in the Indenture. Such transfer or
exchange will be effected upon the Debt Register (as defined in the Indenture)
or such transfer agent, as the case may be, being satisfied with the documents
of title and identity of the person making the request. The Company has
appointed the Subordinated Debt Trustee as Debt Registrar with respect to the
Subordinated Debt Securities. The Company may at any time rescind the
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designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Company will be
required to maintain a transfer agent at the place of payment. The Company may
at any time designate additional transfer agents with respect to the
Subordinated Debt Securities.
In the event of any redemption in part, the Company shall not be required to
(i) issue, exchange or register the transfer of Subordinated Debt Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of less than all of the Subordinated
Debt Securities and ending at the close of business on the date of such
mailing or (ii) register the transfer of or exchange any Subordinated Debt
Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any Subordinated Debt Securities being redeemed in part.
PAYMENT AND PAYING AGENTS
Payment of principal of and premium, if any, on the Subordinated Debt
Securities will be made only against surrender to the Paying Agent (as defined
in the Indenture) of the Subordinated Debt Securities. Principal of and
premium, if any, and interest on Subordinated Debt Securities will be payable,
subject to any applicable laws and regulations, at the office of such Paying
Agent or Paying Agents as the Company may designate from time to time, except
that at the option of the Company payment of any interest may be made by check
mailed to the address of the person entitled thereto as such address shall
appear in the Debt Register with respect to the Subordinated Debt Securities.
Payment of interest on the Subordinated Debt Securities on any Interest
Payment Date will be made to the person in whose name the Subordinated Debt
Security (or predecessor security) is registered at the close of business on
the Regular Record Date for such interest payment.
The Company will initially act as Paying Agent with respect to the
Subordinated Debt Securities except that, if the Subordinated Debt Securities
are distributed to the holders of the Preferred Securities in liquidation of
such holders' interests in the Trust, the Subordinated Debt Trustee will act
as the Paying Agent. The Company may at any time designate additional Paying
Agents or rescind the designation of any Paying Agents or approve a change in
the office through which any Paying Agent acts, except that the Company will
be required to maintain a Paying Agent at the place of payment.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of, premium, if any, or interest, if any, on the Subordinated Debt
Securities which remain unclaimed at the end of two years after such
principal, premium or interest shall have become due and payable will be
repaid to the Company, and the holder of such Subordinated Debt Securities
will thereafter look only to the Company for payment thereof.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Subordinated Debt Trustee, with the consent of the holders of not less than a
majority in principal amount of the Subordinated Debt Securities, to modify
the Indenture or any supplemental indenture affecting that series or the
rights of the holders of the Subordinated Debt Securities; provided, however,
that no such modification may, without the consent of the holder of each
outstanding Subordinated Debt Security affected thereby, (i) extend the fixed
maturity of the Subordinated Debt Securities, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon,
or reduce any premium payable upon the redemption thereof, without the consent
of the holder of the Subordinated Debt Securities so affected or (ii) reduce
the percentage of Subordinated Debt Securities the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of each Subordinated Debt Security then outstanding and affected
thereby.
In addition, the Company and the Subordinated Debt Trustee may execute,
without the consent of holders of the Subordinated Debt Securities, any
supplemental indenture for certain other usual purposes including the creation
of any new series of subordinated debt securities.
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SUCCESSOR CORPORATION
The Company may not consolidate with or merge into, or transfer its
properties and assets substantially as an entirety to, another corporation
unless (i) the successor corporation, which shall be a corporation organized
under the laws of the United States or a State thereof, assumes by
supplemental indenture all the obligations of the Company under the
Subordinated Debt Securities and the Indenture, and (ii) after giving effect
to such transaction, no Indenture Event of Default shall have occurred and be
continuing. The Indenture does not otherwise contain any covenant which
restricts the ability of the Company to merge or consolidate with or into any
other corporation, sell or convey all or substantially all of its assets to
any person, firm or corporation or otherwise engage in restructuring
transactions.
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Subordinated Debt Securities (except in
each case for certain obligations with respect to denominations and provisions
for payment of the Subordinated Debt Securities and obligations to register
the transfer or exchange of Subordinated Debt Securities, replace stolen, lost
or mutilated Subordinated Debt Securities, maintain paying agencies and hold
moneys for payment in trust) if the Company (i) deposits with the Subordinated
Debt Trustee, in trust, moneys or governmental obligations in an amount
sufficient to pay all the principal of, and interest on, the Subordinated Debt
Securities on the dates such payments are due in accordance with the terms of
such Subordinated Debt Securities and (ii) delivers to the Subordinated Debt
Trustee an opinion of counsel to the effect that, based upon the Company's
receipt from, or the publication by, the Internal Revenue Service of a ruling
or a change in law, the holders of the Subordinated Debt Securities will not
recognize income, gain or loss for United States federal income tax purposes
as a result of the deposit, defeasance and discharge and will be subject to
United States federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit, defeasance or
discharge had not occurred.
GOVERNING LAW
The Indenture and the Subordinated Debt Securities will be governed by, and
construed in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE SUBORDINATED DEBT TRUSTEE
The Subordinated Debt Trustee, prior to default, undertakes to perform only
such duties as are specifically set forth in the Indenture 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 provision, the
Subordinated Debt Trustee is under no obligation to exercise any of the powers
vested in it by the Indenture at the request of any holder of Subordinated
Debt Securities, unless offered reasonable indemnity by such holder against
the costs, expenses and liabilities which might be incurred thereby; but the
foregoing shall not relieve the Subordinated Debt Trustee, upon the occurrence
of an Indenture Event of Default, from exercising the rights and powers vested
in it by the Indenture. The Subordinated Debt Trustee is not required to
expend or risk its own funds or otherwise incur personal financial liability
in the performance of its duties if the Subordinated Debt Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
The Subordinated Debt Trustee also serves as Property Trustee under the
Declaration and as the Preferred Guarantee Trustee under the Preferred
Securities Guarantee.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly owned
subsidiary of the Company; provided, however, that in the event of any such
assignment, the Company will remain liable for all of the obligations of such
subsidiary. Subject to the foregoing, the Indenture will be binding upon and
inure to the benefit of the parties thereto and their respective successors
and assigns. The Indenture provides that it may not otherwise be assigned by
the parties thereto.
The Indenture will provide that the Company will pay all costs, expenses,
debts and obligations of the Trust other than with respect to the Trust
Securities.
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EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBT SECURITIES AND THE PREFERRED
SECURITIES GUARANTEE
As set forth in the Declaration, the exclusive purposes of the Trust are to
(i) issue the Trust Securities, (ii) invest the proceeds thereof in the
Subordinated Debt Securities and (iii) engage in only those other activities
necessary or incidental thereto.
As long as payments of interest and other payments are made when due on the
Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities primarily because (i)
the aggregate principal amount of the Subordinated Debt Securities will be
equal to the sum of the aggregate liquidation amount of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the
Subordinated Debt Securities will match the distribution rate and distribution
and other payment dates for the Preferred Securities; (iii) the Company shall
pay for all costs, expenses, debts and obligations of the Trust (other than
with respect to the Trust Securities); and (iv) the Declaration provides that
the Company Trustees shall not cause or permit the Trust to, among other
things, engage in any activity that is not consistent with the purposes of the
Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by the Company as described under "Description
of the Preferred Securities Guarantee." If the Company does not make interest
payments on the Subordinated Debt Securities purchased by the Trust, it is
expected that the Trust will not have sufficient funds to pay distributions on
the Preferred Securities. The Preferred Securities Guarantee does not apply to
any payment of distributions unless and until the Trust has sufficient funds
for the payment of such distributions.
If the Company fails to make interest or other payments on the Subordinated
Debt Securities when due (taking into account any Extension Period), the
Declaration provides a mechanism whereby the holders of the Preferred
Securities, using the procedures described in "Description of the Preferred
Securities--Voting Rights," may direct the Property Trustee to enforce its
rights under the Subordinated Debt Securities, including proceeding directly
against the Company to enforce the Subordinated Debt Securities. If the
Property Trustee fails to enforce its rights under the Indenture or the
Subordinated Debt Securities, a holder of Preferred Securities may, to the
extent permitted by applicable law, institute a legal proceeding directly
against the Company to enforce the Property Trustee's rights under the
Indenture and the Subordinated Debt Securities without first instituting any
legal proceeding against the Property Trustee or any other person or entity,
including the Trust. In addition, during the continuance of a Declaration
Event of Default that results from the failure of the Company to pay principal
of or interest on the Subordinated Debt Securities when due, a holder may
proceed directly against the Company, without first waiting to determine if
the Property Trustee has enforced its rights under the Declaration, to obtain
payment of such principal or interest on Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities owned of record by such holder.
If the Company fails to make payments under the Preferred Securities
Guarantee, the Preferred Securities Guarantee provides a mechanism whereby the
holders of the Preferred Securities may direct the Preferred Guarantee Trustee
to enforce its rights thereunder. If the Preferred Guarantee Trustee fails to
enforce the Preferred Securities Guarantee, any holder of Preferred Securities
may institute a legal proceeding directly against the Company to enforce the
Preferred Guarantee Trustee's rights under the Preferred Securities Guarantee,
without first instituting a legal proceeding against the Trust, the Preferred
Guarantee Trustee or any other person or entity. In addition, any record
holder of Preferred Securities shall have the right, which is absolute and
unconditional, to proceed directly against the Company to obtain Guarantee
Payments, without first waiting to determine if the Preferred Guarantee
Trustee has enforced the Preferred Security Guarantee or instituting a legal
proceeding against the Trust, the Preferred Guarantee Trustee or any other
person or entity.
The Company's obligations under the Preferred Securities Guarantee, the
Declaration, the Subordinated Debt Securities and the Indenture, in the
aggregate, provide a full and unconditional guarantee by the Company of
payments due on the Preferred Securities.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the
Preferred Securities. This summary is based on the Internal Revenue Code of
1986, as amended, Treasury regulations and administrative and judicial rulings
and decisions now in effect, all of which are subject to change, possibly on a
retroactive basis. This summary does not address the tax consequences
applicable to investors that may be subject to special tax rules such as
banks, thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors
or persons that will hold the Preferred Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a U.S. Holder.
Further, it does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any
foreign government that may be applicable to a U.S. Holder.
As used herein, a "U.S. Holder" means a beneficial owner of the Preferred
Securities who or that is (i) a citizen or resident of the United States, (ii)
a corporation or other entity created or organized in or under the laws of the
United States or a political subdivision thereof, (iii) an estate the income
of which is subject to U.S. federal income taxation regardless of its source,
(iv) a trust if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have authority to
control all substantial decisions of the trust, or (v) otherwise subject to
U.S. federal income taxation on a net income basis in respect of the Preferred
Securities, as the case may be. As used herein, a "Non-U.S. Holder" means a
holder that is not a U.S. Holder.
CLASSIFICATION OF THE SUBORDINATED DEBT SECURITIES
The Company intends to take the position that the Subordinated Debt
Securities will be classified for United States federal income tax purposes as
indebtedness of the Company and, by acceptance of a Preferred Security, each
U.S. Holder covenants to treat the Subordinated Debt Securities as
indebtedness and the Preferred Securities as evidence of an indirect
beneficial ownership interest in the Subordinated Debt Securities. No
assurance can be given however, that such position will not be challenged by
the Internal Revenue Service, or if challenged, that such a challenge will not
be successful. It has recently been reported that the Internal Revenue Service
challenged the status as indebtedness, for U.S. federal income tax purposes,
of certain instruments analogous to the Subordinated Debt Securities, held by
an entity similar in certain respects to the Trust. See "Description of the
Preferred Securities--Special Event Redemption or Distribution." Based on the
information available to it, the Company does not believe that the treatment
of the Subordinated Debt Securities as indebtedness for federal income tax
purposes is jeopardized by the position reported to have been taken. The
remainder of this discussion assumes that the Subordinated Debt Securities
will be classified as indebtedness of the Company for United States federal
income tax purposes.
CLASSIFICATION OF COASTAL FINANCE I
Cahill Gordon & Reindel, special tax counsel to the Company and the Trust,
is of the opinion that, under current law and assuming full compliance with
the terms of the Indenture and the Declaration (and certain other documents),
the Trust will be classified as a "grantor trust" for United States federal
income tax purposes and will not be classified as an association taxable as a
corporation or a partnership. Each U.S. Holder will be treated as owning an
undivided beneficial interest in the Subordinated Debt Securities.
Accordingly, each U.S. Holder will be required to include in its gross income
the interest and/or original issue discount ("OID") paid or accrued with
respect to its allocable share of Subordinated Debt Securities. Investors
should be aware that the opinion of Cahill Gordon & Reindel does not address
any other issue and is not binding on the Internal Revenue Service or the
courts.
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INTEREST, ORIGINAL ISSUE DISCOUNT, PREMIUM AND MARKET DISCOUNT
Under applicable Treasury regulations (the "Regulations"), if the likelihood
that the stated interest on a debt instrument will not be timely paid is
"remote," such likelihood is ignored in determining whether the debt
instrument is issued with OID. The Company intends to treat the likelihood of
exercising its option to defer payments of interest on the Subordinated Debt
Securities as being remote within the meaning of the Regulations. Based on the
foregoing, the Company believes that the Subordinated Debt Securities will not
be considered to be issued with OID at the time of their original issuance and
that a U.S. Holder of Preferred Securities should include in gross income such
holder's allocable share of the interest paid on the Subordinated Debt
Securities in accordance with such holder's method of tax accounting.
If, under the Regulations, the Company's option to defer payments of
interest on the Subordinated Debt Securities by extending interest payment
periods for up to 20 consecutive quarters is determined not to be remote, or
if the Company exercises its option, the Subordinated Debt Securities would be
treated as issued with OID at the time of issuance or at the time of such
exercise, as the case may be, and all of the stated interest payments on the
Subordinated Debt Securities thereafter would be treated as OID. In such
event, U.S. Holders would include the OID attributable to the Subordinated
Debt Securities in income on an economic accrual basis before the receipt of
cash attributable to the interest, regardless of their method of tax
accounting. The amount of OID that accrues in any month will approximately
equal the amount of the interest that accrues in that month at the stated
interest rate. In the event that the interest payment period is extended,
Holders will continue to accrue OID approximately equal to the amount of the
interest payment due at the end of the extended interest payment period on an
economic accrual basis over the length of the extended interest period.
Corporate U.S. Holders will not be entitled to a dividends-received deduction
with respect to any income earned with respect to the Preferred Securities.
No rulings or interpretations have been issued by the Internal Revenue
Service which address the meaning of the term "remote" as used in the
Regulations, and it is possible that the Internal Revenue Service could take a
position contrary to that expressed herein.
To the extent a U.S. Holder acquires its Preferred Securities at a price
that is greater or less than the principal amount of such U.S. Holder's share
of the Subordinated Debt Securities, the U.S. Holder will be deemed to have
acquired its interest in the Preferred Securities with amortizable bond
premium or with market discount, as the case may be. If the Subordinated Debt
Securities were to be treated as having been issued with OID, a U.S. Holder
acquiring Preferred Securities at a premium will be permitted to reduce the
amount of OID required to be included in income to reflect such acquisition
premium. A U.S. Holder acquiring Preferred Securities at a market discount
will also include the amount of such discount in income in accordance with the
market discount rules described below.
A U.S. Holder acquiring Preferred Securities at a market discount generally
will be required to recognize ordinary income to the extent of accrued market
discount upon the retirement of the underlying Subordinated Debt Securities
or, to the extent of any gain, upon the disposition of the Preferred
Securities. Such market discount would accrue on a straight-line basis, or, at
the election of the U.S. Holder, under a constant yield method over the
remaining term of the Subordinated Debt Securities. A U.S. Holder may also be
required to defer the deduction of a portion of the interest paid or accrued
on indebtedness incurred to purchase or carry Preferred Securities acquired
with market discount. In lieu of the foregoing, a U.S. Holder may elect to
include market discount in income currently as it accrues on all market
discount instruments acquired by such holder in the taxable year of the
election or thereafter, in which case the interest deferral rule will not
apply. A U.S. Holder may elect, in lieu of applying the market discount or
premium rules described above, to account for all income under the Preferred
Securities as if it were OID.
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RECEIPT OF SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Special Event Redemption or Distribution,"
Subordinated Debt Securities may be distributed to Holders in exchange for the
Preferred Securities and in liquidation of the Trust. Such a distribution
would be treated as a non-taxable event to each U.S. Holder and each U.S.
Holder would receive an aggregate tax basis in the Subordinated Debt
Securities equal to such Holder's aggregate tax basis in the Preferred
Securities. A U.S. Holder's holding period in the Subordinated Debt Securities
so received in liquidation of the Trust would include the period for which the
Preferred Securities were held by such holder. If, however, the Trust is
characterized for United States federal income tax purposes as an association
taxable as a corporation at the time of its dissolution, the distribution of
the Subordinated Debt Securities would constitute a taxable event to U.S.
