<PAGE>
PROSPECTUS
REGISTRATION NOS: 333-63613
333-63613-01
FILED PURSUANT TO RULE 424(b)(1)
2,800,000 PREFERRED SECURITIES
NVP CAPITAL III
7 3/4% TRUST ISSUED PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
NEVADA POWER COMPANY
------------
The 7 3/4% Trust Issued Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the assets
of NVP Capital III, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"). Nevada Power Company, a Nevada corporation (the
"Company"), will own all the common securities (the "Common Securities" and,
together with the Preferred Securities, the "Trust Securities") representing
undivided beneficial interests in the assets of the Trust. The Trust exists for
the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in an equivalent amount of the Company's 7 3/4% Junior Subordinated
Deferrable Interest Debentures due 2038 (the "Subordinated Debentures"). Upon an
event of a default under the Declaration (as defined herein), the holders of
Preferred Securities will have a preference over the holders of the Common
Securities with respect to payments in respect of distributions and payments
upon redemption, liquidation and otherwise.
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" COMMENCING ON PAGE 11 HEREOF 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 have been 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 the 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. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC
OFFERING PRICE UNDERWRITING PROCEEDS TO
(L) DISCOUNT (2) TRUST (3)(4)
<S> <C> <C> <C>
Per Preferred Security................................ $25.00 (3) $25.00
Total................................................. $70,000,000 (3) $70,000,000
</TABLE>
(1) Plus accrued distributions, if any, from the date of initial issuance.
(2) The Trust and the Company have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933. See "Underwriting."
(3) Because the proceeds of the sale of the Preferred Securities will be
invested in the Subordinated Debentures, the Company has agreed, in the
Underwriting Agreement (as defined herein), to pay to the Underwriters, as
compensation ("Underwriters' Compensation") for their arranging the
investment therein of such proceeds, $0.7875 per Preferred Security (or
$2,205,000 in the aggregate); provided that, such compensation for sales of
100,000 or more Preferred Securities to a single purchaser will be $0.5000
per Preferred Security. Therefore, to the extent of such sales, the actual
amount of such compensation will be less than the aggregate amount specified
in the preceding sentence. See "Underwriting."
(4) Expenses of the offering to be paid by the Company are estimated to be
$286,150.
--------------------------
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 in book-entry only form
through the facilities of The Depository Trust Company (the "Depositary"), on or
about October 6, 1998, against payment therefor in immediately available funds.
--------------------------
BEAR, STEARNS & CO. INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
EVEREN SECURITIES, INC.
CREDIT SUISSE FIRST BOSTON
SEPTEMBER 28, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN THE PREFERRED SECURITIES, AND THE IMPOSITION OF A PENALTY BID,
DURING AND AFTER THIS OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
- ------------------------
(CONTINUED FROM PREVIOUS PAGE)
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 7 3/4% of the liquidation amount of $25 per
Preferred Security, accumulating from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing December 31, 1998 ("distributions"). The 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
(the "Guarantee") to the extent described under "Description of the Guarantee."
The Guarantee covers payments of distributions and other payments on the
Preferred Securities if and to the extent that the Trust has funds available
therefor, which will not be the case unless the Company has made payments of
principal, interest or other payments on the Subordinated Debentures held by the
Trust as its sole asset. The Guarantee, when taken together with the Company's
obligations under the Subordinated Debentures, the Indenture (as defined herein)
and the Declaration, including its covenant in the Indenture to pay costs,
expenses, debts and obligations of the Trust (other than with respect to the
Trust Securities), provide a full and unconditional guarantee of amounts due on
the Preferred Securities. See "Risk Factors--Factors Relating to the Preferred
Securities and the Subordinated Debentures--Rights under the Guarantee" and
"Effect of Obligations under the Subordinated Debentures and the Guarantee."
The obligations of the Company under the Guarantee are subordinate and
junior in right of payment to all liabilities of the Company and rank PARI PASSU
with the most senior preferred stock issued, from time to time, if any, by the
Company. The obligations of the Company under the Subordinated Debentures are
subordinate and junior in right of payment to all present and future Senior
Indebtedness (as defined herein) of the Company and rank PARI PASSU with other
junior subordinated debt securities of the Company and obligations to, or rights
of, the Company's other general unsecured creditors. As of June 30, 1998, the
Company had approximately $1,023 million aggregate principal amount of Senior
Indebtedness outstanding and approximately $613 million of obligations that rank
PARI PASSU with the Subordinated Debentures. There are no terms in the Preferred
Securities, the Subordinated Debentures or the Guarantee that limit the
Company's ability to incur additional indebtedness, including indebtedness that
ranks senior to the Subordinated Debentures and the Guarantee. See "Risk
Factors--Factors Relating to the Preferred Securities and the Subordinated
Debentures--Ranking of the Subordinated Debentures and the Guarantee." The
Subordinated Debentures purchased by the Trust may be subsequently distributed
PRO RATA to holders of the Trust Securities in connection with a Liquidation (as
defined herein) of the Trust.
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and the interest and
other payment dates on the Subordinated Debentures, which will be the sole
assets of the Trust. As a result, if principal or interest is not paid on the
Subordinated Debentures, no amounts will be paid on the Preferred Securities. If
the Company does not make principal or interest payments on the Subordinated
Debentures, the Trust will not have sufficient funds to make distributions on
the Preferred Securities, in which event the Guarantee will not apply to such
distributions until the Trust has sufficient funds available therefor. In such
event, the remedy of a holder of Preferred Securities is to enforce the
Subordinated Debentures. See "Description of the Preferred Securities--
Declaration Events of Default" and "--Voting Rights."
So long as no Indenture Event of Default (as defined herein) has occurred
and is continuing, the Company has the right under the Indenture to defer
payments of interest on the Subordinated Debentures by extending the interest
payment period on the Subordinated Debentures at any time for up to 20
2
<PAGE>
consecutive quarters (an "Extension Period"), provided that an Extension Period
may not extend beyond the Stated Maturity (as defined herein) of the
Subordinated Debentures. If interest payments are so deferred, distributions on
the Preferred Securities will also be deferred. During such Extension Period,
distributions will continue to accumulate with interest thereon (to the extent
permitted by applicable law) at an annual rate of 7 3/4% per annum compounded
quarterly. During any Extension Period, holders of Preferred Securities will be
required to accrue deferred interest as original issue discount ("OID"), and to
include such OID in their gross income for United States federal income tax
purposes in advance of the receipt of the cash distributions with respect to
such deferred interest payments. There could be multiple Extension Periods of
varying lengths throughout the term of the Subordinated Debentures. If the
Company exercises the right to extend an interest payment period, the Company
shall not, during such Extension Period, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of its capital stock or (ii) make any payment of principal
of, or interest or premium, if any, on or repay, repurchase or redeem, or make
any sinking fund payment with respect to, any indebtedness of the Company
(including other junior subordinated debt securities) that ranks PARI PASSU with
or junior in right of payment to the Subordinated Debentures or make any
guarantee payments with respect to the foregoing (other than (a) dividends or
distributions in common stock of the Company, (b) redemptions or purchases of
any rights pursuant to the Company's Stock Purchase Rights Plan, or any
successor to such Stock Purchase Rights Plan, and the declaration of a dividend
of such rights or the issuance of preferred stock under such plans in the
future, (c) payments under the Guarantee, (d) purchases of common stock related
to the issuance of common stock under the Company's Stock Purchase and Dividend
Reinvestment Plan and any of the Company's benefit plans for its directors,
officers or employees and (e) purchases of common stock required to prevent the
loss or secure the renewal or reinstatement of any government license or
franchise held by the Company or any of its subsidiaries). The Company has no
present intention of exercising its right to defer payments of interest by
extending the interest payment period on the Subordinated Debentures. Moreover,
because of the consequences of exercising such right, including a prohibition on
the payment of dividends with respect to the Company's capital stock, the
Company believes that the likelihood of such exercise is remote. See "Risk
Factors--Factors Relating to the Preferred Securities and the Subordinated
Debentures--Option to Extend Interest Payment Period; Tax Consequence of
Election," "Description of the Subordinated Debentures--Option to Extend
Interest Payment Period" and "Certain Federal Income Tax Consequences--Original
Issue Discount."