Holders of Preferred Securities and a U.S. Holder's holding period in
Subordinated Debt Securities would not include the period during which the
Subordinated Debt Securities were held by the Trust.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Subordinated Debt Securities may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption
of their Preferred Securities. Such a redemption would, for United States
federal income tax purposes, constitute a taxable disposition of the redeemed
Preferred Securities, and a U.S. Holder would recognize gain or loss as if it
sold such redeemed Preferred Securities for cash. See "--Sale of Preferred
Securities."
SALE OF PREFERRED SECURITIES
A U.S. Holder that sells Preferred Securities will recognize gain or loss
equal to the difference between its adjusted tax basis in the Preferred
Securities and the amount realized on the sale. A U.S. Holder's adjusted tax
basis in the Preferred Securities generally will be its initial purchase
price. If the Subordinated Debt Securities are treated as having been issued
with OID, a U.S. Holder's adjusted tax basis would be such holder's initial
purchase price increased by OID previously included in such holder's gross
income to the date of disposition and decreased by payments received on the
Preferred Securities. Subject to the market discount rules described above,
any such gain or loss generally will be capital gain or loss and generally
will be long-term capital gain or loss if the Preferred Securities have been
held for more than one year.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the
underlying Subordinated Debt Securities. A U.S. Holder disposing of its
Preferred Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest through the
date of disposition in income (to the extent not previously included in
income) as ordinary income, and the amount realized on disposition excludes
the portion of the sale price treated as interest. To the extent the amount
realized on disposition is less than the U.S. Holder's adjusted tax basis, a
U.S. 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.
NON-U.S. HOLDERS
Subject to the discussion of backup withholding below, interest (including
OID, if any) with respect to the Preferred Securities paid to a Non-U.S.
Holder will be exempt from U.S. withholding tax, provided that the Holder
complies with applicable certification requirements (and does not actually or
constructively own ten percent or more of the voting stock of the Company and
is not a controlled foreign corporation related to the Company or its
affiliates).
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the Preferred
Securities generally will be reported to Holders on Form 1099, which forms
should be mailed to holders of Preferred Securities by January 31 following
each calendar year.
S-40
<PAGE>
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States federal income tax, provided
that required information is provided to the Internal Revenue Service.
Recently promulgated Treasury regulations, effective for certain payments made
to Non-U.S. Holders after December 31, 1999, may change certain certification
procedures relating to the receipt by intermediaries of payments on behalf of
a beneficial owner of Preferred Securities. Prospective investors should
consult their tax advisors regarding the possible effect of such new Treasury
regulations on an investment in the Preferred Securities.
THE 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 PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
S-41
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Trust, the Company and each of the
underwriters named below (the "Underwriters"), the Trust has agreed to sell to
each of the Underwriters, and each of the Underwriters, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Smith Barney Inc., Bear, Stearns &
Co. Inc., A.G. Edwards & Sons, Inc., Goldman, Sachs & Co., Lehman Brothers
Inc., Morgan Stanley & Co. Incorporated, PaineWebber Incorporated and
Prudential Securities Incorporated are acting as representatives (the
"Representatives"), has severally agreed to purchase the number of Preferred
Securities set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................. 1,020,000
Smith Barney Inc....................................... 1,020,000
Bear, Stearns & Co. Inc................................ 980,000
A.G. Edwards & Sons, Inc............................... 980,000
Goldman, Sachs & Co.................................... 980,000
Lehman Brothers Inc.................................... 980,000
Morgan Stanley & Co. Incorporated...................... 980,000
PaineWebber Incorporated............................... 980,000
Prudential Securities Incorporated..................... 980,000
BT Alex. Brown Incorporated............................ 100,000
Robert W. Baird & Co. Incorporated..................... 100,000
ABN AMRO Incorporated.................................. 100,000
CIBC Oppenheimer Corp. ................................ 100,000
Cowen & Company........................................ 100,000
Dain Rauscher Wessels.................................. 100,000
Donaldson, Lufkin & Jenrette Securities Corporation.... 100,000
EVEREN Securities, Inc. ............................... 100,000
Fleet Securities, Inc. ................................ 100,000
Legg Mason Wood Walker, Incorporated................... 100,000
Olde & Co., Incorporated............................... 100,000
Piper Jaffray Inc. .................................... 100,000
Raymond James & Associates, Inc. ...................... 100,000
The Robinson-Humphrey Company, LLC..................... 100,000
Tucker Anthony Incorporated............................ 100,000
Wheat First Securities, Inc. .......................... 100,000
Advest, Inc. .......................................... 50,000
Blaylock & Partners, L.P. ............................. 50,000
J. C. Bradford & Co. .................................. 50,000
Craigie Incorporated................................... 50,000
Crowell, Weedon & Co. ................................. 50,000
Fahnestock & Co. Inc. ................................. 50,000
Ferris, Baker Watts, Incorporated...................... 50,000
Fidelity Capital Markets a Division of Nat'l Finc'l Svs
Corp. ................................................ 50,000
First Albany Corporation............................... 50,000
First of Michigan Corporation.......................... 50,000
Gibraltar Securities Co. .............................. 50,000
Gruntal & Co., L.L.C. ................................. 50,000
Hilliard Lyons Inc..................................... 50,000
Interstate/Johnson Lane Corporation.................... 50,000
Janney Montgomery Scott Inc. .......................... 50,000
</TABLE>
S-42
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
McDonald & Company Securities, Inc. ................... 50,000
McGinn, Smith & Co., Inc. ............................. 50,000
Mesirow Financial, Inc. ............................... 50,000
Morgan Keegan & Company, Inc. ......................... 50,000
The Ohio Company....................................... 50,000
Pryor, McClendon, Counts & Co., Inc. .................. 50,000
Roney & Co., LLC ...................................... 50,000
Scott & Stringfellow, Inc. ............................ 50,000
Southwest Securities, Inc. ............................ 50,000
Stephens Inc. ......................................... 50,000
Stifel, Nicolaus & Company, Incorporated............... 50,000
Stone & Youngberg...................................... 50,000
TD Securities (USA) Inc. .............................. 50,000
Trilon International Inc. ............................. 50,000
Utendahl Capital Partners, L.P. ....................... 50,000
----------
Total............................................. 12,000,000
==========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the
Preferred Securities offered hereby if any of the Preferred Securities are
purchased. In the event of default by an Underwriter, the Underwriting
Agreement provides that, in certain circumstances, the purchase commitments of
the nondefaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.
The Underwriters propose initially to offer the Preferred Securities to the
public at the initial public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a concession not in
excess of $.50 per Preferred Security; provided, however, that such concession
for sales of 10,000 or more Preferred Securities to a single purchaser will
not be in excess of $.30 per Preferred Security. The Underwriters may allow,
and such dealers may reallow, a discount not in excess of $.30 per Preferred
Security to certain other dealers. After the initial public offering, the
public offering price, concession and discount may be changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Debt Securities of the
Company, the Underwriting Agreement provides that the Company will pay as
compensation ("Underwriters' Compensation") to the Underwriters for the
Underwriters arranging the investment therein of such proceeds, an amount in
same-day funds of $.7875 per Preferred Security (or $9,450,000 in the
aggregate); provided, however, that such compensation for sales of 10,000 or
more Preferred Securities to any single purchaser will be $.50 per Preferred
Security. Therefore, to the extent of such sales, the actual amount of
Underwriters' Compensation will be less than the aggregate amount specified in
the preceding sentence.
During a period of 30 days from the date of this Prospectus Supplement,
neither the Trust nor the Company will, without the prior written consent of
the Representatives, directly or indirectly, sell, offer to sell, contract to
sell, grant any option for the sale of, or otherwise dispose of, any Trust
Preferred Securities (as defined in the accompanying Prospectus), any security
convertible into, or exchangeable or exercisable for, Trust Preferred
Securities or any debt securities substantially similar to the Subordinated
Debt Securities or any equity securities substantially similar to the Trust
Preferred Securities (except for the Subordinated Debt Securities and the
Preferred Securities offered hereby and subject to certain exceptions
specified in the Underwriting Agreement).
Prior to this Offering there has been no public market for the Preferred
Securities. The Representatives have advised the Trust that the Underwriters
intend to make a market in the Preferred Securities but will have no
obligation to make a market in the Preferred Securities and may cease market
making activities, if commenced,
S-43
<PAGE>
at any time. In order to meet one of the requirements for listing the
Preferred Securities on the New York Stock Exchange, the Underwriters will
undertake to sell lots of 100 or more Preferred Securities to a minimum of 400
beneficial holders.
The Company and the Trust have agreed to indemnify the Underwriters against,
or to contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities
Act of 1933, as amended.
Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, the Company in the ordinary course of
business.
Until the distribution of the Preferred Securities is completed, rules of
the Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Preferred Securities. As an exception to these rules, the Representatives are
permitted to engage in certain transactions that stabilize the price of the
Preferred Securities. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Preferred
Securities.
If the Underwriters create a short position in the Preferred Securities in
connection with this offering, i.e. if they sell more Preferred Securities
than are contemplated on the cover page of this Prospectus Supplement, the
Representatives may reduce that short position by purchasing Preferred
Securities in the open market.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
Preferred Securities in the open market to reduce the Underwriters' short
position or to stabilize the price of the Preferred Securities they may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those securities as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above might have on the price of the Preferred
Securities. In addition, neither the Company nor any of the Underwriters makes
any representation that the Representatives will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Trust by Richards, Layton &
Finger, P.A., Wilmington, Delaware, special Delaware counsel to the Trust. The
validity of the Subordinated Debt Securities, the Preferred Securities
Guarantee and certain matters relating thereto will be passed upon on behalf
of the Company by Austin M. O'Toole, Esq., Senior Vice President and Secretary
of the Company. Certain United States federal income taxation matters will be
passed upon for the Company and the Trust, and certain legal matters will be
passed upon on behalf of the Underwriters, by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York.
S-44
<PAGE>
DEFINITIONS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Additional Interest........... S-32
Beneficial Owner.............. S-24
Business Day.................. S-16
Change in 1940 Act Law........ S-18
Common Securities............. S-1
Common Securities Guarantee... S-26
Company....................... S-1
Company Trustees.............. S-12
Creditor...................... S-22
DTC........................... S-23
Declaration................... S-12
Declaration Event of Default.. S-20
Delaware Trustee.............. S-12
Direct Participants........... S-23
Dissolution Tax Opinion....... S-18
distributions................. S-2
Event of Default.............. S-33
Exchange Act.................. S-23
Extension Period.............. S-2
Global Security............... S-33
Guarantee Payments............ S-26
Indenture..................... S-29
Indenture Event of Default.... S-20
Indirect Participants......... S-23
Interest Payment Date......... S-31
Investment Company Event...... S-18
Liquidation Distribution...... S-19
1940 Act...................... S-18
No Recognition Opinion........ S-17
Non-U.S. Holder............... S-38
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
OID................................................................... S-38
Participants.......................................................... S-23
Preferred Guarantee Trustee........................................... S-12
Preferred Securities.................................................. S-1
Preferred Securities Guarantee........................................ S-2
Property Account...................................................... S-12
Property Trustee...................................................... S-12
Redemption Price...................................................... S-3
Redemption Tax Opinion................................................ S-17
Regular Trustees...................................................... S-12
Regulations........................................................... S-39
Representative........................................................ S-42
Senior Indebtedness................................................... S-30
Series H Preferred.................................................... S-13
Special Event......................................................... S-17
Sponsor............................................................... S-12
Successor Securities.................................................. S-23
Subordinated Debt Securities.......................................... S-2
Subordinated Debt Trustee............................................. S-29
Super-Majority........................................................ S-20
Tax Event............................................................. S-18
Trust................................................................. S-1
Trust Act............................................................. S-12
Trust Indenture Act................................................... S-12
Trust Securities...................................................... S-1
Underwriting Agreement................................................ S-42
Underwriters.......................................................... S-42
Underwriters' Compensation............................................ S-42
U.S. Holder........................................................... S-38
</TABLE>
S-45
<PAGE>
PROSPECTUS
THE COASTAL CORPORATION
[LOGO OF
COASTAL CORPORATION DEBT SECURITIES
APPEARS HERE] PREFERRED STOCK
COMMON STOCK
COMMON STOCK WARRANTS
SUBORDINATED DEFERRABLE INTEREST DEBENTURES
---------------
COASTAL FINANCE I
COASTAL FINANCE II
TRUST PREFERRED SECURITIES
GUARANTEED BY
THE COASTAL CORPORATION
---------------
The Coastal Corporation ("Coastal" or the "Company") may from time to time
offer (i) its unsecured senior debt securities (the "Senior Debt Securities"),
(ii) its unsecured subordinated debt securities (the "Subordinated Debt
Securities" and, together with the Senior Debt Securities, the "Debt
Securities"), which may be convertible into shares of common stock, par value
33 1/3c per share of the Company (the "Common Stock"), (iii) shares of its
preferred stock, par value 33 1/3c per share (the "Preferred Stock"), which
may be convertible into shares of Common Stock or exchangeable for Debt
Securities, (iv) shares of its Common Stock, (v) warrants to purchase shares
of its Common Stock (the "Common Stock Warrants"); (vi) its unsecured
subordinated deferrable interest debentures (the "Subordinated Deferrable
Interest Debentures") and (vii) the Trust Preferred Securities Guarantees (as
defined below).
Coastal Finance I and Coastal Finance II (each, a "Trust"), each a statutory
business trust formed under the laws of Delaware, may from time to time offer
preferred securities evidencing preferred undivided beneficial interests in
the assets of the respective Trust ("Trust Preferred Securities"). The payment
of periodic cash distributions ("distributions") with respect to Trust
Preferred Securities of each of the Trusts, out of moneys held by each of the
Trusts, and payments on liquidation, redemption or otherwise with respect to
such Trust Preferred Securities will be guaranteed by the Company as described
herein (each, a "Trust Preferred Securities Guarantee"). The Company's
obligations under the Trust Preferred Securities Guarantees will be
subordinate and junior in right of payment to all other liabilities of the
Company and pari passu (equally and ratably) with the most senior preferred
stock issued by the Company and with any guarantee that may be entered into by
the Company in respect of any preferred stock of any subsidiary or affiliate
of the Company. Subordinated Deferrable Interest Debentures may be issued and
sold from time to time in one or more series by the Company to a Trust in
connection with the investment of the proceeds from the offering of Trust
Preferred Securities and Trust Common Securities (as defined herein) of such
Trust. The Subordinated Deferrable Interest Debentures subsequently may be
distributed pro rata to holders of Trust Preferred Securities and Trust Common
Securities in connection with the termination of such Trust upon the
occurrence of certain events as may be described in the Prospectus Supplement.
The Preferred Stock and the Common Stock are collectively referred to as the
"Equity Securities," and the Debt Securities, the Equity Securities, the Trust
Preferred Securities, the Trust Preferred Securities Guarantee, the
Subordinated Deferrable Interest Debentures and the Common Stock Warrants are
collectively referred to as the "Securities."
The Securities offered pursuant to this Prospectus may be offered separately
or together in one or more series up to an aggregate public offering price of
$700,000,000 (or the equivalent thereof in foreign currency or currency units)
at individual prices and on terms to be determined at the time of the offering
and set forth in one or more supplements to this Prospectus (each, a
"Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and,
among other things, will include, where applicable, (i) in the case of Debt
Securities or Subordinated Deferrable Interest Debentures, the specific
designation, aggregate principal amount offered, ranking, rate or rates of
interest or the provisions for determining such rate or rates and the time of
payment thereof, maturity, currency of payment, terms relating to redemption
(whether mandatory, at the option of the Company or the holder), terms for
sinking fund payments, terms for conversion into Common Stock, additional
covenants and the initial public offering price, (ii) in the case of shares of
Preferred Stock or Trust Preferred Securities, the number of shares, specific
title and stated value, any dividend, liquidation, redemption, conversion,
exchange, voting and other rights and restrictions and the initial public
offering price, (iii) in the case of shares of Common Stock, the number of
shares of Common Stock and the terms of the offering and sale thereof and (iv)
in the case of Common Stock Warrants, the duration, aggregate amount, exercise
price and initial public offering price.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain U.S. Federal income taxes, accounting and other
considerations relating to, and any listing on a securities exchange of, the
Securities covered by such Prospectus Supplement.
The Securities may be sold directly by the Company or the applicable Trust,
through agents designated by the Company or the applicable Trust from time to
time or through underwriters or dealers designated by the Company or the
applicable Trust from time to time. If any agents of the Company or the
applicable Trust or any dealers or underwriters are involved in the sale of
the Securities in respect of which this Prospectus is being delivered, the
names of such agents, dealers or underwriters and any applicable agent's
commission, dealer's purchase price or underwriter's discount will be as set
forth in or may be calculated from the applicable Prospectus Supplement. The
net proceeds to the Company or the applicable Trust, as the case may be, from
such sale will be the purchase price of such Securities less such commission
in the case of an agent, the purchase price of such Securities in the case of
a dealer or the public offering price of such Securities less such discount in
the case of an underwriter and less, in each case, other attributable issuance
expenses. See "Plan of Distribution" for indemnification arrangements for
agents, dealers and underwriters.