The Subordinated Debentures will mature on September 30, 2038, which date
may be extended once to a date not later than September 30, 2047 (such earlier
or later date, the "Stated Maturity") by the Company, provided certain financial
conditions are met. See "Description of the Subordinated Debentures--Option to
Extend Maturity Date." The Subordinated Debentures are redeemable by the
Company, in whole or in part, from time to time, on or after October 6, 2003, or
at any time in whole upon the occurrence of a Special Event (as defined herein),
in each case, at a price equal to the aggregate principal amount thereof plus
accrued and unpaid interest thereon to the date fixed for redemption (the
"Debenture Redemption Price"). If the Company redeems Subordinated Debentures,
the Trust must redeem Preferred Securities having an aggregate liquidation
amount equal to the aggregate principal amount of the Subordinated Debentures so
redeemed at $25 per Preferred Security plus accumulated and unpaid distributions
thereon, including interest thereon, to the date fixed for redemption (the
"Redemption Price"). The Preferred Securities will also be redeemed in whole at
the Redemption Price at the Stated Maturity of the Subordinated Debentures. See
"Description of the Preferred Securities--Redemptions."
The Company will have the right at any time to liquidate the Trust and cause
the Subordinated Debentures to be distributed to the holders of the Preferred
Securities. If the Subordinated Debentures are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the
Subordinated Debentures listed on the New York Stock Exchange or on such other
exchange or organization as the Preferred Securities are then listed. See
"Description of the Subordinated Debentures--Distribution of the Subordinated
Debentures."
3
<PAGE>
In the event of any involuntary or voluntary liquidation, dissolution,
winding-up or termination of the Trust (each, a "Liquidation"), the holders of
the Preferred Securities will be entitled to receive for each Preferred
Security, after satisfaction of liabilities to creditors of the Trust, if any, a
liquidation amount of $25 plus accumulated and unpaid distributions thereon
(including interest thereon) to the date of payment, unless, in connection with
such Liquidation, the Subordinated Debentures are distributed to the holders of
the Preferred Securities. See "Description of the Preferred
Securities--Liquidation Distribution Upon Dissolution."
The Preferred Securities initially will be represented by a global
certificate registered in the name of the Depositary or its nominee. Beneficial
interests in the Preferred Securities will be shown on, and transfers thereof
will be effected only through, records maintained by Participants (as defined
herein) in the Depositary. Except as described herein, Preferred Securities in
certificated form will not be issued in exchange for such global certificate.
See "Description of the Preferred Securities--Book-Entry Only Issuance--The
Depository Trust Company."
4
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and at the following regional offices of the
Commission: Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and 7
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission and that is located at
http://www.sec.gov.
The Company's common stock is listed on the New York Stock Exchange (Symbol:
"NVP") and the Pacific Exchange, Inc. Reports, proxy statements and other
information concerning the Company may be inspected at the offices of such
exchanges.
The Company and the Trust have filed with the Commission a Registration
Statement on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933 (the "Securities
Act") with respect to the securities offered hereby. This Prospectus omits, in
accordance with the rules and regulations of the Commission, certain of the
information contained in the Registration Statement. Reference is hereby made to
the Registration Statement and the exhibits and the financial statements, notes
and schedules filed as a part thereof or incorporated by reference therein for
further information with respect to the Company, the Trust and the securities
offered hereby. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, where a copy or
form of such document has been filed as an exhibit to the Registration Statement
or otherwise has been filed with the Commission, reference is made to the copy
or form so filed. Each such statement is qualified in its entirety by such
reference.
Separate financial statements of the Trust will not be prepared and,
therefore, are not included herein. The Company and the Trust do not consider
that such financial statements would be material to holders of the Preferred
Securities because the Trust is a newly formed special purpose entity, has no
operating history or independent operations and is not engaged in and does not
propose to engage in any activity other than holding as trust assets the
Subordinated Debentures and issuing the Trust Securities. See "The Trust,"
"Description of the Preferred Securities," "Description of the Guarantee" and
"Description of the Subordinated Debentures."
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated by reference in this Prospectus and shall be
deemed to be a part hereof:
(1) Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
File No. 1-4698
1998.
(2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File
No. 1-4698.
(3) Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File
No. 1-4698.
(4) Current Report on Form 8-K dated April 29, 1998, File No. 1-4698.
(5) Current Report on Form 8-K dated July 7, 1998, File No. 1-4698.
5
<PAGE>
Each document filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of any offering of securities made by
this Prospectus shall be deemed to be incorporated herein by reference and to be
a part hereof from the date of filing such document. Any statement contained
herein or in a document, all or a portion of which is incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which 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 the Registration Statement or this Prospectus.
The Company will provide without charge to any person to whom a copy of this
Prospectus is delivered, upon written or oral request of such person a copy of
any and all of the documents that have been or may be incorporated by reference
herein (other than exhibits to such documents which are not specifically
incorporated by reference into such documents). Such requests should be directed
by mail to: Richard C. Schmalz, Director, Treasury, Nevada Power Company, P.O.
Box 230, Las Vegas, Nevada 89151 or by telephone (702) 367-5608.
6
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION WITH RESPECT TO THE COMPANY AND THIS OFFERING INCLUDED
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN. SEE
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE." AS USED HEREIN, (I) THE
"INDENTURE" MEANS THE INDENTURE, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME, BETWEEN THE COMPANY AND IBJ SCHRODER BANK & TRUST COMPANY ("IBJ
SCHRODER"), AS INDENTURE TRUSTEE (THE "INDENTURE TRUSTEE"), AND (II) THE
"DECLARATION" MEANS THE AMENDED AND RESTATED DECLARATION OF TRUST AMONG THE
COMPANY, AS SPONSOR (THE "SPONSOR"), IBJ SCHRODER, AS PROPERTY TRUSTEE (THE
"PROPERTY TRUSTEE"), DELAWARE TRUST CAPITAL MANAGEMENT, INC., AS DELAWARE
TRUSTEE (THE "DELAWARE TRUSTEE"), THE REGULAR TRUSTEES NAMED THEREIN
(COLLECTIVELY WITH THE PROPERTY TRUSTEE AND THE DELAWARE TRUSTEE, THE
"TRUSTEES") AND THE HOLDERS, FROM TIME TO TIME, OF UNDIVIDED BENEFICIAL
INTERESTS IN THE TRUST TO BE ISSUED PURSUANT TO THE DECLARATION. EACH OF THE
CAPITALIZED TERMS USED IN THIS PROSPECTUS AND NOT OTHERWISE DEFINED HAS THE
MEANING SET FORTH IN THE INDENTURE OR THE DECLARATION, AS THE CONTEXT INDICATES.
THE COMPANY
The Company, incorporated under the laws of Nevada in 1929, is an operating
public utility engaged in the electric utility business in the City of Las Vegas
and vicinity in southern Nevada. As of December 31, 1997, the Company served
approximately 518,391 customers in its service territory, which has a population
of approximately 1,303,000. In 1997, the Company's electric energy requirements
were obtained from the following sources: coal generation--36%, oil and natural
gas--18%, and purchased power, including hydroelectric--46%.
Growth in the Company's service territory is continuing at a rapid pace. The
Company's customer base grew at annual rates of 6.4%, 7.2% and 6.0% during 1997,
1996 and 1995, respectively. Kilowatt-hours also increased 6.6%, 13.1% and 1.4%
during 1997, 1996 and 1995, respectively.