---------------
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 COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is April 23, 1998
<PAGE>
AVAILABLE INFORMATION
The Trusts and the Company have filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Securities Act"), a combined registration statement on Form S-3 (herein,
together with all amendments and exhibits, referred to as the "Registration
Statement") relating to the Debt Securities, the Subordinated Deferrable
Interest Debentures, the Equity Securities, the Trust Preferred Securities and
the Trust Preferred Securities Guarantees.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, information statements and other
information with the Commission. Such reports, proxy statements, information
statements and other information concerning the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices at Seven World Trade Center, 13th Floor, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, upon the payment of fees prescribed by the Commission.
The Commission maintains a site on the World Wide Web that contains reports,
proxy and information statements and other information regarding registrants
(including the Company) that file electronically with the Commission. The
address of the Commission's Web site is http://www.sec.gov. Reports, proxy
statements, information statements and other information concerning the
Company can also be inspected at the offices of the New York Stock Exchange,
Inc. located at 20 Broad Street, New York, New York 10005.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (together with all amendments, exhibits and
schedules thereto, the "Registration Statement"), of which this Prospectus is
a part, which Coastal has filed with the Commission under the Securities Act
of 1933, as amended (the "Securities Act"). Statements contained herein
concerning the provisions of any contract or other document are necessarily
summaries of such contracts or documents, and each statement is qualified in
its entirety by reference to the copy of the applicable contract or document
filed with the Commission. Copies of the Registration Statement are on file at
the offices of the Commission and may be obtained, upon payment of fees
prescribed by the Commission, or may be examined without charge at the public
reference facilities of the Commission described above.
No separate financial statements of the Trusts have been included herein.
The Company does not believe that such financial statements would be material
to holders of the Trust Preferred Securities because (i) all of the voting
securities of the Trusts will be owned, directly or indirectly, by the
Company, a reporting company under the Exchange Act, (ii) the Trusts have no
independent operations and exist for the sole purpose of issuing securities
representing undivided beneficial interests in the assets of the applicable
Trust and investing the proceeds thereof in the Subordinated Deferrable
Interest Debentures issued by the Company and (iii) the obligations of the
Trusts under the Trust Securities are fully and unconditionally guaranteed by
the Company to the extent that the Trust has funds available to meet such
obligations. See "The Trusts," "Description of the Trust Preferred
Securities," "Description of the Trust Preferred Securities Guarantees" and
"Description of the Subordinated Deferrable Interest Debentures." The Trusts
intend to not file separate reports under the Exchange Act but must apply for
and be granted relief by the Commission to avoid the requirement to file such
reports.
INCORPORATION OF DOCUMENTS BY REFERENCE
Coastal hereby incorporates in this Prospectus by reference its Annual
Report on Form 10-K for the year ended December 31, 1997 (the "1997 Annual
Report"), which has been filed with the Commission pursuant to the Exchange
Act (File No. 1-7176).
2
<PAGE>
All reports and any definitive proxy or information statements filed by
Coastal pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of the offering
of the Securities offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein, or contained in this
Prospectus, shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Any person, including any beneficial owner, receiving a copy of this
Prospectus may obtain without charge, upon request, a copy of any of the
documents incorporated by reference herein, except for the exhibits to such
documents (unless such exhibits are specifically incorporated by reference in
such documents). Such requests should be directed to The Coastal Corporation,
Coastal Tower, Nine Greenway Plaza, Houston, Texas 77046-0995, Attention:
Corporate Secretary, telephone number: (713) 877-1400.
3
<PAGE>
THE COMPANY
Coastal, acting through its subsidiaries, is a diversified energy holding
company with subsidiary operations in natural gas gathering, marketing,
processing, storage and transmission; petroleum refining, marketing and
distribution and chemicals; gas and oil exploration and production; coal
mining; and power. The Company was incorporated under the laws of Delaware in
1972 to become the successor parent, through a corporate restructuring, of a
corporate enterprise founded in 1955. The Company's principal office is
located at Coastal Tower, Nine Greenway Plaza, Houston, Texas 77046-0995
(telephone number (713) 877-1400).
THE TRUSTS
Each of Coastal Finance I and Coastal Finance II is a statutory business
trust formed under Delaware law pursuant to (i) a separate declaration of
trust, executed by the Company, as sponsor for such trust (the "Sponsor"), and
the Trustees (as defined herein) as of that date of such trust and (ii) the
filing of a separate certificate of trust with the Delaware Secretary of
State. The declaration of trust of each Trust will be amended and restated in
its entirety (as so amended and restated, the "Declaration") substantially in
the form filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each Trust exists for the exclusive purposes of (i)
issuing and selling the Trust Preferred Securities representing preferred
undivided beneficial interests in the assets of such Trust and Trust Common
Securities representing common undivided beneficial interests in the assets of
such Trust (the "Trust Common Securities" and, together with the Trust
Preferred Securities, the "Trust Securities"), (ii) investing the gross
proceeds of the Trust Securities in a series of Subordinated Debt Securities
and (iii) engaging in only those other activities necessary or incidental
thereto. All of the Trust Common Securities will be directly or indirectly
owned by the Company. The Trust Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Trust Preferred Securities
except that upon an event of default under the Declaration, the rights of the
holders of the Trust Common Securities to payment in respect of distributions
and payments upon liquidation, redemption and otherwise will be subordinated
to the rights of the holders of the Trust Preferred Securities. The Company
will, directly or indirectly, acquire Trust Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of each Trust. Each Trust
has a term of approximately 55 years, but may earlier terminate as provided in
the applicable Declaration. Each Trust's business and affairs will be
conducted by the trustees (the "Trustees") appointed by the Company, as the
direct or indirect holder of all the Trust Common Securities. The holder of
the Trust Common Securities will be entitled to appoint, remove or replace any
of, or increase or reduce the number of, the Trustees of a Trust. The duties
and obligations of such Trustees shall be governed by the Declaration of such
Trust, the Trust Indenture Act and the Trust Act. A majority of the Trustees
(the "Regular Trustees") of each Trust will be persons who are employees or
officers of or affiliated with the Company. One Trustee of each Trust will be
a financial institution which will be unaffiliated with the Company and which
shall act as property trustee and as indenture trustee for purposes of the
Trust Indenture Act of 1939 (the "Trust Indenture Act"), pursuant to the terms
set forth in a Prospectus Supplement (the "Property Trustee"). In addition,
unless the Property Trustee maintains a principal place of business in the
State of Delaware, and otherwise meets the requirements of applicable law,
another Trustee of each Trust will have its principal place of business or
reside in the State of Delaware (the "Delaware Trustee"). The Company will pay
all fees, expenses, debts and obligations (other than the Trust Securities)
related to the Trusts and the offering of Trust Securities. The office of the
Delaware Trustee for each Trust in the State of Delaware is The Bank of New
York (Delaware) 400 White Clay Center, Route 273, Newark, Delaware 19711. The
principal place of business of each Trust shall be c/o The Coastal
Corporation, Coastal Tower, Nine Greenway Plaza, Houston, Texas 77046-0995
(telephone number (713) 877-1400).
4
<PAGE>
USE OF PROCEEDS
Except as otherwise provided in an applicable Prospectus Supplement, the net
proceeds from the sale of the Securities will be used to repay short-term
borrowings and for the repayment of borrowings under various credit
agreements, including short-term borrowings and credit agreements of
subsidiaries, and for other general corporate purposes. Prior to such uses,
the net proceeds from the sale of Securities will be invested in certificates
of deposit or other highly liquid investments with short-term maturities.
ACCOUNTING TREATMENT RELATING TO TRUST SECURITIES
The financial statements of each Trust that has issued Trust Securities will
be consolidated with the Company's financial statements, with the Trust
Preferred Securities of each Trust shown on the Company's consolidated
financial statements as Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely subordinated debt securities of
the Company. The Company's financial statements will include a footnote that
discloses, among other things, that the sole asset of each Trust included
therein consists of Subordinated Deferrable Interest Debentures of the
Company, and will specify the designation, principal amount, interest rate and
maturity date of such Subordinated Deferrable Interest Debentures.
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
A description of the Company's ratio of earnings to fixed charges or
earnings to combined fixed charges and preferred stock dividends, as
applicable, on a consolidated basis, will appear in an applicable Prospectus
Supplement.
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DESCRIPTION OF DEBT SECURITIES
Debt Securities may be issued from time to time under one or more
indentures, each dated as of a date on or prior to the issuance of the Debt
Securities to which it relates. Senior Debt Securities and Subordinated Debt
Securities may be issued pursuant to separate indentures (respectively, a
"Senior Indenture" and a "Subordinated Indenture"), in each case between the
Company and Harris Trust and Savings Bank, as Trustee (the "Trustee"), and in
the form that has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part, subject to such amendments or supplements as
may be adopted from time to time. The Senior Indenture and the Subordinated
Indenture, as amended or supplemented from time to time, are sometimes
referred to individually as an "Indenture" and collectively as the
"Indentures." Each Indenture will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made hereunder
relating to the Debt Securities and the Indentures are summaries of the
anticipated provisions thereof, do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of the provisions
of the applicable Indenture, including the definitions therein of certain
terms and those terms made part of such Indenture by reference to the TIA, as
in effect on the date of such Indenture, and to such Debt Securities. Certain
capitalized terms used below and not defined have the respective meanings
assigned to them in the applicable Indenture.
TERMS
The Debt Securities will be unsecured obligations of the Company. The
Indebtedness represented by (i) Senior Debt Securities will rank pari passu in
right of payment with all other unsecured and unsubordinated Indebtedness of
the Company and (ii) Subordinated Debt Securities will be subordinated in
right of payment to the prior payment in full of all Senior Indebtedness (as
defined below) of the Company. See "--Ranking of Debt Securities." The
particular terms of the Debt Securities offered by a Prospectus Supplement
will be described in such Prospectus Supplement, along with any applicable
modifications of or additions to the general terms of the Debt Securities as
described herein and in the applicable Indenture and any applicable U.S.
Federal income tax considerations. Accordingly, for a description of the terms
of any Series of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the description of the Debt
Securities set forth in this Prospectus.
Each Indenture will provide for the issuance by the Company from time to
time of its Debt Securities in one or more Series. The aggregate principal
amount of Debt Securities which may be issued under each Indenture will be
unlimited and each Indenture will set forth the specific terms of any Series
of Debt Securities or provide that such terms shall be set forth in, or
determined pursuant to, an Authorizing Resolution and/or a supplemental
indenture, if any, relating to such Series.
The specific terms of each Series of Debt Securities will be set forth in
the applicable Prospectus Supplement relating thereto, including the
following, as applicable:
1. the title of such Debt Securities and whether such Debt Securities are
Senior Debt Securities or Subordinated Debt Securities;
2. the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
3. the price (expressed as a percentage of the principal amount thereof)
at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof, or, if
applicable, the portion of the principal amount of such Debt Securities
that is convertible into Common Stock or the method by which any such
portion shall be determined;
4. if convertible into Common Stock, the terms on which such Debt
Securities are convertible, including the initial conversion price, the
conversion period, any events requiring an adjustment of the applicable
conversion price and any requirements relating to the reservation of such
shares of Common Stock for purposes of conversion;
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5. the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable and, if
applicable, the terms on which such maturity may be extended;
6. the rate or rates (which may be fixed or floating), or the method by
which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any;
7. the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment dates,
or the method by which such dates shall be determined, the persons to whom
such interest shall be payable, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve 30-day months;
8. the place or places where the principal of and interest, if any, on
such Debt Securities will be payable, where such Debt Securities may be
surrendered for registration of transfer or exchange and where notices or
demands to or upon the Company in respect of such Debt Securities and the
applicable Indenture may be served;
9. the period or periods, if any, within which, the price or prices at
which and the other terms and conditions upon which such Debt Securities
may, pursuant to any optional or mandatory redemption provisions, be
redeemed, as a whole or in part, at the option of the Company;
10. the obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any Sinking Fund (as defined in the
applicable Indenture) or analogous provision or at the option of a holder
thereof, and the period or periods within which, the price or prices at
which and the other terms and conditions upon which such Debt Securities
will be redeemed, repaid or purchased, as a whole or in part, pursuant to
such obligations;
11. if other than U.S. dollars, the currency or currencies in which the
principal of and interest, if any, on such Debt Securities are denominated
and payable, which may be a foreign currency or units of two or more
foreign currencies or a composite currency or currencies, and the terms and
conditions relating thereto;
12. whether the amount of payments of principal of or interest, if any,
on such Debt Securities may be determined with reference to an index,
formula or other method (which index, formula or method may, but need not
be, based on the yield on or trading price of other securities, including
United States Treasury securities, or on a currency, currencies, currency
unit or units, or composite currency or currencies) and the manner in which
such amounts shall be determined;
13. whether the principal of or interest, if any, on the Debt Securities
of the Series are to be payable, at the election of the Company or a holder
thereof, in a currency or currencies, currency unit or units or composite
currency or currencies other than that in which such Debt Securities are
denominated or stated to be payable and the period or periods within which,
and the terms and conditions upon which, such election may be made;
14. provisions, if any, granting special rights to the holders of Debt
Securities of the Series upon the occurrence of such events as may be
specified;
15. any deletions from, modifications of or additions to the Events of
Default or covenants of the Company with respect to Debt Securities of the
Series, whether or not such Events of Default (as defined below) or
covenants are consistent with the Events of Default or covenants described
herein;
16. whether Debt Securities of the Series are to be issuable initially in
temporary global form and whether any Debt Securities of the Series are to
be issuable in permanent global form and, if so, whether beneficial owners
of interests in any such security in permanent global form may exchange
such interests for Debt Securities of such Series and of like tenor of any
authorized form and denomination and the circumstances under which any such
exchanges may occur, if other than in the manner provided in the applicable
Indenture, and, if Debt Securities of the Series are to be issuable as a
Global Security (as defined below), the identity of the depository for such
Series;
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17. the applicability, if any, of the defeasance and covenant defeasance
provisions of the applicable Indenture to the Debt Securities of the
Series; and
18. any other terms of the Series (which terms shall not be inconsistent
with the provisions of the Indenture under which the Debt Securities are
issued).
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities").
In such cases, all material U.S. Federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as may be set forth in the applicable Prospectus Supplement, the Debt
Securities will not contain any provisions that would limit the ability of the
Company to incur Indebtedness or that would afford holders of Debt Securities
protection in the event of a highly leveraged transaction involving the
Company or in the event of a change of control. Reference is made to the
applicable Prospectus Supplement for information with respect to any deletions
from, modifications of or additions to the Events of Default or covenants of
the Company that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of each Series will be issued only in registered form, without
coupons, in denominations of $1,000 and integral multiples thereof, or in such
other currencies or denominations as may be set forth in the applicable
Indenture or specified in, or pursuant to, an Authorizing Resolution and/or
supplemental indenture, if any, relating to such Series of Debt Securities.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of and interest, if any, on any Series of Debt Securities will be
payable at the corporate trust office of the Trustee, the address of which
will be stated in the applicable Prospectus Supplement; provided, however,
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the person entitled thereto as it appears in the
applicable register for such Debt Securities.
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any Series will be exchangeable for any
authorized denomination of other Debt Securities of the same Series and of a
like aggregate principal amount and tenor upon surrender of such Debt
Securities at the corporate trust office of the Trustee or at the office of
any registrar designated by the Company for such purpose. In addition, subject
to certain limitations imposed upon Debt Securities issued in book-entry form,
the Debt Securities of any Series may be surrendered for registration of
transfer or exchange thereof at the corporate trust office of the Trustee or
at the office of any registrar designated by the Company for such purpose. No
service charge will be made for any 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 certain transfers and
exchanges. The Company may act as registrar and may change any registrar
without notice.
CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants in
respect of a Series of Debt Securities that are not described in this
Prospectus. Unless otherwise indicated in the applicable Prospectus
Supplement, Senior Debt Securities will include the covenants described below.
Definitions
"Attributable Debt" will mean, with respect to any Sale and Leaseback
Transaction as of any particular time, the present value (discounted at the
rate of interest implicit in the terms of the lease) of the obligations of the
lessee under such lease for net rental payments during the remaining term of
the lease (including any period for which such lease has been extended or may,
at the option of the Company, be extended).
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"Consolidated Net Tangible Assets" will mean the total assets appearing on a
consolidated balance sheet of the Company and its Subsidiaries, less, without
duplication: (i) current liabilities; (ii) reserves for estimated rate refunds
pending the outcome of a rate proceeding to the extent such refunds have not
been finally determined; (iii) all intangible assets; and (iv) deferred income
tax assets.
"Funded Debt" will mean all Indebtedness maturing one year or more from the
date of the creation thereof, all Indebtedness directly or indirectly
renewable or extendible, at the option of the debtor, by its terms or by the
terms of any instrument or agreement relating thereto, to a date one year or
more from the date of the creation thereof, and all Indebtedness under a
revolving credit or similar agreement obligating the lender or lenders to
extend credit over a period of one year or more, even though such Indebtedness
may also conform to the definition of Short-Term Borrowing (as defined in the
applicable Indenture).
"Indebtedness" will mean (i) any liability of any person (a) for borrowed
money, (b) evidenced by a note, debenture or similar instrument (including a
purchase money obligation) given in connection with the acquisition of any
property or assets (other than inventory or similar property acquired in the
ordinary course of business), including securities, or (c) for the payment of
money relating to a Capitalized Lease Obligation (as defined in the applicable
Indenture); (ii) any guarantee by any person of any liability of others
described in the preceding clause (i); and (iii) any amendment, renewal,
extension or refunding of any liability of the types referred to in clauses
(i) and (ii) above.
"Lien" will mean any mortgage, lien, pledge, charge or other security
interest or encumbrance of any kind.
"Principal Domestic Property of the Company" will mean any property, plant,
equipment or facility of the Company which is located in the United States or
any territory or political subdivision thereof, except any property which the
Board of Directors or management of the Company shall determine to be not
material to the business or operations of the Company and its Subsidiaries,
taken as a whole.
"Sale and Leaseback Transaction" will have the meaning set forth in the
"Restrictions on Sales and Leasebacks" covenant described below.
"Significant Subsidiary" will mean a Subsidiary, including its Subsidiaries,
which meets any of the following conditions:
(a) the Company's and its other Subsidiaries' investments in and advances
to the Subsidiary exceed 10 percent of the total assets of the Company and
its Subsidiaries consolidated as of the end of any two of the three most
recently completed fiscal years;
(b) the Company's and its other Subsidiaries' proportionate share of the
total assets of the Subsidiary exceeds 10 percent of the total assets of
the Company and its Subsidiaries consolidated as of the end of any two of
the three most recently completed fiscal years; or
(c) the Company's and its other Subsidiaries' equity in the income from
continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of the Subsidiary
exceeds 10 percent of such income of the Company and its Subsidiaries
consolidated as of the end of any two of the three most recently completed
fiscal years.
"Stated Maturity" when used with respect to any security or any installment
of interest thereon will mean the date specified in such security as the fixed
date on which the principal of such security or such installment of interest
is due and payable.
"Subsidiary" will mean (i) a corporation a majority of whose Capital Stock
with voting power, under ordinary circumstances, to elect directors is at the
time, directly or indirectly, owned by the Company, by the Company and a
Subsidiary (or Subsidiaries) of the Company or by a Subsidiary (or
Subsidiaries) of the Company or (ii) any person (other than a corporation) in
which the Company, a Subsidiary (or Subsidiaries) of the
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Company or the Company and a Subsidiary (or Subsidiaries) of the Company,
directly or indirectly, at the date of determination thereof has at least
majority ownership interest; provided, however, that no corporation shall be
deemed a Subsidiary until the Company, a Subsidiary (or Subsidiaries) of the
Company or the Company and a Subsidiary (or Subsidiaries) of the Company
acquires more than 50% of the outstanding voting stock thereof and has elected
a majority of its board of directors.
Restrictions on Liens
The Company will not incur, create, assume or otherwise become liable with
respect to any Indebtedness secured by a Lien, or guarantee any Indebtedness
with a guarantee which is secured by a Lien, on any Principal Domestic
Property of the Company or any shares of stock or Indebtedness of any
Significant Subsidiary, without effectively providing that the Debt Securities
of each Series (together with, if the Company shall so determine, any other
Indebtedness of the Company then existing or thereafter created ranking
equally with the Debt Securities of each Series) shall be secured equally and
ratably with (or, at the option of the Company, prior to) such secured
Indebtedness, so long as such secured Indebtedness shall be so secured;
provided, however, that this covenant will not apply to Indebtedness secured
by: (a) Liens existing on the date of the Indenture; (b) Liens in favor of
governmental bodies to secure progress, advance or other payments; (c) Liens
existing on property, shares of stock or Indebtedness at the time of
acquisition thereof (including acquisition through lease, merger or
consolidation) or Liens to secure the payment of all or any part of the
purchase price thereof or the cost of construction, installation, renovation,
improvement or development thereon or thereof or to secure any Indebtedness
incurred prior to, at the time of, or within 360 days after the later of the
acquisition, completion of such construction, installation, renovation,
improvement or development or the commencement of full operation of such
property or within 360 days after the acquisition of such shares or
Indebtedness for the purpose of financing all or any part of the purchase
price thereof; (d) Liens securing Indebtedness in an aggregate amount which,
at the time of incurrence and together with all outstanding Attributable Debt
in respect of Sale and Leaseback Transactions permitted by clause (y) in the
"Restrictions on Sales and Leasebacks" covenant, does not exceed ten percent
of the Consolidated Net Tangible Assets of the Company; (e) Liens securing
Indebtedness other than Funded Debt; and (f) any extension, renewal or
replacement (or successive extensions, renewals or replacements), as a whole
or in part, of any Lien referred to in the foregoing clauses (a) through (e)
inclusive; provided that such extension, renewal or replacement of such Lien
is limited to all or any part of the same property, shares of stock or
Indebtedness that secured the Lien extended, renewed or replaced (plus
improvements on such property), and that such secured Indebtedness at such
time is not increased.
Restrictions on Sales and Leasebacks
The Company will not sell or transfer any Principal Domestic Property of the
Company, with the Company taking back a lease of such Principal Domestic
Property of the Company (a "Sale and Leaseback Transaction"), unless (i) such
Principal Domestic Property of the Company is sold within 360 days from the
date of acquisition of such Principal Domestic Property of the Company or the
date of the completion of construction or commencement of full operations of
such Principal Domestic Property of the Company, whichever is later, or (ii)
the Company, within 120 days after such sale, applies or causes to be applied
to the retirement of Funded Debt of the Company or any Subsidiary (other than
Funded Debt of the Company which by its terms or the terms of the instrument
pursuant to which it was issued is subordinate in right of payment to the Debt
Securities of each Series) an amount not less than the greater of (A) the net
proceeds of the sale of such Principal Domestic Property of the Company or (B)
the fair value (as determined in any manner approved by the Board of
Directors) of such Principal Domestic Property of the Company. The provisions
of this covenant shall not prevent a Sale and Leaseback Transaction (x) if the
lease entered into by the Company in connection therewith is for a period,
including renewals, of not more than 36 months or (y) if the Company would, at
the time of entering into such Sale and Leaseback Transaction, be entitled,
without equally and ratably securing the Debt Securities, to create or assume
a Lien on such Principal Domestic Property of the Company securing
Indebtedness in an amount at least equal to the Attributable Debt in respect
of such Sale and Leaseback Transaction pursuant to clause (d) above in the
"Restrictions on Liens" covenant.
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MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company shall not consolidate with or merge with or into any other
corporation or transfer all or substantially all of its property and assets as
an entirety to any person, unless (i) either the Company shall be the
continuing person, or the person (if other than the Company) formed by such
consolidation or into which the Company is merged or to which all or
substantially all of the properties and assets of the Company as an entirety
are transferred is a corporation organized and existing under the laws of the
United States or any State thereof or the District of Columbia which expressly
assumes all of the obligations of the Company under each Series of Debt
Securities and the Indenture with respect to each such Series and (ii)
immediately before and immediately after giving effect to such transaction, no
Event of Default and no event which, after notice or passage of time or both,
would become an Event of Default shall have occurred and be continuing.
Notwithstanding the foregoing, any Subsidiary may consolidate with, merge with
or into or transfer all or part of its properties and assets to the Company or
any other Subsidiary or Subsidiaries.
RANKING OF DEBT SECURITIES
Senior Debt Securities
The Senior Debt Securities will constitute unsecured senior obligations of
the Company and will rank pari passu in right of payment with all other Senior
Indebtedness (as defined below) of the Company. However, the Senior Debt
Securities will be effectively subordinated in right of payment to all secured
Indebtedness of the Company to the extent of the value of the assets securing
such Indebtedness and will be effectively subordinated to all indebtedness of
the Company's Subsidiaries and all mandatory redemption preferred stock of the
Company's Subsidiaries. Except as otherwise set forth in the applicable Senior
Indenture or specified in an Authorizing Resolution and/or supplemental
indenture, if any, relating to a Series of Senior Debt Securities to be
issued, there will be no limitations in any Senior Indenture on the amount of
additional Indebtedness which may rank pari passu with the Senior Debt
Securities or on the amount of Indebtedness, secured or otherwise, which may
be incurred or preferred stock which may be issued by any of the Company's
Subsidiaries; provided, however, that the incurrence of secured Indebtedness
by the Company is subject to the limitations set forth in the "Restrictions on
Liens" covenant.
Subordinated Debt Securities
The Subordinated Debt Securities will constitute unsecured obligations of
the Company. Unless otherwise provided in the applicable Prospectus
Supplement, the payment of principal of, interest on and all other amounts
owing in respect of the Subordinated Debt Securities will be subordinated in
right of payment to the prior payment in full in cash of principal of,
interest on and all other amounts owing in respect of all Senior Indebtedness
of the Company. Upon any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any total or partial liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors or marshaling of
assets of the Company or in a bankruptcy, reorganization, insolvency,
receivership or other similar proceeding relating to the Company or its
property, whether voluntary or involuntary, all principal of, interest on and
all other amounts due or to become due upon all Senior Indebtedness shall
first be paid in full in cash, or such payment duly provided for to the
satisfaction of the holders of Senior Indebtedness, before any payment or
distribution of any kind or character is made on account of any principal of,
interest on or other amounts owing in respect of the Subordinated Debt
Securities, or for the acquisition of any of the Subordinated Debt Securities
for cash, property or otherwise. If any default occurs and is continuing in
the payment when due, whether at maturity, upon any redemption, by declaration
or otherwise, of any principal of, interest on, unpaid drawings for letters of
credit issued in respect of, or regularly accruing fees with respect to, any
Senior Indebtedness, no payment of any kind or character shall be made by or
on behalf of the Company or any other person on its or their behalf with
respect to any principal of, interest on or other amounts owing in respect of
the Subordinated Debt Securities or to acquire any of the Subordinated Debt
Securities for cash, property or otherwise.
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In addition, if any other event of default occurs and is continuing with
respect to any Senior Indebtedness, as such event of default is defined in the
instrument creating or evidencing such Senior Indebtedness, permitting the
holders of such Senior Indebtedness then outstanding to accelerate the
maturity thereof and if the Representative (as defined in the applicable
Indenture) for the respective issue of Senior Indebtedness gives written
notice of the event of default to the Trustee (a "Default Notice"), then,
unless and until all events of default have been cured or waived or have
ceased to exist or the Trustee receives notice from the Representative for the
respective issue of Senior Indebtedness terminating the Blockage Period (as
defined below), during the 180 days after the delivery of such Default Notice
(the "Blockage Period"), neither the Company nor any other person on its
behalf shall (x) make any payment of any kind or character with respect to any
principal of, interest on or other amounts owing in respect of the
Subordinated Debt Securities or (y) acquire any of the Subordinated Debt
Securities for cash, property or otherwise. Notwithstanding anything herein to
the contrary, in no event will a Blockage Period extend beyond 180 days from
the date the payment on the Subordinated Debt Securities was due and only one
such Blockage Period may be commenced within any 360 consecutive days. No
event of default which existed or was continuing on the date of the
commencement of any Blockage Period with respect to the Senior Indebtedness
shall be, or be made, the basis for commencement of a second Blockage Period
by the Representative of such Senior Indebtedness whether or not within a
period of 360 consecutive days, unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed
or was continuing shall constitute a new event of default for this purpose).
The Subordinated Indentures will not restrict the amount of Senior
Indebtedness or other Indebtedness of the Company or any Subsidiary. As a
result of the foregoing provisions, in the event of the Company's insolvency,
holders of the Subordinated Debt Securities may recover ratably less than
general creditors of the Company.
"Senior Indebtedness" will be defined in each Subordinated Indenture as
Indebtedness of the Company, whether outstanding on the date of issue of any
Subordinated Debt Securities or thereafter created, incurred, assumed or
guaranteed by the Company, other than the following: (i) any Indebtedness as
to which, by the terms of the instrument creating or evidencing such
Indebtedness, it is expressly provided that such Indebtedness is subordinated
in right of payment to all Indebtedness of the Company not expressly
subordinated to such Indebtedness, (ii) any Indebtedness which, by its terms,
expressly refers to the Subordinated Debt Securities and states that such
Indebtedness shall not be senior, shall be pari passu or shall be subordinated
in right of payment to the Subordinated Debt Securities, (iii) the
Subordinated Debt Securities of the same or another Series and (iv)
Indebtedness of or amounts owed by the Company for compensation to employees,
or for goods, materials and services purchased in the ordinary course of
business.
DISCHARGE
Unless otherwise provided in the applicable Prospectus Supplement, the
Company generally may terminate its obligations under any Series of Debt
Securities and the Indenture with respect to such Series, at any time, (a) by
delivering all outstanding Debt Securities of such Series to the Trustee for
cancellation and paying all sums payable by it under such Debt Securities and
the Indenture with respect to such Series or (b) after giving notice to the
Trustee of its intention to defease all of the Debt Securities of such Series,
by irrevocably depositing with the Trustee or a paying agent (other than the
Company or a Subsidiary) (i) in the case of any Debt Securities of any Series
denominated in U.S. dollars, cash or U.S. Government Obligations sufficient to
pay all principal of and interest on such Debt Securities and (ii) in the case
of any Debt Securities of any Series denominated in any currency other than
U.S. dollars, an amount of the Required Currency sufficient to pay all
principal of and interest on such Debt Securities; provided, however, that if
such irrevocable deposit pursuant to (b) above is made on or prior to one year
from the Stated Maturity for payment of principal of such Series of Debt
Securities, the Company shall have delivered to the Trustee either an opinion
of counsel with no material qualifications or a
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favorable ruling of the Internal Revenue Service, in either case to the effect
that holders of such Debt Securities (i) will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit (and the
defeasance contemplated in connection therewith) and (ii) will be subject to
Federal income tax on the same amounts and in the same manner and at the same
time as would have been the case if such deposit and defeasance had not
occurred.
MODIFICATION AND WAIVER
Modification and amendment of an Indenture will be permitted to be made by
the Company and the Trustee with the consent of the holders of not less than a
majority in principal amount of the outstanding Debt Securities of all Series
affected thereby (voting as a single class); provided, however, that such
modification or amendment may not, without the consent of each holder of the
Debt Securities affected thereby, (i) change the Stated Maturity of the
principal of or any installment of interest with respect to the Debt
Securities; (ii) reduce the principal amount of, or the rate of interest on,
the Debt Securities; (iii) change the currency of payment of principal of or
interest on the Debt Securities; (iv) impair the right to institute suit for
the enforcement of any payment on or with respect to the Debt Securities; (v)
reduce the above-stated percentage of holders of the Debt Securities of any
Series necessary to modify or amend the Indenture relating to such Series;
(vi) modify the foregoing requirements or reduce the percentage of outstanding
Debt Securities necessary to waive any covenant or past default; (vii) in the
case of any Subordinated Indenture, modify the subordination provisions
thereof in a manner adverse to the holders of Subordinated Debt Securities of
any Series then outstanding; or (viii) in the case of any convertible Debt
Securities, adversely affect the right to convert the Debt Securities into
Common Stock in accordance with the provisions of the applicable Indenture.
Holders of not less than a majority in principal amount of the outstanding
Debt Securities of all Series affected thereby (voting as a single class) may
waive certain past defaults and may waive compliance by the Company with any
provision of the Indenture relating to such Debt Securities (subject to the
immediately preceding sentence); provided, however, that, (i) without the
consent of each holder of Debt Securities affected thereby, no waiver may be
made of a default in the payment of the principal of or interest on any Debt
Security and (ii) only the holders of a majority in principal amount of Debt
Securities of a particular Series may waive compliance with a provision of the
Indenture relating to such Series or the Debt Securities of such Series having
applicability solely to such Series.
EVENTS OF DEFAULT AND NOTICE THEREOF
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the following events are "Events of Default" with
respect to any Series of Debt Securities issued thereunder: (i) failure of the
Company to pay interest on any Debt Securities of such Series within 30 days
of when due or principal of any Debt Securities of such Series when due
(including any Sinking Fund installment); (ii) failure to perform any other
agreement contained in the Debt Securities of such Series or the Indenture
relating to such Series (other than an agreement relating solely to another
Series of Debt Securities) for 60 days after notice; (iii) certain events of
bankruptcy, insolvency or reorganization with respect to the Company.
Additional or different Events of Default, if any, applicable to the Series of
Debt Securities in respect of which this Prospectus is being delivered will be
specified in the applicable Prospectus Supplement.
Each Indenture will provide that the Trustee under such Indenture shall,
within 75 days after the occurrence of any default (the term "default" to
include the events specified above without grace or notice) with respect to
any Series of Debt Securities actually known to it, give to the holders of
such Debt Securities notice of such default; provided, however, that, except
in the case of a default in the payment of principal of or interest on any of
the Debt Securities of such Series or in the payment of any Sinking Fund
installment, the Trustee for such Series shall be protected in withholding
such notice if it in good faith determines that the withholding of such notice
is in the interest of the holders of such Debt Securities. Each Indenture will
require the Company to certify to the Trustee under such Indenture quarterly
as to whether any default exists.