In 1997, the Nevada State Legislature enacted legislation to separate
traditional electric service into regulated and unregulated services. It is
expected that the generation and marketing of electricity and some other related
services will not be regulated in the future while the transmission and
distribution of electricity will continue to be regulated. The legislation
authorizes customers to obtain generation and marketing services from
alternative sellers starting no later than December 31, 1999. In addition, the
legislation allows the Public Utilities Commission of Nevada (the "PUCN") to
authorize full recovery of costs which they determine to be stranded but does
not guarantee full recovery of such costs. In response to this legislation, the
Company has formed a team of high-level employees to work exclusively on the
Company's response to the legislation and its possible impact on the Company. At
the present time, the Company cannot predict what impact the legislation may
have on its customer base, or the effect, if any, on the Company's future
corporate structure, financial position or results of operations.
In April 1998, the Company and Sierra Pacific Resources, a Nevada utility
holding company ("Sierra Pacific"), entered into an Agreement and Plan of Merger
dated as of April 29, 1998 (the "Merger Agreement") that, by way of consummation
of the Mergers (as defined herein), provides for the Company and Sierra Pacific
Power Company ("SPPC"), the principal operating subsidiary of Sierra Pacific, to
become subsidiaries of Sierra Pacific, with both companies retaining their
individual names and identities in their respective service territories. See
"Risk Factors--Factors Relating to the Mergers" and "The Mergers."
The principal executive offices of the Company are located in Las Vegas,
Nevada, and its mailing address is P.O. Box 230, Las Vegas, Nevada 89151,
telephone number (702) 367-5000.
7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................ 2,800,000 7 3/4% Trust Issued Preferred Securities
(liquidation amount $25 per Preferred Security) of NVP
Capital III.
Offering Price.................... $25 per Preferred Security.
Distributions..................... Holders of the Preferred Securities are entitled to
receive cumulative cash distributions at an annual rate
of 7 3/4% of the liquidation amount of $25 per Preferred
Security, accumulating from the date of original
issuance and payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year,
commencing December 31, 1998.
Guarantee......................... The 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 under the Guarantee but only to the extent
described under "Description of the Guarantee." The
Guarantee covers payments of distributions and other
payments on the Preferred Securities if and to the
extent that the Trust has funds available therefor,
which will not be the case unless the Company has made
payments of principal, interest or other payments on the
Subordinated Debentures held by the Trust as its sole
asset. The obligations of the Company under the
Guarantee are subordinate and junior in right of payment
to all liabilities of the Company and rank PARI PASSU
with the most senior preferred stock issued, from time
to time, if any, by the Company. The Guarantee, when
taken together with the Company's obligations under the
Subordinated Debentures, the Indenture and the
Declaration, including its covenant in the Indenture to
pay costs, expenses, debts and obligations of the Trust
(other than with respect to the Trust Securities),
provide a full and unconditional guarantee of amounts
due on the Preferred Securities.
Subordinated Debentures........... The Trust will invest the proceeds of the Trust
Securities in an equivalent amount of the Company's
7 3/4% Junior Subordinated Deferrable Interest
Debentures due 2038. The Subordinated Debentures will
mature on September 30, 2038, which date may be extended
once to a date not later than September 30, 2047 by the
Company, provided certain financial conditions are met.
The obligations of the Company under the Subordinated
Debentures are subordinate and junior in right of
payment to all present and future Senior Indebtedness of
the Company and rank PARI PASSU with other junior
subordinated debt securities of the Company and
obligations to, or rights of, the Company's other
general unsecured creditors. As of June 30, 1998, the
Company had approximately $1,023 million aggregate
principal amount of Senior Indebtedness outstanding and
approximately $613 million of obligations that rank PARI
PASSU with the Subordinated Debentures.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Interest Deferral................. So long as no Indenture Event of Default has occurred
and is continuing, the Company has the right under the
Indenture to defer payments of interest on the
Subordinated Debentures by extending the interest
payment period on the Subordinated Debentures at any
time for up to 20 consecutive quarters, provided that an
Extension Period may not extend beyond the Stated
Maturity of the Subordinated Debentures. If interest
payments are so deferred, distributions on the Preferred
Securities will also be deferred. During such Extension
Period, distributions will continue to accumulate with
interest thereon (to the extent permitted by applicable
law) at an annual rate of 7 3/4% per annum compounded
quarterly. During any Extension Period, holders of
Preferred Securities will be required to accrue deferred
interest as OID, and to include such OID in their gross
income for United States federal income tax purposes in
advance of the receipt of the cash distributions with
respect to such deferred interest payments. There could
be multiple Extension Periods of varying lengths
throughout the term of the Subordinated Debentures.
If the Company exercises the right to extend an interest
payment period, subject to certain exceptions set forth
herein, the Company shall not during such Extension
Period (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock or
(ii) make any payment of principal of, or interest or
premium, if any, on or repay, repurchase or redeem, or
make any sinking fund payment with respect to, any
indebtedness of the Company (including other junior
subordinated debt securities) that ranks PARI PASSU with
or junior in right of payment to the Subordinated
Debentures or make any guarantee payments with respect
to the foregoing. The Company has no present intention
of exercising its right to defer payments of interest by
extending the interest payment period on the
Subordinated Debentures. Moreover, because of the
consequences of exercising such right, including a
prohibition on the payment of dividends with respect to
the Company's capital stock, the Company believes that
the likelihood of such exercise is remote.
Relationship Among the Preferred
Securities, the Subordinated
Debentures and the Guarantee...... The distribution rate and the distribution and other
payment dates for the Preferred Securities will
correspond to the interest rate and the interest and
other payment dates on the Subordinated Debentures,
which will be the sole assets of the Trust. As a result,
if principal or interest is not paid on the Subordinated
Debentures, no amounts will be paid on the Preferred
Securities. If the Company does not make principal or
interest payments on the Subordinated Debentures, the
Trust will not have sufficient funds to make
distributions on the
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Preferred Securities, in which event the Guarantee will
not apply to such distributions until the Trust has
sufficient funds available therefor. In such event, the
remedy of a holder of Preferred Securities is to enforce
the Subordinated Debentures.
Redemption of the Subordinated
Debentures and the Preferred
Securities........................ The Subordinated Debentures are redeemable by the
Company, in whole or in part, from time to time, on or
after October 6, 2003, or at any time in whole upon the
occurrence of a Special Event, in each case, at the
Debenture Redemption Price. If the Company redeems
Subordinated Debentures, the Trust must redeem Preferred
Securities having an aggregate liquidation amount equal
to the aggregate principal amount of the Subordinated
Debentures so redeemed at the Redemption Price. The
Preferred Securities will also be redeemed in whole at
the Redemption Price at the Stated Maturity of the
Subordinated Debentures.
Distribution of the Subordinated
Debentures........................ The Company will have the right at any time to liquidate
the Trust and cause the Subordinated Debentures to be
distributed to the holders of the Preferred Securities.
If the Subordinated Debentures are distributed to the
holders of the Preferred Securities, the Company will
use its best efforts to have the Subordinated Debentures
listed on the New York Stock Exchange or on such other
exchange or organization as the Preferred Securities are
then listed.
Liquidation of the Trust.......... In the event of a Liquidation, the holders of the
Preferred Securities will be entitled to receive for
each Preferred Security, after satisfaction to creditors
of the Trust, if any, a liquidation amount of $25 plus
accumulated and unpaid distributions thereon (including
interest thereon) to the date of payment, unless, in
connection with such Liquidation, the Subordinated
Debentures are distributed to the holders of the
Preferred Securities.
Listing........................... The Preferred Securities have been approved for listing,
subject to official notice of issuance, on the New York
Stock Exchange.
Risk Factors...................... Prospective investors should carefully consider the
matters set forth under "Risk Factors."