In case an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency or reorganization) with respect to any Series of Debt
Securities shall occur and be continuing, the Trustee for such
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Series or the holders of at least 25% in aggregate principal amount of the
Debt Securities of such Series then outstanding, by notice in writing to the
Company (and to the Trustee for such Series if given by the holders of the
Debt Securities of such Series), will be entitled to declare all unpaid
principal of and accrued interest on such Debt Securities then outstanding to
be due and payable immediately. In case an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization shall occur, all
unpaid principal of and accrued interest on all Debt Securities of such Series
then outstanding shall be due and payable immediately without any declaration
or other act on the part of the Trustee for such Series or the holders of any
Debt Securities of such Series. Such acceleration may be annulled and past
defaults (except, unless theretofore cured, a default in payment of principal
of or interest on the Debt Securities of such Series) may be waived by the
holders of a majority in principal amount of the Debt Securities of such
Series then outstanding upon the conditions provided in the applicable
Indenture.
Each Indenture will provide that no holder of the Debt Securities of any
Series issued thereunder may pursue any remedy under such Indenture unless the
Trustee for such Series shall have failed to act after, among other things,
notice of an Event of Default and request by holders of at least 25% in
principal amount of the Debt Securities of such Series of which the Event of
Default has occurred and the offer to the Trustee for such Series of indemnity
satisfactory to it; provided, however, that such provision does not affect the
right to sue for enforcement of any overdue payment on such Debt Securities.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities of any
Series will be convertible into Common Stock will be set forth in the
Prospectus Supplement relating thereto. Such terms will include the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at the option of the holders of such Series of
Debt Securities or at the option of the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such Series of Debt Securities.
THE TRUSTEE
The Trustee for each Series of Debt Securities will be The Bank of New York.
Each Indenture will contain certain limitations on a right of the Trustee
thereunder, as a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; provided, however, that if it acquires any conflicting
interest, it must eliminate such conflict or resign.
The holders of a majority in principal amount of all outstanding Debt
Securities of a Series (or if more than one Series is affected thereby, of all
Series so affected, voting as a single class) will have the right to direct
the time, method and place of conducting any proceeding for exercising any
remedy or power available to the Trustee for such Series or all such Series so
affected.
In case an Event of Default shall occur (and shall not be cured) under any
Indenture relating to a Series of Debt Securities and is actually known to a
responsible officer of the Trustee for such Series, such Trustee shall
exercise such of the rights and powers vested in it by such Indenture and use
the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
Subject to such provisions, the Trustee will not be under any obligation to
exercise any of its rights or powers under the applicable Indenture at the
request of any of the holders of Debt Securities unless they shall have
offered to the Trustee security and indemnity satisfactory to it.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by the laws of the
State of New York.
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GLOBAL SECURITIES; BOOK-ENTRY SYSTEM
The Debt Securities of any Series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") identified in
the Prospectus Supplement relating to such Series. Global Securities, if any,
issued in the United States are expected to be deposited with The Depository
Trust Company ("DTC"), as Depository. Global Securities will be issued in
fully registered form and may be issued in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security may not be transferred
except as a whole by the Depository for such Global Security to a nominee of
such Depository or by a nominee of such Depository to such Depository or
another nominee of such Depository or by such Depository or any nominee of
such Depository to a successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to any Series
of Debt Securities will be described in the Prospectus Supplement relating to
such Series. The Company expects that unless otherwise indicated in the
applicable Prospectus Supplement, the following provisions will apply to
depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and
transfer system the respective principal amounts of the individual Debt
Securities represented by such Global Security to the accounts of persons that
have accounts with such Depository ("Participants"). Such accounts will be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered directly by
the Company. Ownership of beneficial interests in such Global Security will be
limited to Participants or persons that may hold interests through
Participants.
The Company expects that, pursuant to procedures established by DTC,
ownership of beneficial interests in any Global Security with respect to which
DTC is the Depository will be shown on, and the transfer of that ownership
will be effected only through, records maintained by DTC or its nominee (with
respect to beneficial interests of Participants) and records of Participants
(with respect to beneficial interests of persons who hold through
Participants). Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records of DTC or for
maintaining, supervising or reviewing any records of DTC or any of its
Participants relating to beneficial ownership interests in the Debt
Securities. The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and laws may impair the ability to own, pledge or transfer beneficial
interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described below or in the applicable
Prospectus Supplement, owners of beneficial interest in a Global Security will
not be entitled to have any of the individual Debt Securities represented by
such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of any such Debt Securities in
definitive form and will not be considered the owners or holders thereof under
the applicable Indenture. Beneficial owners of Debt Securities evidenced by a
Global Security will not be considered the owners or holders thereof under the
applicable Indenture for any purpose, including with respect to the giving of
any direction, instructions or approvals to the Trustee thereunder.
Accordingly, each person owning a beneficial interest in a Global Security
with respect to which DTC is the Depository must rely on the procedures of DTC
and, if such person is not a Participant, on the procedures of the Participant
through which such person owns its interests, to exercise any rights of a
holder under the applicable Indenture. The Company understands that, under
existing industry practice, if it requests any action of holders or if an
owner of a beneficial interest in a Global Security desires to give or take
any action which a holder is entitled to give or take under the applicable
Indenture, DTC would authorize the Participants holding the relevant
beneficial interest to give or take such action, and such Participants would
authorize beneficial owners through such Participants to give or take such
actions or would otherwise act upon the instructions of beneficial owners
holding through them.
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<PAGE>
Payments of principal of, and any interest on, individual Debt Securities
represented by a Global Security registered in the name of a Depository or its
nominee will be made to or at the direction of the Depository or its nominee,
as the case may be, as the registered owner of the Global Security under the
applicable Indenture. Under the terms of the applicable Indenture, the Company
and the Trustee may treat the persons in whose name Debt Securities, including
a Global Security, are registered as the owners thereof for the purpose of
receiving such payments. Consequently, neither the Company nor the Trustee has
or will have any responsibility or liability for the payment of such amounts
to beneficial owners of Debt Securities (including principal and interest).
The Company believes, however, that it is currently the policy of DTC to
immediately credit the accounts of relevant Participants with such payments,
in amounts proportionate to their respective holdings of beneficial interests
in the relevant Global Security as shown on the records of DTC or its nominee.
The Company also expects that payments by Participants to owners of beneficial
interests in such Global Security held through such Participants 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 Participants. Redemption
notices with respect to any Debt Securities represented by a Global Security
will be sent to the Depository or its nominee. If less than all of the Debt
Securities of any series are to be redeemed, the Company expects the
Depository to determine the amount of the interest of each Participant in such
Debt Securities to be redeemed to be determined by lot. None of the Company,
the Trustee, any Paying Agent or the Registrar for such Debt Securities will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the Global
Security for such Debt Securities or for maintaining any records with respect
thereto.
Neither the Company nor the Trustee will be liable for any delay by the
holders of a Global Security or the Depository in identifying the beneficial
owners of Debt Securities and the Company and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from the holder of
a Global Security or the Depository for all purposes. The rules applicable to
DTC and its Participants are on file with the Securities and Exchange
Commission.
If a Depository for any Debt Securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not
appointed by the Company within 90 days, the Company will issue individual
Debt Securities in exchange for the Global Security representing such Debt
Securities. In addition, the Company may at any time and in its sole
discretion, subject to any limitations described in the Prospectus Supplement
relating to such Debt Securities, determine not to have any of such Debt
Securities represented by one or more Global Securities and in such event will
issue individual Debt Securities in exchange for the Global Security or
Securities representing such Debt Securities. Individual Debt Securities so
issued will be issued in denominations of $1,000 and integral multiples
thereof.
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DESCRIPTION OF EQUITY SECURITIES
GENERAL
The Restated Certificate of Incorporation of the Company (the "Certificate
of Incorporation") provides that the aggregate number of shares of all classes
of stock that the Company has authority to issue is 302,700,000 shares,
consisting of 250,000,000 shares of Common Stock, 50,000,000 shares of
Preferred Stock and 2,700,000 shares of Class A common stock, par value
33 1/3c per share ("Class A Common Stock").
As of March 31, 1998, the issued and outstanding Common Stock, Class A
Common Stock and Preferred Stock of the Company was as follows:
<TABLE>
<CAPTION>
CLASS OF STOCK SHARES
-------------- ------
<S> <C>
Common Stock....................................................... 105,815,843
Class A Common Stock............................................... 362,988
Preferred Stock:
$1.19 Cumulative Convertible Preferred Stock, Series A ("Series A
Preferred Stock")............................................... 57,537
$1.83 Cumulative Convertible Preferred Stock, Series B ("Series B
Preferred Stock")............................................... 66,636
$5.00 Cumulative Convertible Preferred Stock, Series C ("Series C
Preferred Stock")............................................... 29,204
$2.125 Cumulative Preferred Stock, Series H ("Series H Preferred
Stock")......................................................... 8,000,000
</TABLE>
All issued and outstanding shares are fully-paid and non-assessable.
PREFERRED STOCK
Terms
The following description of the Preferred Stock summarizes certain general
terms and provisions of each series of Preferred Stock to which any Prospectus
Supplement may relate. Certain other terms of a particular series of Preferred
Stock will be summarized in the Prospectus Supplement relating to such series.
The summaries of the terms of the Preferred Stock below and in any Prospectus
Supplement do not, and will not, purport to be complete and are subject to,
and qualified in their entirety by reference to, the Company's Certificate of
Incorporation and the certificate of designation establishing a series of
Preferred Stock (each, a "Certificate of Designation"), each of which will be
filed with the Commission at or prior to the time of the sale of such series
of Preferred Stock.
The Board of Directors is authorized to provide for issuance of the
Preferred Stock of the Company from time to time, in one or more series, and
to fix the dividend rate, conversion or exchange rights, voting rights, terms
of redemption, redemption price or prices, liquidation preferences and
qualifications, limitations and restrictions thereof with respect to each
series.
An applicable Prospectus Supplement will set forth or describe other
specific terms regarding each series of Preferred Stock offered thereby,
including:
1. the title and stated value of such Preferred Stock;
2. the number of shares of such Preferred Stock offered, the liquidation
preference per share and the initial offering price of such Preferred
Stock;
3. the dividend rate, period and/or payment date, or method of
calculation thereof, applicable to such Preferred Stock;
4. the date from which dividends on such Preferred Stock shall
accumulate, if applicable;
5. the provision for a sinking fund, if any, for such Preferred Stock;
6. the provision for redemption, if applicable, of such Preferred Stock;
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7. any listing of such Preferred Stock on any securities exchange;
8. the terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock or exchangeable for Debt
Securities, including the conversion price or exchange rate, as the case
may be (or the manner of calculation thereof);
9. a discussion of Federal tax considerations applicable to such
Preferred Stock;
10. the relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
11. any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series or Preferred Stock as to dividend
rights and rights upon liquidation, dissolution or winding up of the
affairs of the Company;
12. the voting powers, if any, of such Preferred Stock, in addition to
those set forth below; and
13. any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
Dividends
The holders of the Preferred Stock of each series shall be entitled to
receive, when, as and if declared by the Board of Directors of the Company,
out of the funds of the Company legally available therefor, cash dividends at
the annual rate and on such dates as shall be set forth in the Prospectus
Supplement relating to such series. Each such dividend shall be paid to the
holders of record of shares of such series on such record date as shall be
fixed by the Board of Directors of the Company.
If dividends are not paid in full or declared in full and a sum set apart
for the payment thereof upon the Preferred Stock of a series and any other
Preferred Stock ranking on a parity as to dividends with the Preferred Stock
of such series, all dividends declared upon shares of Preferred Stock of such
series and any other Preferred Stock ranking on a parity as to dividends shall
be declared pro rata so that in all cases the amount of dividends declared per
share on the Preferred Stock of such series and any other Preferred Stock
ranking on a parity as to dividends shall be in the same proportion as the
amount of dividends that would be paid on all shares of Preferred Stock of
such series and such other parity Preferred Stock if all such dividends
(including dividends accrued or in arrears) were paid in full. Except as
provided in the preceding sentence, unless full cumulative dividends on the
Preferred Stock of a series have been paid or declared in full and a sum set
aside for the payment thereof, no dividends shall be declared or paid or set
aside for payment or other distribution made upon the Company's Common Stock,
Class A Common Stock or any other class or series of capital stock of the
Company ranking junior to or on a parity with the Preferred Stock of the
applicable series as to dividends or liquidation rights, nor shall any Common
Stock, Class A Common Stock or any other class or series of capital stock of
the Company ranking junior to or on a parity with the Preferred Stock of such
series as to dividends or liquidation rights be redeemed, purchased or
otherwise acquired for any consideration (or any payment made to or available
for a sinking fund for the redemption of any shares of such stock) by the
Company or any subsidiary of the Company (except by conversion into or
exchange for stock of the Company ranking junior to the Preferred Stock of the
applicable series as to dividends and liquidation rights). Unless otherwise
stated in the applicable Prospectus Supplement, no interest, or sum of money
in lieu of interest, will be payable in respect of any dividend payment or
payments on Preferred Stock of any series which may be in arrears.
Dividends payable on the Preferred Stock of a Series for any period less
than a full quarterly dividend period shall be computed on the basis of a 360-
day year of twelve 30-day months and the actual number of days elapsed in the
period for which payable.
Voting Rights
The holders of the Preferred Stock shall not, except as required by law or
as set forth in the applicable Prospectus Supplement, have any right or power
to vote on any question or in any proceeding or to be represented at, or to
receive notice of, any meeting of stockholders. On any matters on which the
holders of the Preferred Stock shall be entitled to vote, they shall be
entitled to one vote for each share held.
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<PAGE>
Unless otherwise stated in the applicable Prospectus Supplement, in case at
any time the equivalent of six or more full quarterly dividends (whether
consecutive or not) on any series of Preferred Stock shall be in arrears, then
during the period (the "Voting Period") commencing with such time and ending
with the time when all arrearages in dividends on the Preferred Stock of all
series shall have been paid and the full dividend on the Preferred Stock of
all series for the then current quarterly dividend period shall have been paid
or declared and set apart for payment, at any meeting of the stockholders of
the Company held for the election of directors during the Voting Period, the
holders of a majority of the outstanding shares of Preferred Stock of all
series represented in person or by proxy at said meeting shall be entitled, as
a class, to the exclusion of the holders of all other classes of stock of the
Company, to elect two directors of the Company, each share of Preferred Stock
entitling the holder thereof to one vote.
Any director who shall have been elected by holders of Preferred Stock, or
by any director so elected as herein contemplated, may be removed at any time
during a Voting Period, either for or without cause, by, and only by, the
affirmative votes of the holders of record of a majority of the outstanding
shares of Preferred Stock of all series given at a special meeting of such
stockholders called for the purpose, and any vacancy thereby created may be
filled during such Voting Period by the holders of Preferred Stock of all
series, present in person or represented by proxy at such meeting. Any
director elected by holders of Preferred Stock, or by any director so elected
as herein contemplated, who dies, resigns or otherwise ceases to be a director
shall, except as otherwise provided in the preceding sentence, be replaced by
the remaining director theretofore elected by the holders of Preferred Stock.
At the end of the Voting Period, the holders of Preferred Stock of all series
shall be automatically divested of all voting power vested in them under this
provision but subject always to the subsequent vesting of voting power in the
holders of Preferred Stock in the event of any similar cumulated arrearage in
payment of quarterly dividends occurring thereafter. The term of all directors
elected pursuant to this provision shall in all events expire at the end of
the Voting Period.
The approval of the holders of at least two-thirds of the then outstanding
shares of Preferred Stock of a series will be required to amend the applicable
Certificate of Designation to adversely change the preferences, special rights
or powers of the Preferred Stock of such series or to authorize, create or
increase the authorized amount of any class or series of capital stock of the
Company ranking prior to the Preferred Stock of such series either as to
dividend or liquidation rights; provided, however, that the creation or
issuance of any class or series of capital stock of the Company not ranking
prior to the Preferred Stock of a series as to dividend or liquidation rights
shall not require the consent of the holders of the Preferred Stock of such
series.
Ranking
The Preferred Stock to which any Prospectus Supplement may relate will rank
pari passu with the outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series H Preferred Stock of the
Company with respect to dividend rights and liquidation preference. The
Preferred Stock will rank prior to the Company's Common Stock and Class A
Common Stock. Without the requisite vote of holders of the Preferred Stock, as
described above under "--Voting Rights," no class or series of capital stock
can be created ranking senior to the Preferred Stock as to dividend rights or
liquidation preference.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the Company,
the holders of shares of the Preferred Stock of each series are entitled to
receive out of assets of the Company available for distribution to
stockholders, before any distribution of assets is made to holders of Common
Stock, Class A Common Stock or any other class or series of capital stock of
the Company (including any Preferred Stock) which is junior as to liquidation
rights to the Preferred Stock of such series, liquidating distributions in the
amount set forth in the applicable Prospectus Supplement, plus dividends
accrued and accumulated but unpaid to the date of such distribution. If, upon
any liquidation, dissolution or winding up of the Company, the amounts payable
with respect to the Preferred Stock of such series and any other Preferred
Stock of the Company ranking as to any such distribution on a parity with the
Preferred Stock of such series are not paid in full, the holders of the
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<PAGE>
Preferred Stock of such series and of such other Preferred Stock of the
Company will share ratably in any such distribution of assets in proportion to
the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of shares of the Preferred Stock will not be entitled to
any further participation in any distribution of assets by the Company.