</TABLE>
10
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF PREFERRED SECURITIES SHOULD CAREFULLY REVIEW THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY
CONSIDER THE FOLLOWING MATTERS. IN ADDITION, BECAUSE THE HOLDERS OF THE
PREFERRED SECURITIES MAY RECEIVE SUBORDINATED DEBENTURES IN EXCHANGE THEREFOR
UPON LIQUIDATION, PROSPECTIVE PURCHASERS OF THE PREFERRED SECURITIES ARE ALSO
MAKING AN INVESTMENT DECISION WITH REGARD TO THE SUBORDINATED DEBENTURES AND
SHOULD CAREFULLY REVIEW ALL INFORMATION REGARDING THE SUBORDINATED DEBENTURES
CONTAINED HEREIN.
FACTORS RELATING TO THE PREFERRED SECURITIES AND THE SUBORDINATED DEBENTURES
RANKING OF THE SUBORDINATED DEBENTURES AND THE GUARANTEE. The obligations
of the Company under the Subordinated Debentures are subordinate and junior in
right of payment to all present and future Senior Indebtedness and rank PARI
PASSU with other junior subordinated debt securities of the Company and
obligations to, or rights of, the Company's other general unsecured creditors.
The Company's obligations under the Guarantee are subordinate and junior in
right of payment to all liabilities of the Company and rank PARI PASSU with the
most senior preferred stock issued, from time to time, if any, by the Company.
As of June 30, 1998, the Company had approximately $1,023 million aggregate
principal amount of Senior Indebtedness outstanding (including approximately
$427 million aggregate principal amount of secured indebtedness outstanding
under the Mortgage Indenture (as defined herein)) and approximately $613 million
of obligations that rank PARI PASSU with the Subordinated Debentures (including
approximately $119 million aggregate principal amount of junior subordinated
debt securities, accounts payable, accrued liabilities, including taxes,
interest and deposits, and deferred credits and other liabilities, all arising
in the ordinary course of business, and excluding commitments or contingencies
in respect of existing or future obligations for, among other things,
construction expenditures, fuel and purchased power obligations and operating
lease obligations). There are no terms in the Preferred Securities, the
Subordinated Debentures or the Guarantee that limit the Company's ability to
incur additional indebtedness, including indebtedness that ranks senior to the
Subordinated Debentures and the Guarantee. The Subordinated Debentures and the
Guarantee also will be effectively subordinated to all obligations of any
subsidiaries of the Company. See "Description of the Guarantee" and "Description
of the Subordinated Debentures--Ranking" and "--Subordination."
RIGHTS UNDER THE GUARANTEE. The Guarantee will be qualified as an indenture
under the Trust Indenture Act of 1939 (the "Trust Indenture Act"). IBJ Schroder
will act as indenture trustee under the Guarantee for the purposes of compliance
with the provisions of the Trust Indenture Act (the "Guarantee Trustee"). The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Securities.
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accumulated and unpaid distributions that are required to be
paid on the Preferred Securities to the extent the Trust shall have funds
available therefor, (ii) the Redemption Price to the extent the Trust shall have
funds available therefor and (iii) upon a Liquidation (other than in connection
with the distribution of the Subordinated Debentures to the holders of the
Preferred Securities or the redemption of all the Preferred Securities upon the
redemption or Stated Maturity of the Subordinated Debentures), the lesser of (a)
the aggregate of the stated liquidation amount and all accumulated and unpaid
distributions (including interest thereon) on the Preferred Securities to the
date of payment to the extent the Trust shall have funds available therefor and
(b) the amount of assets of the Trust remaining available for distribution to
holders of the Preferred Securities in liquidation of the Trust. See
"Description of the Guarantee--General."
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 Guarantee Trustee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee. Any holder of Preferred Securities may institute a legal proceeding
directly against the
11
<PAGE>
Company to enforce such holder's rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. If the Company were to default on its obligation to pay
amounts payable on the Subordinated Debentures, 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 Guarantee for payment of such
amounts. Instead, holders of the Preferred Securities would be required to rely
on the enforcement (i) by the Property Trustee of its rights as registered
holder of the Subordinated Debentures against the Company pursuant to the terms
of the Subordinated Debentures or (ii) by such holders of their direct right
against the Company to enforce payments on the Subordinated Debentures. See
"Description of the Guarantee--Events of Default" and "Description of the
Subordinated Debentures--Indenture Events of Default." The Declaration provides
that each holder of Preferred Securities, by acceptance thereof, agrees to the
provisions of the Guarantee, including the subordination provisions thereof, and
the Indenture.
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 registered holder of the Subordinated
Debentures against the Company. In addition, subject to certain conditions
described herein, 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 under the Indenture as
registered holder of the Subordinated Debentures. If the Property Trustee fails
to enforce its rights under the Declaration or the Subordinated Debentures, a
holder of Preferred Securities may institute a legal proceeding directly against
the Company to enforce the Property Trustee's rights under the Declaration or
the Subordinated Debentures without first instituting any legal proceeding
against the Property Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay the principal of
or interest on the Subordinated Debentures on the date such principal or
interest is otherwise payable (or in the case of redemption, on the redemption
date), then a holder of Preferred Securities may directly institute a proceeding
against the Company for the enforcement of payment to such holder of the
principal of or interest on the Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder (a "Direct Action") on or after the respective due
dates specified in the Subordinated Debentures. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in connection with such Direct
Action. See "Description of the Preferred Securities--Declaration Events of
Default" and "--Voting Rights."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCE OF EXTENSION. So
long as no Indenture Event of Default has occurred and is continuing, the
Company has the right under the Indenture to defer payments of interest on the
Subordinated Debentures by extending the interest payment period at any time,
and from time to time, on the Subordinated Debentures. As a consequence of such
an extension, quarterly distributions on the Preferred Securities would be
deferred (but, despite such deferral, interest would continue to accrue with
interest thereon compounded quarterly) by the Trust during any such Extension
Period. Such right to extend the interest payment period for the Subordinated
Debentures is limited to an Extension Period not exceeding 20 consecutive
quarters and not beyond the Stated Maturity of the Subordinated Debentures. In
the event that the Company exercises this right to defer interest payments, the
Company shall not during such Extension Period (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of its capital stock or (ii) make any payment of principal
of, or interest or premium, if any, on or repay, repurchase or redeem, or make
any sinking fund payment with respect to, any indebtedness of the
12
<PAGE>
Company (including other junior subordinated debt securities) that ranks pari
passu with or junior in right of payment to the Subordinated Debentures or make
any guarantee payments with respect to the foregoing (other than (a) dividends
or distributions in common stock of the Company, (b) redemptions or purchases of
any rights pursuant to the Company's Stock Purchase Rights Plan, or any
successor to such Stock Purchase Rights Plan, and the declaration of a dividend
of such rights or the issuance of preferred stock under such plans in the
future, (c) payments under the Guarantee, (d) purchases of common stock related
to the issuance of common stock under the Company's Stock Purchase and Dividend
Reinvestment Plan and any of the Company's benefit plans for its directors,
officers or employees and (e) purchases of common stock required to prevent the
loss or secure the renewal or reinstatement of any government license or
franchise held by the Company or any of its subsidiaries). Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period; provided that, such Extension Period, together with all
such previous and further extensions within such Extension Period, may not
exceed 20 consecutive quarters or beyond the Stated Maturity of the Subordinated
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may commence a new Extension Period, subject to
the above requirements. As a result, there could be multiple Extension Periods
of varying lengths throughout the term of the Subordinated Debentures. See
"Description of the Preferred Securities--Distributions" and "Description of the
Subordinated Debentures-- 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 OID in respect of the deferred interest
allocable to its Preferred Securities for United States federal income tax
purposes, which will be allocated but not distributed to holders of record of
Preferred Securities. As a result, each such holder of Preferred Securities will
recognize income for United States federal income tax purposes in advance of the
receipt of cash and will not receive the cash from the Trust related to such
income if such holder disposes of its 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 Debentures.
Moreover, because of the consequences of exercising such right, including a
prohibition on the payment of dividends with respect to the Company's capital
stock, the Company believes that the likelihood of such exercise is remote.
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 Company's
right to defer interest payments, the market price of the Preferred Securities
(which represent an undivided beneficial interest in the Subordinated
Debentures) may be more volatile than other securities on which OID accrues but
with respect to which there is no right to defer interest payments. See "Certain
Federal Income Tax Consequences--Original Issue Discount."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION OF THE SUBORDINATED
DEBENTURES. Upon the occurrence and continuation of a Special Event, as
described under "Description of the Preferred Securities--Redemptions--Special
Event Redemption of Subordinated Debentures," the Company has the right, at any
time, to redeem the Subordinated Debentures, in whole and not in part, at the
Debenture Redemption Price and thereby cause a redemption of the Preferred
Securities, in whole and not in part, at the Redemption Price within 90 days
following the occurrence of such Special Event. In addition, the Company will
have the right at any time to dissolve the Trust and, after satisfaction of
liabilities to creditors of the Trust, if any, as provided by applicable law, to
cause the Subordinated Debentures to be distributed to the holders of the
Preferred Securities in liquidation of the Trust. See "Description of the
Subordinated Debentures-- Distribution of the Subordinated Debentures."
Under current United States federal income tax law, a distribution of
Subordinated Debentures upon a Liquidation would not be a taxable event to
holders of the Preferred Securities. If, however, a
13
<PAGE>
Liquidation occurred and it was determined that the Trust was subject to United
States federal income tax with respect to amounts received or accrued on the
Subordinated Debentures at the time of such Liquidation, then the distribution
of the Subordinated Debentures would be a taxable event to holders of Preferred
Securities. Under current United States federal income tax law, the redemption
of the Subordinated Debentures upon the occurrence of a Special Event or a
Liquidation in which holders of the Preferred Securities receive cash would be a
taxable event to such holders. See "Certain Federal Income Tax
Consequences--Distribution of Subordinated Debentures or Cash On Liquidation of
the Trust."
The Company cannot predict the market prices for the Preferred Securities or
the Subordinated Debentures that may be distributed in exchange for Preferred
Securities if a Liquidation were to occur. The Preferred Securities or the
Subordinated Debentures 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 Debentures, prospective purchasers
of Preferred Securities are also making an investment decision with regard to
the Subordinated Debentures and should carefully review all the information
regarding the Subordinated Debentures and the Company contained or incorporated
by reference herein.
EXTENDING THE STATED MATURITY OF THE SUBORDINATED DEBENTURES. The Company
will have the one-time right at any time to extend the Stated Maturity of the
Subordinated Debentures to a date not later than September 30, 2047.
LIMITED 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, the Regular 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. 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 Debentures. A holder who disposes of Preferred
Securities between record dates for payments of distributions thereon (and
consequently does not receive a distribution from the Trust for the period prior
to such disposition) will nevertheless be required to include in gross income
for United States federal income tax purposes such holder's ratable share of
accrued but unpaid interest (or OID) on the Subordinated Debentures through the
date of disposition as ordinary income. To the extent the selling price (which
may not reflect the value of accrued and unpaid interest (or OID)) is less than
the holder's adjusted tax basis, the 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--Sales of Preferred Securities."
CONSEQUENCE OF HIGHLY LEVERAGED TRANSACTION. The Indenture does not contain
provisions that afford holders of the Subordinated Debentures protection in the
event of a highly leveraged transaction, including a change in control, or other
similar transactions involving the Company that may adversely affect such
holders. See "Description of the Subordinated Debentures--Consolidation, Merger
and Sale of Assets."
FACTORS RELATING TO THE MERGERS
UNCERTAINTIES IN INTEGRATING THE COMPANIES AND ACHIEVING COST SAVINGS. The
Company and Sierra Pacific have entered into the Merger Agreement with the
expectation that the Mergers will result in certain benefits, including, without
limitation, cost savings, operating efficiencies, cost avoidances and other
synergies. Achieving the benefits of the Mergers will depend in substantial part
upon the receipt of timely and favorable regulatory approvals and upon the
successful integration of the businesses of the Company and Sierra Pacific in an
efficient manner, and there can be no assurance that this will occur. The
14
<PAGE>
consolidation of operations will require substantial attention from management.
Any diversion of management's attention and any difficulties encountered in the
transition and integration process could have a material adverse effect on the
revenues, levels of expenses and operating results of the combined company.
There can be no assurance that the combined company will realize any of the
anticipated benefits of the Mergers.
REFINANCING OF SECURITIES. All securities of the Company outstanding at the
time the Mergers are consummated, including the Company's first mortgage bonds,
pollution control revenue bonds and junior subordinated debentures (including
the Subordinated Debentures), will be assumed by the Surviving Corporation (as
defined herein) without the need for any consent or approval of the holders
thereof. In the case of certain securities issued for the benefit of the
Company, the interest on which is exempt from federal income taxation ($541
million outstanding), the Company must receive an opinion of nationally
recognized bond counsel that the Mergers will not have an adverse affect on such
tax exemption. The Company will seek such opinions where required. In the event
such opinions cannot be obtained, it may be necessary to redeem or otherwise
retire and refinance such securities. If it should be necessary for the Company
to retire any of the tax exempt securities, the Company anticipates that it
would, subject to approval from the PUCN, issue taxable securities of similar
maturities and use the proceeds to retire the required amount of existing tax
exempt securities. Depending on market conditions, the interest cost of
refunding securities could be significantly higher than the interest cost of the
current tax exempt securities. The Company believes it would have access to the
capital markets to effect such refinancing on reasonable terms although no
assurance can be given as to the success of any such refinancing.
DIVESTITURE OF GENERATION. As part of the proposal to the PUCN for approval
of the Mergers, the Company and Sierra Pacific have proposed that they each sell
all their existing generating capacity. Upon such sales, the Company and SPPC
would no longer be responsible for providing adequate generating capacity except
possibly in limited circumstances as the "provider of last resort." The
uncertainties surrounding divestiture include the price that generation assets
will bring, the regulatory treatment of any gain or loss from the sale of assets
and the ability to effectively use the proceeds of sales in the companies'
businesses. No assurance can be given that the divestiture of generating
facilities will be successful or that the Company or SPPC would not experience
operating or other business difficulties following such divestiture.
THE MERGERS
The Company and Sierra Pacific announced on April 30, 1998 that their boards
of directors had unanimously approved the Merger Agreement providing for a
merger of equals that would create a company with a total market capitalization
of approximately $4.0 billion.
The combined entity, which will be named Sierra Pacific Resources, will
serve a total of more than 800,000 electric, 100,000 gas and 65,000 water
customers living in southern and northern Nevada, and in the Lake Tahoe area of
California. As a result of the Mergers, Sierra Pacific will be the holding
company for the Surviving Corporation, SPPC and other subsidiaries. Sierra
Pacific is a utility holding company with operating subsidiaries primarily
engaged in the energy and utility businesses. Sierra Pacific's five primary
subsidiaries include: SPPC, Tuscarora Gas Pipeline Company, Sierra Energy
Company, d/b/a e-three, Lands of Sierra, Inc. and Sierra Pacific Energy Company.
Sierra Pacific's principal subsidiary, SPPC, provides electric service to
northern Nevada and northeastern California, and provides natural gas and water
service to the Reno/Sparks area of Nevada. The assets of SPPC represented 99% of
the consolidated assets of Sierra Pacific at December 31, 1997.
The Merger Agreement provides for two mergers. First, Sierra Pacific will
merge with LAKE Merger Sub, Inc., a wholly owned subsidiary of Sierra Pacific,
with Sierra Pacific as the surviving corporation (the "First Merger").