Neither a consolidation or merger of the Company with another corporation nor
a sale or transfer of all or part of the Company's assets for cash or
securities shall be considered a liquidation, dissolution or winding up of the
Company.
Redemption Provisions
The Preferred Stock of each series will have such optional or mandatory
redemption terms, if any, as shall be set forth in the applicable Prospectus
Supplement.
Conversion and Exchange Rights
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock or exchangeable into Debt Securities will be
set forth in the applicable Prospectus Supplement relating to such series of
Preferred Stock. Such terms will include (i) in the case such series of
Preferred Stock is convertible into Common Stock, (A) the number of shares of
Common Stock into which shares of such series of Preferred Stock are
convertible, (B) the conversion price (or manner of calculation thereof), (C)
the conversion period, (D) provisions as to whether conversion will be at the
option of the holders of such series of Preferred Stock or at the option of
the Company, (E) the events requiring an adjustment of the conversion price
and (F) provisions affecting conversion in the event of the redemption of such
series of Preferred Stock and (ii) in the case such series of Preferred Stock
is exchangeable into Debt Securities, (A) the principal amount of Debt
Securities into which shares of such series of Preferred Stock are
exchangeable, (B) the exchange period and (C) provisions as to whether
exchange will be at the option of the holders of such series of Preferred
Stock or at the option of the Company.
Miscellaneous
The Preferred Stock will have no preemptive rights. All of the Preferred
Stock, upon payment in full therefor, will be fully paid and nonassessable.
COMMON STOCK AND CLASS A COMMON STOCK
Dividends
Subject to the preferential rights of the holders of Preferred Stock, all
issued and outstanding shares of Common Stock are entitled to participate
equally in dividends when, as and if declared by the Board of Directors of the
Company out of funds legally available for such purposes. The Directors of the
Company may declare and pay dividends upon the shares of its capital stock
either out of surplus or if there is no surplus, out of net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal
year, subject to the restrictions contained in certain agreements.
The Board of Directors may fix, in advance, a date as the record date for
purposes of determining stockholders entitled to receive dividends. Such date
may not be more than 60 days prior to the payment of such dividends; however,
if no record date is fixed by the Board of Directors, the record date will be
at the close of business on the day which the Board of Directors adopts the
resolution relating to the dividend.
Meetings of Stockholders
A meeting of the stockholders of the Company for the election of Directors
and for the transaction of any other business of the Company as may lawfully
come before the meeting is held annually at a date, time and place designated
by the Board of Directors.
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<PAGE>
In addition, a special meeting of the stockholders of the Company may be
called by the Board of Directors, the Chairman of the Board or the President
at any time. The Certificate of Incorporation provides that any action
required or permitted to be taken at a meeting of stockholders may be taken
only at a meeting of stockholders.
Voting Rights
A majority of the voting power of all outstanding shares of the Company
entitled to vote at a meeting of stockholders constitutes a quorum. Except as
otherwise provided by law or by the Certificate of Incorporation or the By-
laws of the Company, a resolution can be adopted at a meeting provided a
quorum is present.
The holders of Common Stock are entitled to one vote per share on all
matters upon which stockholders generally have the right to vote, while
holders of Class A Common Stock are entitled to 100 votes per share on all
matters on which such holders have the right to vote. All shares presently
outstanding are fully paid and nonassessable.
The shares of Common Stock do not have cumulative voting rights. At every
meeting of the stockholders called for the election of directors, the holders
of Common Stock, voting as a class with the holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and any other Series
of Preferred Stock generally entitled to vote therefor (collectively, the
"Voting Preferred"), shall be entitled to elect one-quarter of the number of
directors to be elected at such meeting, and if one-quarter of such number of
directors is not a whole number, then the holders of Common Stock, voting as a
class with the holders of Voting Preferred Stock, shall be entitled to elect
the next higher whole number of directors to be elected at such meeting, and
the holders of Class A Common Stock shall have no voting rights with respect
to the election of such directors. The holders of Class A Common Stock, Common
Stock and Voting Preferred Stock, voting as a single class, shall be entitled
to elect the remaining directors to be elected at such meeting. If, during the
interval between annual meetings of stockholders for the election of
directors, the number of directors who have been elected by either the holders
of Common Stock voting as a class with the holders of Voting Preferred Stock
or by the holders of Class A Common Stock, Common Stock and Voting Preferred
Stock, shall, by reason of resignation, death, retirement, disqualification or
removal, be reduced, the vacancy or vacancies in the directors so created may
be filled by a majority vote of the remaining directors then in office, even
if less than a quorum, or by a sole remaining director. Any director elected
by the remaining directors then in office to fill any vacancy in the
directorships designated by the holders of Common Stock and Voting Preferred
Stock may be removed from office by vote of the holders of a majority of the
shares of Common Stock voting as a class with the holders of Voting Preferred
Stock.
Notice of a stockholders' meeting, stating the place, date, time and the
purpose thereof, must be delivered either personally or by mail to each
stockholder at his address as it appears on the books of the Company unless
otherwise provided by law or the Certificate of Incorporation at least 10 days
but not more than 50 days prior to the date set for the meeting. Stockholders
may exercise their voting rights through proxies as provided in the By-laws.
Provisions Relating to Control of the Company
The Class A Common Stock carries certain rights, and the Certificate of
Incorporation of the Company contains certain provisions, which affect the
control of the Company, and are described below.
(i) Class A Common Stock
The Class A Common Stock is non-transferable. Each share of Class A Common
Stock carries the right to exercise 100 votes and may be converted into one
share of Common Stock. The Board of Directors may declare and pay dividends in
respect of the Class A Common Stock provided that a greater dividend is, at
the same time, declared and paid in respect of the Common Stock.
As conversions into shares of Common Stock carrying only one vote per share
occur and the amount of outstanding Class A Common Stock is accordingly
reduced, the voting power attaching to the Class A Common
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Stock will become consolidated in the hands of those who continue to hold such
stock and effectively strengthen their ability to influence the composition of
the Board of Directors (subject always to the right of the holders of Common
Stock and Voting Preferred Stock entitled to vote to elect one-quarter of the
total number of directors).
(ii) Board of Directors
(a) The Certificate of Incorporation of the Company provides for a Board of
Directors consisting of a minimum of three and a maximum of eighteen directors
to be divided into three classes (with each of the three classes required to
be as nearly equal as possible) serving staggered three-year terms. The effect
of this provision is that, at each annual meeting of the Company,
approximately one-third of the Board of Directors is elected to succeed those
whose terms expire. The total number of directors and the number of directors
constituting each class may be varied, from time to time, by the Board of
Directors within the authorized limits.
(b) Notwithstanding that the maximum of directors is established at
eighteen, the rights of any holders of Preferred Stock or any other class or
series of stock (other than Common Stock) to elect a specified number of
directors, are governed by the terms of the Certificate of Incorporation
applicable thereto, and such directors shall not be classified as described
above unless so provided.
(c) The directors are also empowered to fill casual vacancies occurring on
the Board. Any director so appointed by the Board would hold office for the
unexpired portion of the term of the director whose place he or she had taken.
Where the Board appoints a director to fill a newly created directorship
resulting from an increase in the number of directors, that director would
hold office until the next election of the class for which he or she was
chosen. If the size of the Board was increased, the additional director or
directors would be apportioned among the three classes to make all classes as
nearly equal as possible.
(d) No person (except a person nominated by or on behalf of the Board) is
eligible for election as a director at any annual or special meeting of
stockholders unless a written request that such person's name be placed in
nomination is received from a stockholder of record by the Secretary of the
Company not less than 30 days prior to the date fixed for the meeting,
together with the written consent of such person to serve as a director.
(iii) Meetings of Stockholders
Stockholder action may be taken only at a stockholders' meeting. Coastal's
stockholders do not have the power to call a special meeting and it may
therefore be more difficult for stockholders to take action opposed by the
Board of Directors. This may have the effect of deterring persons from seeking
to acquire substantial stock positions in or control of the Company, including
an attempt to acquire control of the Company made in response to any attempt
by the Company to acquire securities of, or control of, another corporation.
(iv) Business Combinations
The approval of the holders of 85% of the voting power of the outstanding
shares of stock of the Company is required, in certain circumstances, for the
adoption or authorization of a business combination with any controlling
company (being an entity which either owns, or is controlled by any entity
which owns, 20% of the voting power of the outstanding shares of Coastal's
stock). Delaware law provides that, unless the certificate of incorporation
specifies otherwise, the votes of the holders of a majority of the outstanding
voting stock are sufficient to approve a business combination.
A proposed business combination will not have to meet the 85% vote
requirement where certain fair price and other procedural requirements are
satisfied. These requirements are designed to ensure that the cash or market
value of any other consideration to be received by Coastal's stockholders in
such business combination is fair, to preserve the rights of the public
stockholders of Coastal by ensuring that appropriate representation on the
Board of Directors of the Company will be maintained, to keep public
stockholders fully informed as to the
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advisability of the proposed business combination and to ensure that there is
no major change in the business or capital structure of the Company and no
reduction in the rate of dividends payable on the Company's stock without the
approval of the Board of Directors.
Pre-emptive Rights
Neither stockholders nor any other person have any pre-emptive subscription
rights.
Liquidation, Dissolution and Reorganization
All shares of Common Stock and Class A Common Stock rank equally upon
liquidation or dissolution of the Company, after payment of all debts and
expenses and satisfaction of the interests of the holders of any shares of
Preferred Stock of the Company then outstanding.
The Certificate of Incorporation provides that if a majority in number
representing three-fourths in value of the creditors or class or creditors,
and/or of the stockholders or class of stockholders of the Company, as the
case may be, agree to any compromise or arrangement and to any reorganization
of the Company at a meeting properly called by a Delaware court, such action,
if sanctioned by the court will be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of the
Company as the case may be and also on the Company.
Transferability of Shares of Common Stock and Class A Common Stock
There are no restrictions in the Certificate of Incorporation or By-Laws of
the Company on the transferability of shares of Common Stock. Shares of Class
A Common Stock are not transferable and upon any attempted transfer or upon
death of the holder thereof are automatically converted into shares of Common
Stock.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants which may be issued
independently or together with any Securities offered by any Prospectus
Supplement and may be attached to or separate from such Securities. Each
series of Common Stock Warrants will be issued under a separate warrant
agreement (a "Warrant Agreement") to be entered into between the Company and a
bank or trust company, as Warrant Agent (the "Warrant Agent"), all as set
forth in the applicable Prospectus Supplement. The Warrant Agent will act
solely as an agent of the Company in connection with the certificates
representing the Common Stock Warrants (the "Common Stock Warrant
Certificates") and will not assume any obligation or relationship of agency or
trust for or with any holders of Common Stock Warrant Certificates or
beneficial owners of Common Stock Warrants. The Warrant Agreement, including
the form of Common Stock Warrant Certificate representing each series of
Common Stock Warrants, will be filed with the Commission at or prior to the
time of sale of any such series of Common Stock Warrants. The following
summaries of certain provisions of the Warrant Agreement and Common Stock
Warrant Certificate do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the Warrant
Agreement relating to, and the Common Stock Warrant Certificate representing,
a Series of Common Stock Warrants.
GENERAL
An applicable Prospectus Supplement will set forth and describe other
specific terms regarding each series of Common Stock Warrants offered hereby,
including:
1. the offering price;
2. the number of shares of Common Stock purchasable upon exercise of each
such Common Stock Warrant and the price at which such number of shares of
Common Stock may be purchased upon such exercise;
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3. the date on which the right to exercise such Common Stock Warrants
shall commence and the date on which such right shall expire (the
"Expiration Date"); and
4. any other terms of such Common Stock Warrants (and the applicable
Prospectus Supplement may state that any of the terms set forth herein are
inapplicable to such series).
Common Stock Warrants for the purchase of Common Stock will be offered and
exercisable for U.S. dollars only and will be in registered form only.
Common Stock Warrant Certificates may be exchanged for new Common Stock
Warrant Certificates of different denominations, may be presented for
registration or transfer, and may be exercised at the corporate trust office
of the Warrant Agent or any other office indicated in the applicable
Prospectus Supplement. Prior to the exercise of any Common Stock Warrants,
holders of such Common Stock Warrants will not have any rights of holders of
the Common Stock purchasable upon such exercise, including the right to
receive payments of dividends, if any, on the Common Stock purchasable upon
such exercise or to exercise any applicable right to vote.
EXERCISE OF COMMON STOCK WARRANTS
Each Common Stock Warrant will entitle the holder thereof to purchase such
shares of Common Stock at such exercise price as shall in each case be set
forth in, or calculable from, the Prospectus Supplement relating to the
offered Common Stock Warrants. After the close of business on the Expiration
Date (or such later date to which such Expiration Date may be extended by the
Company) unexercised Common Stock Warrants will become void.
Common Stock Warrants may be exercised by delivering to the Warrant Agent
payment as provided in the applicable Prospectus Supplement of the amount
required to purchase the Common Stock purchasable upon such exercise, together
with certain information set forth on the reverse side of the Common Stock
Warrant Certificate. Upon receipt of such payment and the Common Stock Warrant
Certificate properly completed and duly executed at the corporate trust office
of the Warrant Agent or any other office indicated in the applicable
Prospectus Supplement, the Company will, as soon as practicable, issue and
deliver the Common Stock purchasable upon such exercise. If fewer than all of
the Common Stock Warrants represented by such Common Stock Warrant Certificate
are exercised, a new Common Stock Warrant Certificate will be issued for the
remaining amount of Common Stock Warrants.
AMENDMENTS AND SUPPLEMENTS TO WARRANT AGREEMENT
The Warrant Agreement for a series of Common Stock Warrants may be amended
or supplemented without the consent of the holders of the Common Stock
Warrants issued thereunder to effect changes that are not inconsistent with
the provisions of the Common Stock Warrants and that do not adversely affect
the interests of the holders of the Common Stock Warrants.
COMMON STOCK WARRANT ADJUSTMENTS
Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of shares of Common Stock covered by, a
Common Stock Warrant are subject to adjustment in certain events, including:
(i) the issuance of Common Stock as a dividend or distribution on the Common
Stock; (ii) subdivisions and combinations of the Common Stock; (iii) the
issuance to all holders of Common Stock of certain rights or warrants
entitling them to subscribe for or purchase Common Stock, at less than the
Current Market Value (as defined in the Warrant Agreement for such series of
Common Stock Warrants); and (iv) the distribution to all holders of Common
Stock of evidences of indebtedness or assets of the Company (excluding certain
cash dividends and distributions described below).
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No adjustment in the exercise price of, and the number of shares of Common
Stock covered by, a Common Stock Warrant will be made for regular quarterly or
other periodic or recurring cash dividends or distributions or for cash
dividends or distributions to the extent paid from retained earnings. No
adjustment will be required unless such adjustment would require a change of
at least one percent in the exercise price and exercise rate then in effect;
provided, however, that any such adjustment not so made will be carried
forward and taken into account in any subsequent adjustment; provided further,
that any such adjustment not so made shall be made no later than three years
after the occurrence of the event requiring such adjustment to be made or
carried forward. Except as stated above, the exercise price of, and the number
of shares of Common Stock covered by, a Common Stock Warrant will not be
adjusted for the issuance of Common Stock or any securities convertible into
or exchangeable for Common Stock, or securities carrying the right to purchase
any of the foregoing.
In the case of (i) a reclassification or change of the Common Stock, (ii) a
consolidation or merger involving the Company or (iii) a sale or conveyance to
another corporation of the property and assets of the Company as an entirety
or substantially as an entirety, in each case as a result of which holders of
the Company's Common Stock shall be entitled to receive stock, securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, the holders of the Common Stock Warrants then outstanding
will be entitled thereafter to convert such Common Stock Warrants into the
kind and amount of shares of stock and other securities or property which they
would have received upon such reclassification, change, consolidation, merger,
sale or conveyance had such Common Stock Warrants been exercised immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance.