Immediately after the First Merger, DESERT Merger Sub, Inc., a wholly owned
subsidiary of Sierra Pacific will merge with the Company, with DESERT Merger
Sub, Inc. as the surviving
15
<PAGE>
corporation (the "Second Merger" and together with the First Merger, the
"Mergers"). DESERT Merger Sub, Inc. will change its name to Nevada Power Company
(the "Surviving Corporation"). Upon consummation of the Mergers, the Surviving
Corporation and SPPC will be subsidiaries of Sierra Pacific, with both companies
retaining their individual names and identities in their respective service
territories.
Following the Mergers, the corporate organization of Sierra Pacific will be
as follows:
[CHART]
The obligations of the Company, on the one hand, and Sierra Pacific, on the
other hand, to consummate the Mergers are subject to the satisfaction of several
conditions, including, but not limited to the approval of the Merger Agreement
by the stockholders of each of the Company and Sierra Pacific, the receipt of
all material governmental approvals including approvals by the PUCN and the
Federal Energy Regulatory Commission and the absence of any material adverse
change with respect to the Company or Sierra Pacific.
The Merger Agreement may be terminated under certain circumstances,
including by mutual written consent of Sierra Pacific and the Company, by either
party if the Mergers are not consummated by October 29, 1999 (which date will be
extended to April 29, 2000 in certain circumstances), by either party if the
requisite stockholder approvals are not obtained or if any state or federal law
or court order prohibits consummation of the Mergers, by a non-breaching party
if there occurs a material breach by the other party of the Merger Agreement
which is not cured within 20 days after notice, or by either party, in certain
circumstances, as a result of a more favorable third-party tender offer or
business combination proposal with respect to such party.
All securities of the Company outstanding at the time the Mergers are
consummated, including the Company's first mortgage bonds, pollution control
revenue bonds and junior subordinated debentures (including the Subordinated
Debentures), will be assumed by the Surviving Corporation without the need for
any consent or approval of the holders thereof.
The Company believes that the First Merger will be treated in a manner
similar to a pooling of interests for accounting purposes. The Second Merger
will be treated for accounting purposes in accordance with the rules for
purchase accounting. In connection with the Second Merger, for accounting
purposes, the assets and liabilities of Sierra Pacific will be recorded on the
books of the Company (as if it were the surviving parent of the consolidated
entity) at their estimated fair market values with the remaining purchase price
reflected as goodwill. The transaction will be treated as a reverse acquisition
with the Company being the acquirer for accounting purposes. Accordingly, the
historical financial information of the merged entity will reflect that of the
Company so that no merger-related adjustments will be made to the historical
financial statements of the Company.
16
<PAGE>
For more information pertaining to the Mergers, see the Company's Current
Report on Form 8-K dated April 29, 1998. See "Incorporation of Certain
Information by Reference."
Certain matters discussed in this section and "Risk Factors--Factors
Relating to the Mergers" constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements relate to the anticipated plans and objectives of
management for future operations, business prospects, outcome of regulatory
proceedings, market conditions and other matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements in certain circumstances. Forward-looking statements include the
information concerning possible or assumed future results of operations of the
Surviving Corporation and Sierra Pacific, as the combined company, and other
future events set forth herein. Readers are cautioned not to place undue
reliance on such forward-looking statements, which involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors may affect the Company's operations,
markets, products, services and prices. The Company does not assume any
obligation to update such forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting such
forward-looking statements.
17
<PAGE>
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, dated as of March 23, 1998, executed by the
Company, as Sponsor, and the trustees of the Trust and (ii) the filing of a
certificate of trust with the Secretary of State of the State of Delaware on
March 23, 1998, as amended on September 22, 1998. Such declaration will be
amended and restated in its entirety substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
Declaration will be qualified as an indenture under 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 Only Issuance--The Depository Trust Company." The Company
will acquire Common Securities in an aggregate liquidation amount equal to 3% of
the total capital of the Trust. The Trust exists for the exclusive purposes of
(i) issuing and selling the Trust Securities, (ii) using the proceeds from such
sale to acquire the Subordinated Debentures, and (iii) engaging in only those
other activities necessary or incidental thereto. The Trust has a term of 55
years but may terminate earlier as provided in the Declaration.
Pursuant to the Declaration, the number of trustees of the Trust will
initially be four. Two of the trustees of the Trust (the "Regular Trustees")
will be persons who are employees or officers of, or who are affiliated with,
the Company. The third trustee, Delaware Trust Capital Management, Inc., is a
financial institution that maintains its principal place of business in the
state of Delaware and is unaffiliated with the Company. Except as otherwise
provided in the Declaration, the Delaware Trustee's sole duty shall be to, upon
the request of the other Trustees or the Company, execute any documents and
maintain custody of any records required to maintain the existence of, or
dissolve, the Trust under the Delaware Business Trust Act (the "Trust Act"). The
fourth trustee, IBJ Schroder, will serve as Property Trustee under the
Declaration and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act, until removed or replaced by the Company,
as the holder of all the Common Securities. IBJ Schroder will also act as the
Guarantee Trustee. See "Description of the Guarantee."
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities and will have the power to
exercise all rights, powers, and privileges under the Indenture as the
registered holder of the Subordinated Debentures. 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 Debentures for the benefit of the holders of the Trust
Securities. The Property Trustee will make payments of distributions and
payments on liquidation, redemption and otherwise to the holders of the Trust
Securities out of funds from the Property Account. The Guarantee Trustee will
hold the Guarantee for the benefit of the holders of the Preferred Securities.
The Company, as the holder of the Common Securities, or the holders of a
majority in aggregate liquidation amount of the Preferred Securities if a
Declaration Event of Default has occurred and is continuing, will have the right
to appoint, remove or replace the Property Trustee or the Delaware Trustee. The
Company, as the holder of the Common Securities, will have the exclusive right
to appoint, remove or replace any Regular Trustee and to increase or decrease
the number of the Trustees. The Company will pay all debts and obligations of
the Trust (other than with respect to the Trust Securities), including all fees
and expenses related to the Trust and the offering of the Trust Securities. See
"Description of the Subordinated Debentures--Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Trust Act and the Trust Indenture Act. See "Description of the
Preferred Securities."
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<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
The following selected financial data for the five years ended December 31,
1997 and as of each of the five years ended December 31, 1997 are derived from
the audited financial statements of the Company. The following selected data as
of and for the six month periods ended June 30, 1998 and 1997 have been derived
from financial statements of the Company that have not been audited, but that,
in the opinion of the management of the Company, reflect all adjustments
necessary for the fair presentation of such data for the interim periods. The
results of operations for the six months ended June 30, 1998 are not necessarily
indicative of the results of operations for the full year. This financial
information should be read in conjunction with the financial statements and
related notes thereto incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 and Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Electric revenues........... $ 364,198 $ 355,324 $ 799,148 $ 805,374 $ 749,981 $ 764,158 $ 651,772
Operating expenses.......... 299,592 279,507 597,410 608,616 579,105 593,907 489,624
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before income
taxes..................... 64,606 75,817 201,738 196,758 170,876 170,251 162,148
Interest expense............ 27,666 24,372 49,743 49,486 46,936 43,015 39,305
Taxes....................... 18,555 24,079 64,542 64,528 53,318 56,454 53,679
Other income (expenses)..... 3,871 2,458 3,019 (3,876) 6,349 11,088 4,384
Distribution requirements on
Company-obligated
mandatorily redeemable
preferred securities of
subsidiary trust.......... 4,874 2,383 7,256 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.................. 17,382 27,441 83,216 78,868 76,971 81,870 73,548
Dividend requirements on
preferred stock........... 89 1,034 1,125 3,956 3,966 3,976 3,986
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings available for
common stock.............. $ 17,293 $ 26,407 $ 82,091 $ 74,912 $ 73,005 $ 77,894 $ 69,562
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average common
shares outstanding........ 50,751 49,294 49,691 47,976 46,288 42,784 39,482
Earnings per average common
share..................... $ 0.34 $ 0.54 $ 1.65 $ 1.56 $ 1.58 $ 1.82 $ 1.76
Dividends declared per
common share.............. $ 0.80 $ 0.80 $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60
Twelve months ended ratio of
earnings to fixed
charges(1)................ 2.41 2.88 2.76 2.92 2.84 3.11 2.90
CASH FLOW DATA:
Cash from operating
activities................ $ 31,557 $ 24,047 $ 110,372 $ 154,990 $ 185,919 $ 144,270 $ 130,945
Cash from investing
activities................ (116,445) (97,723) (214,013) (180,801) (160,828) (184,349) (165,858)
Cash from financing
activities................ 84,743 71,795 101,817 2,848 293 40,057 34,898
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)
during the period......... $ (145) $ (1,881) $ (1,824) $ (22,963) $ 25,384 $ (22) $ (15)
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
- ------------------------------
(1) In computing the ratio of earnings to fixed charges, earnings represent
income before interest expense and distribution requirements, plus income
taxes; fixed charges represent interest expense, distribution requirements,
amortization of debt discount, premium and expense and other interest plus
one-third annual rentals.
19
<PAGE>
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (CONTINUED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net property, plant &
equipment............ $2,041,720 $1,877,635 $1,960,709 $1,819,330 $1,701,120 $1,584,003 $1,450,146
Total assets........... 2,466,646 2,251,267 2,339,422 2,163,224 2,073,050 1,907,389 1,809,337
Long-term debt......... 892,858 823,492 895,439 841,364 799,999 712,571 716,589
Company-obligated
mandatorily
redeemable preferred
securities of the
Company's subsidiary
trust, NVP Capital I,
holding solely $122.6
million principal
amount of 8.2% junior
subordinated
debentures of the
Company due 2037..... 118,872 118,872 118,872 -- -- -- --
Stockholders' equity... 829,890 806,896 837,086 841,817 806,224 773,813 688,188
</TABLE>
SELECTED OPERATING INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Electric Sales (megawatt
hours, in thousands)... 6,385,735 6,572,154 14,596,228 13,697,059 12,109,355 11,942,724 11,155,270
</TABLE>
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998 and as adjusted to give effect to the sale of $70 million Trust Issued
Preferred Securities. The following data should be read in conjunction with the
financial statements and notes thereto and Management's Discussion and Analysis
of Financial Condition and Results of Operations of the Company incorporated
herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
------------------------------------------------
(IN THOUSANDS)
ACTUAL % AS ADJUSTED %
------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
DEBT:
Short-Term Debt and Current Maturities:.......................... $ 130,446 6.6% $ 130,446 6.4%
Secured Long-Term Debt:
Capital Leases................................................. 87,964 4.5% 87,964 4.3%
First Mortgage Bonds........................................... 427,257 21.7% 427,257 20.9%
Unsecured Debt:
Pollution Control Revenue Bonds................................ 73,300 3.7% 73,300 3.6%
Industrial Development Bonds................................... 304,038 15.4% 304,038 14.9%
8.50% Note Due 2000............................................ 300 * 300 *
------------ --------- ------------ ---------
TOTAL DEBT................................................... 1,023,305 51.8% 1,023,305 50.1%
PREFERRED SECURITIES:
Company-Obligated Mandatorily Redeemable Preferred Securities of
the Company's Subsidiary Trust, Holding Solely Subordinated
Debentures of the Company, Due 2037 (1)........................ 118,872 6.0% 118,872 5.8%
Company-Obligated Mandatorily Redeemable Preferred Securities of
the Company's Subsidiary Trust, Holding Solely Subordinated
Debentures of the Company, Due 2038 (2)........................ -- -- 70,000 3.4%
------------ --------- ------------ ---------
TOTAL PREFERRED SECURITIES................................... 118,872 6.0% 188,872 9.3%
SHAREHOLDERS' EQUITY:
Cumulative Preferred Stock with Mandatory Sinking Funds and
Redeemable Cumulative Preferred Stock.......................... 3,385 * 3,385 *
Common Shareholders' Equity...................................... 826,505 41.9% 826,505 40.5%
------------ --------- ------------ ---------
TOTAL SHAREHOLDERS' EQUITY................................... 829,890 42.1% 829,890 40.6%
------------ --------- ------------ ---------
TOTAL CAPITALIZATION............................................... $ 1,972,067 100% $ 2,042,067 100%
------------ --------- ------------ ---------
------------ --------- ------------ ---------
* Less than 1%
</TABLE>
- ------------------------
(1) The sole assets of NVP Capital I are $122,547,930 aggregate principal amount
of 8.20% Junior Subordinated Deferrable Interest Debentures, Series A of the
Company, including $3,676,430 attributable to the common securities of NVP
Capital I, all of which are held by the Company, and $118,871,500
attributable to the 8.20% Cumulative Quarterly Income Preferred Securities,
Series A, of NVP Capital I.
(2) The sole assets of the Trust will be $72,164,950 aggregate principal amount
of the Subordinated Debentures, including $2,164,950 attributable to the
Common Securities, all of which will be held by the Company, and $70,000,000
attributable to the Preferred Securities.
21
<PAGE>
USE OF PROCEEDS
The Trust will use the proceeds of the sale of the Trust Securities to
acquire the Subordinated Debentures from the Company. The Company will use the
net proceeds from the sale of the Subordinated Debentures for general corporate
utility purposes, which may include the repayment of short-term debt, capital
expenditures and working capital.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included in
the financial statements of the Company. The Preferred Securities will be
presented as a separate line item in the balance sheet of the Company and
appropriate disclosures about the Preferred Securities, the Guarantee and the
Subordinated Debentures will be included in the notes to the Company's financial
statements. For financial reporting purposes, the Company will record interest
payments on the Subordinated Debentures as an expense.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, IBJ Schroder, will act as indenture trustee
under the Declaration 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
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, a form of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part, the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities will be owned 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 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 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 the Subordinated Debentures purchased by the Trust for
the benefit of 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, are guaranteed by the Company to the extent described
under "Description of the Guarantee." The Guarantee will be held by IBJ
Schroder, the Guarantee Trustee, for the benefit of the holders of the Preferred
Securities. The Guarantee does not cover payment of distributions when the Trust
does not have sufficient available funds to pay such distributions. In such
event, the remedy of a holder of Preferred Securities is to direct the Property
Trustee to enforce the Property Trustee's rights under the Declaration or the
Subordinated Debentures and, if the Property Trustee fails to enforce such
rights, to institute a Direct Action. See "--Declaration Events of Default."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 7 3/4% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will
22
<PAGE>
bear interest thereon at the rate per annum of 7 3/4% thereof compounded
quarterly. The term "distribution" as used herein includes any such interest
payable unless otherwise stated. Distributions on the Preferred Securities will
be cumulative, will accumulate from October 6, 1998, and will be payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing December 31, 1998, when, as and if available for payment, by
the Property Trustee, except as otherwise described below. The amount of
distributions payable for any 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 quarterly
distribution period, on the basis of the actual number of days elapsed per
30-day month.