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DESCRIPTION OF THE TRUST PREFERRED SECURITIES
Each Trust may issue only one series of Trust Preferred Securities having
terms described in the Prospectus Supplement relating thereto. The Declaration
of each Trust authorizes the Regular Trustees of such Trust to issue on behalf
of such Trust one series of Trust Preferred Securities. Each Declaration will
be qualified as an indenture under the Trust Indenture Act. The Trust
Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as shall be set forth in each
Declaration or made part of each Declaration by the Trust Indenture Act and
the Trust Act. Reference is made to the Prospectus Supplement relating to the
Trust Preferred Securities of a Trust for specific terms, including (i) the
distinctive designation of such Trust Preferred Securities; (ii) the number of
Trust Preferred Securities issued by such Trust; (iii) the annual distribution
rate (or method of determining such rate) for Trust Preferred Securities
issued by such Trust and the date or dates upon which such distributions shall
be payable; provided, however, that distributions on such Trust Preferred
Securities shall be payable on a quarterly basis to holders of such Preferred
Securities as of a record date in each quarter during which such Trust
Preferred Securities are outstanding; (iv) whether distributions on Trust
Preferred Securities issued by such Trust shall be cumulative, and, in the
case of Trust Preferred Securities having such cumulative distribution rights,
the date or dates or method of determining the date or dates from which
distributions on Trust Preferred Securities issued by such Trust shall be
cumulative; (v) the amount or amounts which shall be paid out of the assets of
such Trust to purchase or redeem Trust Preferred Securities issued by such
Trust and the price or prices at which, the period or periods within which,
and the terms and conditions upon which, Trust Preferred Securities issued by
such Trust shall be purchased or redeemed, in whole or in part, pursuant to
such obligation; (vi) the voting rights, if any, of Trust Preferred Securities
issued by such Trust in addition to those required by law, including any
requirement for the approval by the holders of Trust Preferred Securities, or
of Trust Preferred Securities issued by one or more Trusts, or of both, as a
condition to specified action or amendments to the Declaration of such Trust;
and (vii) any other relevant rights, preferences, privileges, limitations or
restrictions of Trust Preferred Securities issued by such Trust not
inconsistent with the Declaration of such Trust or with applicable law. All
Trust Preferred Securities offered hereby will be guaranteed by the Company as
described under "Description of the Trust Preferred Securities Guarantees"
below. Any applicable United States federal income tax considerations
applicable to any offering of Trust Preferred Securities will be described in
the Prospectus Supplement relating thereto.
In connection with the issuance of Trust Preferred Securities, each Trust
will issue one series of Trust Common Securities. The Declaration of each
Trust authorizes the Regular Trustees of such Trust to issue on behalf of such
Trust one series of Trust Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such restrictions as
shall be set forth therein. The terms of the Trust Common Securities issued by
a Trust will be substantially identical to the terms of the Trust Preferred
Securities issued by such Trust and the Trust Common Securities will rank pari
passu, and payments will be made thereon pro rata, with the Trust Preferred
Securities except that, upon an event of default under the Declaration, the
rights of the holders of the Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the Trust Preferred Securities.
All of the Trust Common Securities of a Trust will be directly or indirectly
owned by the Company.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Trust Preferred
Securities Guarantees which will be executed and delivered by the Company for
the benefit of the holders from time to time of Trust Preferred Securities.
Each Trust Preferred Securities Guarantee will be qualified as an indenture
under the Trust Indenture Act. The Bank of New York will act as indenture
trustee under each Trust Preferred Securities Guarantee (the "Preferred
Guarantee Trustee"). The terms of each Preferred Securities Guarantee will be
those set forth in such Trust Preferred Securities Guarantee and those made
part of such Preferred Securities Guarantee by the Trust Indenture Act. The
following summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the form of Trust Preferred Securities Guarantee,
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which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, and the Trust Indenture Act. Each Trust Preferred
Securities Guarantee will be held by the Preferred Guarantee Trustee for the
benefit of the holders of the Trust Preferred Securities of the applicable
Trust.
GENERAL
Pursuant to each Trust Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree to pay in full, to the holders of the
Trust Preferred Securities issued by a Trust, the Guarantee Payments (as
defined herein) (except to the extent paid by such Trust), as and when due,
regardless of any defense, right to set-off or counterclaim which such Trust
may have or assert. The following payments with respect to Preferred
Securities issued by a Trust, to the extent not paid by such Trust (the
"Guarantee Payments"), will be subject to the Trust Preferred Securities
Guarantee thereon (without duplication): (i) any accrued and unpaid
distributions which are required to be paid on such Trust Preferred
Securities, to the extent such Trust shall have funds available therefor, (ii)
the redemption price, including all accrued and unpaid distributions to the
redemption date (the "Redemption Price"), to the extent such Trust has funds
available therefor, with respect to any Preferred Securities called for
redemption by such Trust and (iii) upon a voluntary or involuntary
termination, dissolution or winding-up of such Trust (other than in connection
with the distribution of Subordinated Deferrable Interest Debentures to the
holders of Trust Preferred Securities in exchange for their Trust Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on such Trust Preferred Securities to the
date of payment and (b) the amount of assets of such Trust remaining available
for distribution to holders of such Trust Preferred Securities in liquidation
of such Trust. The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Company to the
holders of Trust Preferred Securities or by causing the applicable Trust to
pay such amounts to such holders.
Each Trust Preferred Securities Guarantee will be a full and unconditional
guarantee with respect to the Trust Preferred Securities issued by the
applicable Trust from the time of issuance of such Trust Preferred Securities,
but will not apply to any payment of distributions when the Trust does not
have sufficient funds available to make such payment or distributions. If the
Company does not make interest payments on the Subordinated Deferrable
Interest Debentures purchased by a Trust, such Trust will not pay
distributions on the Trust Preferred Securities issued by such Trust and will
not have funds available therefor. See "Description of the Subordinated
Deferrable Interest Debentures--Certain Covenants."
The Company has also agreed separately to guarantee the obligations of the
Trusts with respect to the Trust Common Securities (the "Trust Common
Securities Guarantees") to the same extent as the Trust Preferred Securities
Guarantee, except that upon the occurrence and during the continuation of an
event of default under the Indenture (as hereinafter defined), holders of
Trust Preferred Securities shall have priority over holders of Trust Common
Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Trust Preferred Securities Guarantee, the Company will covenant
that, so long as any Trust Preferred Securities issued by the applicable Trust
remain outstanding, if any event that would constitute an event of default
shall exist under such Trust Preferred Securities Guarantee or the Declaration
of such Trust, then (a) the Company shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of its capital stock, (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by the Company which
rank pari passu with or junior to such Subordinated Deferrable Interest
Debentures and (c) the Company shall not make any guarantee payments (other
than pursuant to the Trust Preferred Security Guarantees) with respect to the
foregoing. However, each Trust Preferred Security Guarantee will except from
the foregoing covenant any dividend, redemption, liquidation, interest,
principal or guarantee payment by the Company where the payment is made by way
of securities (including capital stock) that rank junior to the securities on
which such dividend, redemption, liquidation, interest, principal or guarantee
payment is being made.
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MODIFICATION OF THE TRUST PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Trust Preferred Securities (in which case no vote will be
required), each Trust Preferred Securities Guarantee may be amended only with
the prior approval of the holders of not less than a majority in aggregate
liquidation amount of the outstanding Trust Preferred Securities issued by the
applicable Trust. The manner of obtaining any such approval of holders of such
Trust Preferred Securities will be as set forth in an accompanying Prospectus
Supplement. All guarantees and agreements contained in a Trust Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Company and shall inure to the benefit of the
holders of the Trust Preferred Securities then outstanding of the applicable
Trust.
TERMINATION
Each Trust Preferred Securities Guarantee will terminate as to the Trust
Preferred Securities issued by the applicable Trust upon full payment of the
Redemption Price of all Trust Preferred Securities of such Trust, upon
distribution of the Subordinated Deferrable Interest Debentures held by such
Trust to the holders of the Trust Preferred Securities of such Trust in
liquidation of such holders' interest in such Trust Preferred Securities or
upon full payment of the amounts payable in accordance with the Declaration of
such Trust upon liquidation of such Trust. Each Trust Preferred Securities
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Trust Preferred Securities issued by the
applicable Trust must restore payment of any sums paid under such Trust
Preferred Securities or such Trust Preferred Securities Guarantee.
EVENTS OF DEFAULT
An event of default under a Trust Preferred Securities Guarantee will occur
upon the failure of the Company to perform any of its payment or other
obligations thereunder.
The holders of a majority in liquidation amount of the Trust Preferred
Securities relating to such Trust Preferred Securities Guarantee have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Preferred Guarantee Trustee in respect of such
Trust Preferred Securities Guarantee or to direct the exercise of any trust or
power conferred upon the Trust Preferred Guarantee Trustee under such Trust
Preferred Securities Guarantee. If the Preferred Guarantee Trustee fails to
enforce such Trust Preferred Securities Guarantee, any holder of Trust
Preferred Securities relating to such Trust Preferred Securities Guarantee may
institute a legal proceeding directly against the Company to enforce the
Preferred Guarantee Trustee's rights under such Trust Preferred Securities
Guarantee, without first instituting a legal proceeding against the relevant
Trust, the Preferred Guarantee Trustee or any other person or entity. In
addition, any record holder of Trust Preferred Securities relating to such
Trust Preferred Securities Guarantee shall have the right, which is absolute
and unconditional, to proceed directly against the Company to obtain Guarantee
Payments thereunder, without first waiting to determine if the Preferred
Guarantee Trustee has enforced such Trust Preferred Security Guarantee or
instituting a legal proceeding against the Trust which issued such Trust
Preferred Securities, the Preferred Guarantee Trustee or any other person or
entity.
STATUS OF THE TRUST PREFERRED SECURITIES GUARANTEES
The Trust Preferred Securities Guarantees will constitute unsecured
obligations of the Company and will rank (i) subordinate and junior in right
of payment to all other liabilities of the Company, (ii) pari passu with the
most senior preferred or preference stock now or hereafter issued by the
Company and with any guarantee now or hereafter entered into by the Company in
respect of any preferred or preference stock of any subsidiary or affiliate of
the Company and (iii) senior to the Company's common stock. The terms of the
Trust Preferred Securities provide that each holder of Trust Preferred
Securities issued by such Trust by acceptance thereof agrees to the
subordination provisions and other terms of the Trust Preferred Securities
Guarantee relating thereto.
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The Trust Preferred Securities Guarantees will constitute a guarantee of
payment and not of collection (that is, the guaranteed party may institute a
legal proceeding directly against the guarantor to enforce its rights under
the guarantee without instituting a legal proceeding against any other person
or entity).
The Company's obligations under the Declaration for each Trust, the Trust
Preferred Securities Guarantee with respect to the Trust Preferred Securities
issued by such Trust, the Subordinated Deferrable Interest Debentures
purchased by such Trust and the Indenture, in the aggregate, will provide a
full and unconditional guarantee by the Company of payments due on the Trust
Preferred Securities issued by such Trust.
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to a Trust Preferred Securities Guarantee, undertakes to perform only
such duties as are specifically set forth in such Trust Preferred Securities
Guarantee 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 Preferred Guaranteed Trustee is under no
obligation to exercise any of the powers vested in it by the Trust Preferred
Securities Guarantee at the request of any holder of Trust Preferred
Securities, unless offered reasonable indemnity against the costs, expenses
and liabilities which might be incurred thereby.
The Company and certain of its affiliates maintain deposit accounts and
banking relationships with the Preferred Guarantee Trustee. The Preferred
Guarantee Trustee serves as trustee under other indentures pursuant to which
unsecured debt securities of the Company are outstanding.
GOVERNING LAW
The Trust Preferred Securities Guarantees will be governed by and construed
in accordance with the internal laws of the State of New York.
DESCRIPTION OF THE SUBORDINATED DEFERRABLE INTEREST DEBENTURES
Subordinated Deferrable Interest Debentures may be issued from time to time
in one or more series under an Indenture (the "Indenture") to be entered into
among the Company and The Bank of New York, as Trustee (the "Subordinated Debt
Trustee"). The terms of the Subordinated Deferrable Interest Debentures will
include those stated in the Indenture and in a Supplemental Indenture (as
defined below) and those made part of the Indenture by reference to the Trust
Indenture Act. The following summary does not purport to be complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the Indenture, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Trust
Indenture Act. Whenever particular provisions or defined terms in the
Indenture are referred to herein, such provisions or defined terms are
incorporated by reference herein.
GENERAL
The Subordinated Deferrable Interest Debentures will be unsecured,
subordinated obligations of the Company. The Indenture does not limit the
aggregate principal amount of Subordinated Deferrable Interest Debentures
which may be issued thereunder and provides that the Subordinated Deferrable
Interest Debentures may be issued from time to time in one or more series. The
Subordinated Deferrable Interest Debentures are issuable in one or more series
pursuant to an indenture supplemental to the Indenture or a resolution of the
Company's Board of Directors or a special committee thereof (each, a
"Supplemental Indenture").
In the event Subordinated Deferrable Interest Debentures are issued to a
Trust or a trustee of such Trust in connection with the issuance of Trust
Securities by such Trust, such Subordinated Deferrable Interest Debentures
subsequently may be distributed pro rata to the holders of such Trust
Securities in connection with the
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termination of such Trust upon the occurrence of certain events described in
the Prospectus Supplement relating to such Trust Securities. Only one series
of Subordinated Deferrable Interest Debentures will be issued to a Trust or a
trustee of such Trust in connection with the issuance of Trust Securities by
such Trust.
Reference is made to the accompanying Prospectus Supplement for the
following terms of the series of Subordinated Deferrable Interest Debentures
being offered thereby: (i) the specific title of such Subordinated Deferrable
Interest Debentures; (ii) any limit on the aggregate principal amount of such
Subordinated Deferrable Interest Debentures; (iii) the date or dates on which
the principal of such Subordinated Deferrable Interest Debentures is payable
and the right, if any, to extend such date or dates; (iv) the rate or rates at
which such Subordinated Deferrable Interest Debentures will bear interest or
the method of determination of such rate or rates; (v) the date or dates from
which such interest shall accrue, the interest payment dates on which such
interest will be payable or the manner of determination of such interest
payment dates and the record dates for the determination of holders to whom
interest is payable on any such interest payment dates; (vi) the right, if
any, to extend the interest payment periods and the duration of such
extension; (vii) the period or periods within which, the price or prices at
which, and the terms and conditions upon which, such Subordinated Deferrable
Interest Debentures may be redeemed, in whole or in part, at the option of the
Company; (viii) the right and/or obligation, if any, of the Company to redeem
or purchase such Subordinated Deferrable Interest Debentures pursuant to any
sinking fund or analogous provisions or at the option of the holder thereof
and the period or periods during which, the price or prices at which, and the
terms and conditions upon which, such Subordinated Deferrable Interest
Debentures shall be redeemed or purchased, in whole or part, pursuant to such
right and/or obligation; (ix) the terms of subordination; (x) if other than
denominations of $25 or any integral multiple thereof, the denominations in
which such Subordinated Deferrable Interest Debentures shall be issuable; (xi)
any and all other terms with respect to such series; and (xii) whether such
Subordinated Deferrable Interest Debentures are issuable as a global security,
and in such case, the identity of the depositary.
The Indenture does not contain any provisions that afford holders of
Subordinated Deferrable Interest Debentures protection in the event of a
highly leveraged transaction involving the Company.
SUBORDINATION
The Subordinated Deferrable Interest Debentures will be subordinated and
junior in right of payment to certain other indebtedness of the Company to the
extent set forth in the accompanying Prospectus Supplement.
CERTAIN COVENANTS
If Subordinated Deferrable Interest Debentures are issued to a Trust or a
trustee of such Trust in connection with the issuance of Trust Securities by
such Trust and (i) there shall have occurred and be continuing any event that
would constitute an Event of Default under the Indenture or (ii) the Company
shall be in default with respect to its payment of any obligations under the
related Trust Preferred Securities Guarantee or Trust Common Securities
Guarantee, and such default shall be continuing, then (a) the Company shall
not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock, (b) the Company shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Company which rank pari passu with or junior to such
Subordinated Deferrable Interest Debentures and (c) the Company shall not make
any guarantee payments (other than pursuant to the Trust Preferred Security
Guarantees) with respect to the foregoing.
If Subordinated Deferrable Interest Debentures are issued to a Trust or a
trustee of such Trust in connection with the issuance of Trust Securities by
such Trust and the Company shall have given notice of its election to defer
payments of interest on such Subordinated Deferrable Interest Debentures by
extending the interest payment period as provided in the Indenture and such
period, or any extension thereof, shall be continuing, then (a) the Company
shall not declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase or make a liquidation payment with respect to, any of
its capital stock, (b) the Company shall not make
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any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities issued by the Company which rank pari passu with
or junior to such Subordinated Deferrable Interest Debentures and (c) the
Company shall not make any guarantee payments (other than pursuant to the
Trust Preferred Security Guarantees) with respect to the foregoing.
Notwithstanding the foregoing restrictions, the Company will be permitted,
in any event, to make dividend, redemption, liquidation and guarantee payments
on capital stock, and interest, principal, redemption and guarantee payments
on debt securities issued by the Company ranking pari passu with or junior to
Subordinated Deferrable Interest Debentures, where the payment is made by way
of securities (including capital stock) that rank junior to the securities on
which such payment is being made.
In the event Subordinated Deferrable Interest Debentures are issued to a
Trust or a trustee of such Trust in connection with the issuance of Trust
Securities of such Trust, for so long as such Trust Securities remain
outstanding, the Company will covenant (i) to directly or indirectly maintain
100% ownership of the Trust Common Securities of such Trust; provided,
however, that any permitted successor of the Company under the Indenture may
succeed to the Company's ownership of such Trust Common Securities, (ii) not
to cause, as sponsor of such Trust, or to permit, as holder of the Trust
Common Securities of such Trust, the termination, dissolution or winding-up of
such Trust, except in connection with a distribution of the Subordinated
Deferrable Interest Debentures as provided in the Declaration and in
connection with certain mergers, consolidations or amalgamations, (iii) to use
its reasonable efforts to cause such Trust (a) to remain a statutory business
trust, except in connection with the distribution of Subordinated Deferrable
Interest Debentures to the holders of Trust Securities in liquidation of such
Trust, the redemption of all of the Trust Securities of such Trust, or certain
mergers, consolidations or amalgamations, each as permitted by the Declaration
of such Trust, and (b) to otherwise continue not to be classified as an
association taxable as a corporation or partnership for United States federal
income tax purposes and (iv) to use reasonable efforts to cause each holder of
Trust Securities of such Trust to be treated as owning an undivided beneficial
interest in the Subordinated Deferrable Interest Debentures issued to such
Trust.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Subordinated Deferrable Interest Debentures of each series will be issued in
registered form and in either certificated form or represented by one or more
global securities. If not represented by one or more global securities,
Subordinated Deferrable Interest Debentures may be presented for registration
of transfer (with the form of transfer endorsed thereon duly executed) or
exchange at the office of the Debt Registrar or at the office of any transfer
agent designated by the Company for such purpose with respect to any series of
Subordinated Deferrable Interest Debentures and referred to in an applicable
Prospectus Supplement, without service charge and upon payment of any taxes
and other governmental charges as described in the Indenture. Such transfer or
exchange will be effected upon the Debt Registrar or such transfer agent, as
the case may be, being satisfied with the documents of title and identity of
the person making the request. The Company has appointed the Subordinated Debt
Trustee as Debt Registrar with respect to each series of Subordinated
Deferrable Interest Debentures. If a Prospectus Supplement refers to any
transfer agents (in addition to the Debt Registrar) initially designated by
the Company with respect to any series of Subordinated Deferrable Interest
Debentures, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that the Company will be required to maintain a
transfer agent in each Place of Payment for such series. The Company may at
any time designate additional transfer agents with respect to any series of
Subordinated Deferrable Interest Debentures.
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange any Subordinated Deferrable
Interest Debentures during a period beginning at the opening of business 15
days before any selection for redemption of Subordinated Deferrable Interest
Debentures of like tenor and of the series of which such Subordinated
Deferrable Interest Debentures are a part, and ending at the close of business
on the earliest date on which the relevant notice of redemption is deemed to
have been given to all holders of Subordinated Deferrable Interest Debentures
of like tenor and of such series to be redeemed and
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(ii) register the transfer of or exchange any Subordinated Deferrable Interest
Debentures so selected for redemption, in whole or in part, except the
unredeemed portion of any Subordinated Deferrable Interest Debentures being
redeemed in part.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and premium, if any, on any Subordinated Deferrable Interest
Debentures will be made only against surrender to the Paying Agent of such
Subordinated Deferrable Interest Debentures. Unless otherwise indicated in an
applicable Prospectus Supplement, principal of, any premium, if any, and
interest, if any, on Subordinated Deferrable Interest Debentures will be
payable, subject to any applicable laws and regulations, at the office of such
Paying Agent or Paying Agents as the Company may designate from time to time,
except that at the option of the Company, payment of any interest may be made
by check mailed to the address of the person entitled thereto as such address
as shall appear in the Debt Register with respect to such Subordinated
Deferrable Interest Debentures. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of interest on a Subordinated Deferrable
Interest Debenture on any Interest Payment Date will be made to the person in
whose name such Subordinated Deferrable Interest Debenture (or predecessor
security) is registered at the close of business on the Regular Record Date
for such interest payment.
The Subordinated Debt Trustee will act as Paying Agent with respect to each
series of Subordinated Deferrable Interest Debentures. The Company may at any
time designate additional Paying Agents or rescind the designation of any
Paying Agents or approve a change in the office through which any Paying Agent
acts, except that the Company will be required to maintain a Paying Agent in
each Place of Payment for each series of Subordinated Deferrable Interest
Debentures.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or premium or interest, if any, on any Subordinated Deferrable
Interest Debentures of any series which remain unclaimed at the end of two
years after such principal or premium or interest, if any, shall have become
due and payable will be repaid to the Company and the holder of such
Subordinated Deferrable Interest Debentures will thereafter look only to the
Company for payment thereof.
GLOBAL SECURITIES
If any Subordinated Deferrable Interest Debentures of a series are
represented by one or more global securities (each, a "Global Security"), the
applicable Prospectus Supplement will describe the circumstances, if any,
under which beneficial owners of interests in any such Global Security may
exchange such interests for Subordinated Deferrable Interest Debentures of
such series and of like tenor and principal amount in any authorized form and
denomination. Principal of and any premium, if any, and interest on a Global
Security will be payable in the manner described in the applicable Prospectus
Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Subordinated Deferrable Interest Debentures to be represented
by a Global Security will be described in the applicable Prospectus
Supplement.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Subordinated Debt Trustee, with the consent of the holders of not less than a
majority in principal amount of the Subordinated Deferrable Interest
Debentures of each series which are affected by the modification, to modify
the Indenture or any supplemental indenture affecting that series or the
rights of the holders of that series of Subordinated Deferrable Interest
Debentures; provided, however, that no such modification may, without the
consent of the holder of each outstanding Subordinated Deferrable Interest
Debenture affected thereby, (i) extend the fixed maturity of any Subordinated
Deferrable Interest Debentures of any series, or reduce the principal amount
thereof, or reduce the
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rate or extend the time of payment of interest thereon, or reduce any premium
payable upon the redemption thereof, without the consent of the holder of each
Subordinated Deferrable Interest Debenture so affected or (ii) reduce the
percentage of Subordinated Deferrable Interest Debentures the holders of which
are required to consent to any such supplemental indenture, without the
consent of the holders of each then outstanding Subordinated Deferrable
Interest Debenture affected thereby.
In addition, the Company and the Subordinated Debt Trustee may execute,
without the consent of any holder of Subordinated Deferrable Interest
Debentures, any supplemental indenture for certain other usual purposes
including the creation of any new series of Subordinated Deferrable Interest
Debentures.
EVENTS OF DEFAULT
With respect to a particular series of Subordinated Deferrable Interest
Debentures, the Indenture provides (or the Supplemental Indenture for such
series will provide) that any one or more of the following described events
which has occurred and is continuing constitutes an "Event of Default" with
respect to such series of Subordinated Deferrable Interest Debentures:
(a) failure for 30 days to pay interest on the Subordinated Deferrable
Interest Debentures of that series, including any Additional Interest in
respect thereof, when due; provided, however, that a valid extension of the
interest payment period by the Company shall not constitute a default in
the payment of interest for this purpose; or
(b) failure to pay principal or premium, if any, on the Subordinated
Deferrable Interest Debentures of that series when due whether at maturity,
upon redemption, by declaration or otherwise, or to make any sinking fund
payment with respect to that series; or
(c) failure to observe or perform any other covenant (other than those
specifically relating to another series) contained in the Indenture for 90
days after written notice to the Company from the Subordinated Debt Trustee
or the holders of at least 25% in principal amount of the outstanding
Subordinated Deferrable Interest Debentures of that series; or
(d) certain events of bankruptcy, insolvency or reorganization of the
Company; or
(e) in the event Subordinated Deferrable Interest Debentures are issued
to a Trust or a trustee of such Trust in connection with the issuance of
Trust Securities by such Trust, the voluntary or involuntary dissolution,
winding-up or termination of such Trust, except in connection with the
distribution of Subordinated Deferrable Interest Debentures to the holders
of Trust Securities in liquidation of such Trust, the redemption of all of
the Trust Securities of such Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of such Trust.
The holders of a majority in aggregate outstanding amount of any series of
Subordinated Deferrable Interest Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Subordinated Debt Trustee for the series. The Subordinated Debt Trustee or the
holders of not less than 25% in aggregate outstanding principal amount of any
particular series of the Subordinated Deferrable Interest Debentures may
declare the principal immediately due and payable upon an Event of Default
with respect to such series, but the holders of a majority in aggregate
outstanding principal amount of such series may annul such declaration and
waive the default with respect to such series if the Event of Default has been
cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration and any applicable premium has
been deposited with the Subordinated Debt Trustee. If an Event of Default
results from the failure of the Company to pay when due principal of or
interest on the Subordinated Deferrable Interest Debentures issued to a Trust,
during the continuance of such an Event of Default a holder of Trust Preferred
Securities issued by such Trust may immediately institute a legal proceeding
directly against the Company to obtain payment of such principal or interest
on Subordinated Deferrable Interest Debentures having a principal amount equal
to the aggregate liquidation amount of the Trust Preferred Securities owned of
record by such holder.
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The holders of a majority in aggregate outstanding principal amount of any
series of Subordinated Deferrable Interest Debentures affected thereby may, on
behalf of the holders of all the Subordinated Deferrable Interest Debentures
of such series, waive any past default, except (i) a default in the payment of
principal, premium, if any, or interest (unless such default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration and any applicable premium has been
deposited with the Subordinated Debt Trustee) or (ii) a default in the
covenants described in the first or second paragraph under "--Certain
Covenants" above.
CONSOLIDATION, MERGER AND SALE
The Indenture does not contain any covenant which restricts the ability of
the Company to merge or consolidate with or into any other corporation, sell
or convey all or substantially all of its assets to any person, firm or
corporation or otherwise engage in restructuring transactions.
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Subordinated Deferrable Interest
Debentures of any series (except in each case for certain obligations to
register the transfer or exchange of Subordinated Deferrable Interest
Debentures, replace, stolen, lost or mutilated Subordinated Deferrable
Interest Debentures, maintain paying agencies and hold moneys for payment in
trust) if the Company deposits with the Subordinated Debt Trustee, in trust,
moneys or U.S. Government Obligations in an amount sufficient to pay all the
principal of, and interest on, the Subordinated Deferrable Interest Debentures
of such series on the dates such payments are due in accordance with the terms
of such Subordinated Deferrable Interest Debentures.
GOVERNING LAW
The Indenture and the Subordinated Deferrable Interest Debentures will be
governed by, and construed in accordance with, the internal laws of the State
of New York.
INFORMATION CONCERNING THE SUBORDINATED DEBT TRUSTEE
The Subordinated Debt Trustee, prior to default, undertakes to perform only
such duties as are specifically set forth in the Indenture 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 provision, the
Subordinated Debt Trustee is under no obligation to exercise any of the powers
vested in it by the Indenture at the request of any holder of Subordinated
Deferrable Interest Debentures, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The Subordinated Debt Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance
of its duties if the Subordinated Debt Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
The Company and certain of its affiliates maintain a deposit account and
banking relationship with the Subordinated Debt Trustee. The Subordinated Debt
Trustee serves as trustee under other indentures pursuant to which unsecured
debt securities of the Company are outstanding.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of the Company; provided, however, that in the event of any such
assignment, the Company will remain liable for all of its obligations
thereunder. Subject to the foregoing, the Indenture will be binding upon and
inure to the benefit of the parties thereto and their respective successors
and assigns. The Indenture provides that it may not otherwise be assigned by
the parties thereto.
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PLAN OF DISTRIBUTION
The Company may sell Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to a limited number of institutional
purchasers or to a single purchaser; or (iii) through agents. Any such dealer
or agent, in addition to any underwriter, may be deemed to be an underwriter
within the meaning of the Securities Act. The terms of the offering of the
Securities with respect to which this Prospectus is being delivered will be
set forth in the applicable Prospectus Supplement, including the name or names
of any underwriters, dealers or agents, the purchase price of such Securities
and the proceeds to the Company from such sale, any underwriting discounts and
other items constituting underwriters' compensation, the public offering price
and any discounts or concessions which may be allowed or reallowed or paid to
dealers and any securities exchanges on which the Securities may be listed.
If underwriters are used in the sale of Securities, such Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The Securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by one or more
underwriters acting alone. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the underwriters to purchase the
Securities described in the applicable Prospectus Supplement will be subject
to certain conditions precedent, and the underwriters will be obligated to
purchase all such Securities if any are so purchased by them. Any public
offering price and any discounts or concessions allowed or reallowed or paid
to dealers may be changed from time to time.
The Securities may be sold directly by the Company or the applicable Trust
or through agents designated by the Company or the applicable Trust from time
to time. Any agents involved in the offer or sale of the Securities in respect
of which this Prospectus is being delivered, and any commissions payable by
the Company or the applicable Trust to such agents, will be set forth in the
applicable Prospectus Supplement. Unless otherwise indicated in the applicable
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment.
If dealers are utilized in the sale of any Securities, the Company or the
applicable Trust will sell the Securities to the dealers, as principals. Any
dealer may resell the Securities to the public at varying prices to be
determined by the dealer at the time of resale. The name of any dealer and the
terms of the transaction will be set forth in the Prospectus Supplement with
respect to the Securities being offered.
If so indicated in the applicable Prospectus Supplement, the Company or the
applicable Trust will authorize agents, underwriters or dealers to solicit
offers by certain specified institutions to purchase the Securities to which
this Prospectus and the applicable Prospectus Supplement relates from the
Company or the applicable Trust at the public offering price set forth in the
applicable Prospectus Supplement, plus, if applicable, accrued interest,
pursuant to delayed delivery contracts providing for payment and delivery on a
specified date in the future. Such contracts will be subject only to those
conditions set forth in the applicable Prospectus Supplement, and the
applicable Prospectus Supplement will set forth the commission payable for
solicitation of such contracts.
Underwriters will not be obligated to make a market in any Securities. No
assurance can be given regarding the activity of trading in, or liquidity of,
any Securities..
Agents, dealers and underwriters may be entitled, under agreements entered
into with the Company or the applicable Trust (or both), to indemnification by
the Company or the applicable Trust (or both) against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution to payments they may be required to make in respect thereof.
Agents, dealers and underwriters may be customers of, engage in transactions
with, or perform services for, the Company and/or the applicable Trust in the
ordinary course of business.
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LEGAL MATTERS
Certain legal matters in connection with the Equity Securities, the Debt
Securities, the Common Stock Warrants and the Preferred Securities Guarantees
offered hereby will be passed upon for the Company by Austin M. O'Toole, Esq.,
Senior Vice President and Secretary of Coastal, and for any underwriters,
agents and dealers by Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York. Certain matters of Delaware law
relating to the validity of the Trust Preferred Securities will be passed upon
on behalf of the Trusts by Richards, Layton & Finger, P.A., Wilmington,
Delaware, special Delaware counsel to the Trusts. As of March 11, 1998, Mr.
O'Toole beneficially owned approximately 23,144 shares of Common Stock and 553
shares of Class A Common Stock of Coastal, including exercisable stock
options.
EXPERTS
The annual consolidated financial statements of the Company incorporated in
this Prospectus by reference from the 1997 Annual Report on Form 10-K have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY COASTAL FINANCE I, THE COASTAL
CORPORATION OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF COASTAL FINANCE I OR THE COASTAL CORPORATION SINCE THE DATE HEREOF.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Prospectus Summary........................................................ S-4
Risk Factors.............................................................. S-9
The Trust................................................................. S-12
Accounting Treatment...................................................... S-13
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. S-13
Use of Proceeds........................................................... S-13
Capitalization............................................................ S-14
Description of the Preferred Securities................................... S-15
Description of the Preferred Securities Guarantee......................... S-26
Description of the Subordinated Debt Securities........................... S-29
Effect of Obligations Under the Subordinated Debt Securities and the
Preferred Securities Guarantee........................................... S-37
Certain Federal Income Tax Consequences................................... S-38
Underwriting.............................................................. S-42
Legal Matters............................................................. S-44
Definitions............................................................... S-45
PROSPECTUS
Available Information..................................................... 2
Incorporation of Documents by Reference................................... 2
The Company............................................................... 4
The Trusts................................................................ 4
Use of Proceeds........................................................... 5
Accounting Treatment Relating to Trust Securities......................... 5
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends................................................................ 5
Description of Debt Securities............................................ 6
Description of Equity Securities.......................................... 17
Description of Common Stock Warrants...................................... 23
Description of the Trust Preferred Securities............................. 26
Description of the Trust Preferred Securities Guarantees.................. 26
Description of the Subordinated Deferrable Interest Debentures............ 29
Plan of Distribution...................................................... 35
Legal Matters............................................................. 36
Experts................................................................... 36
</TABLE>
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12,000,000 PREFERRED SECURITIES
COASTAL FINANCE I
8.375% TRUST ORIGINATED PREFERRED SECURITIES(SM) ("TOPrS(SM)")
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
[LOGO OF COASTAL CORPORATION APPEARS HERE]
THE COASTAL CORPORATION
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
A.G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
MAY 7, 1998
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