So long as no Indenture Event of Default has occurred and is continuing, the
Company has the right under the Indenture to defer payments of interest on the
Subordinated Debentures by extending the interest payment period at any time,
and from time to time, on the Subordinated Debentures, which, if exercised,
would defer quarterly distributions on the Preferred Securities (though such
distributions would continue to accumulate with interest since interest would
continue to accrue on the Subordinated Debentures) during any such Extension
Period. Such right to extend the interest payment period for the Subordinated
Debentures is limited to a period not exceeding 20 consecutive quarters and not
beyond the Stated Maturity of the Subordinated Debentures. In the event that the
Company exercises this right, then during such Extension Period the Company
shall not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or (ii) make any payment of principal of, or interest or premium,
if any, on or repay, repurchase or redeem, or make any sinking fund payment with
respect to, any indebtedness of the Company (including other junior subordinated
debt securities) that ranks PARI PASSU with or junior in right of payment to the
Subordinated Debentures or make any guarantee payments with respect to the
foregoing (other than (a) dividends or distributions in common stock of the
Company, (b) redemptions or purchases of any rights pursuant to the Company's
Stock Purchase Rights Plan, or any successor to such Stock Purchase Rights Plan,
and the declaration of a dividend of such rights or the issuance of preferred
stock under such plans in the future, (c) payments under the Guarantee, (d)
purchases of common stock related to the issuance of common stock under the
Company's Stock Purchase and Dividend Reinvestment Plan and any of the Company's
benefit plans for its directors, officers or employees and (e) purchases of
common stock required to prevent the loss or secure the renewal or reinstatement
of any government license or franchise held by the Company or any of its
subsidiaries). Prior to the termination of any such Extension Period, the
Company may further extend the interest payment period; provided that, such
Extension Period, together with all such previous and further extensions within
such Extension Period, may not exceed 20 consecutive quarters or the Stated
Maturity of the Subordinated Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may select a new
Extension Period, subject to the above requirements. As a result, there could be
multiple Extension Periods of varying lengths throughout the term of the
Subordinated Debentures. See "Description of the Subordinated
Debentures--Interest" and "--Option to Extend Interest Payment Period." If
distributions are deferred, the deferred distributions and accrued interest
thereon will be paid to holders of record of the Preferred Securities as they
appear on the books and records of the Trust on the record date next following
the termination of the applicable 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 from the Company on the Subordinated Debentures. The payment
of distributions out of moneys held by the Trust is guaranteed by the Company to
the extent set forth under "Description of the 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 prior to the relevant payment dates. Such
distributions will be paid through the Property Trustee who will hold amounts
received in respect of the
23
<PAGE>
Subordinated Debentures in the Property Account for the benefit of the holders
of the Trust Securities. Subject to any applicable laws and regulations and the
provisions of the Declaration, as long as the Preferred Securities remain in
book-entry only form, each such payment will be made as described under
"--Book-Entry Only Issuance--The Depository Trust Company." In the event that
the Preferred Securities cease to be in book-entry only form, the relevant
record dates for the Preferred Securities shall conform to the rules of any
securities exchange on which the Preferred Securities are listed and, if none,
shall be selected by the Regular Trustees, which dates shall be at least 15
Business Days but less than 60 Business Days before the relevant payment dates,
which payment dates correspond to the interest payment dates on the Subordinated
Debentures, and distributions will be payable at the corporate trust office of
the Property Trustee. 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 will be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. A
"Business Day" means any day other than a day on which banking institutions in
New York, New York are authorized or required by law to close.
REDEMPTIONS
MANDATORY REDEMPTION. Upon the repayment of the Subordinated Debentures at
Stated Maturity or upon redemption thereof, in whole or in part (as described
below and under "Description of the Subordinated Debentures--Optional
Redemption"), the proceeds from such repayment or redemption will simultaneously
be applied to redeem Preferred Securities having an aggregate liquidation amount
equal to the aggregate principal amount of the Subordinated Debentures so repaid
or redeemed at the Redemption Price; provided that, holders of Preferred
Securities are given not less than 30 nor more than 60 days' notice of such
redemption. In the event that fewer than all of the outstanding Preferred
Securities are to be redeemed, so long as the Preferred Securities remain in
book-entry only form, the Preferred Securities will be redeemed PRO RATA as
described under "--Book-Entry Only Issuance--The Depository Trust Company."
OPTIONAL REDEMPTION OF SUBORDINATED DEBENTURES. The Company will have the
right to redeem the Subordinated Debentures, in whole or in part, from time to
time, on or after October 6, 2003, at the Debenture Redemption Price and thereby
cause a mandatory redemption of Preferred Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Subordinated
Debentures so redeemed at the Redemption Price. See "Description of the
Subordinated Debentures--Optional Redemption."
SPECIAL EVENT REDEMPTION OF SUBORDINATED DEBENTURES. Upon the occurrence
and continuation of a Special Event, the Company shall have the right, at any
time, to redeem the Subordinated Debentures, in whole and not in part, at the
Debenture Redemption Price and thereby cause a mandatory redemption of the
Preferred Securities, in whole and not in part, at the Redemption Price within
90 days following the occurrence of such Special Event.
If a Special Event occurs and the Company does not elect to redeem the
Subordinated Debentures or to dissolve the Trust, the Preferred Securities will
remain outstanding and, if such Special Event is a Tax Event (as defined below),
Additional Interest (as described under "Description of the Subordinated
Debentures--Certain Covenants") will be payable on the Subordinated Debentures.
See "--Liquidation Distribution Upon Dissolution" and "Description of the
Subordinated Debentures--Distribution of the Subordinated Debentures."
"Special Event" means the occurrence of an Investment Company Act Event or a
Tax Event.
"Investment Company Act Event" means receipt by the Trust or the Company of
an opinion of a nationally recognized independent counsel experienced in such
matters to the effect that, as a result of a
24
<PAGE>
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 after the date of this Prospectus, there is more than an
insubstantial risk that the Trust is or will be considered an investment company
under the Investment Company Act of 1940 (the "1940 Act").
"Tax Event" means receipt by the Trust or the Company of an opinion of a
nationally recognized independent tax counsel experienced in such matters to the
effect that, as a result of (i) 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, (ii) any amendment to or change in an interpretation or application of
such laws or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination on or after the
date of this Prospectus), (iii) any interpretation or pronouncement by any such
body, court, agency or authority that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (iv) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated or effective, or
which interpretation or pronouncement is issued or announced, or which action is
taken, in each case on or after the date of this Prospectus, there is more than
an insubstantial risk that (a) the Trust is, or within 90 days of the date
thereof will be, subject to United States federal income tax with respect to
income accrued or received on the Subordinated Debentures, (b) interest payable
by the Company on the Subordinated Debentures is not, or within 90 days of the
date thereof will not be, deductible by the Company for United States federal
income tax purposes or (c) the Trust is, or within 90 days of the date thereof
will be, subject to more than a DE MINIMIS amount of other taxes, duties or
other governmental charges.
It has been reported that the Internal Revenue Service (the "IRS") has
challenged the deductibility, for United States federal income tax purposes, of
interest payments on an instrument similar in some respects to the Subordinated
Debentures, held by an entity similar in some respects to the Trust. The Company
and the Trust do not believe that this challenge will affect the Company's
ability to deduct interest payments on the Subordinated Debentures. However,
prospective investors should be aware that further developments favoring the
IRS's challenge, or other unrelated developments, could give rise to a Tax
Event. See "Certain Federal Income Tax Consequences."
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accumulated and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), (i) while the Preferred Securities are in
book-entry only form, by 12:00 noon, New York City time, on the redemption date,
provided the Company has paid to the Property Trustee a sufficient amount of
cash in connection with the related redemption or Stated Maturity of the
Subordinated Debentures, then the Property Trustee 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 or (ii) if the Preferred
Securities are no longer in book-entry only form, provided the Company has paid
to the Property Trustee a sufficient amount of cash in connection with the
related redemption or Stated Maturity of the Subordinated Debentures, then the
Property Trustee will pay the relevant Redemption Price to the holders of such
Preferred Securities by check mailed to the address of the relevant holder
appearing on the books and records of the Trust on the redemption date upon
surrender of their certificates evidencing such Preferred Securities. If notice
of redemption has been given and funds deposited as required, then, immediately
prior to the close of business on the date of such deposit, or on the redemption
date, as applicable, distributions will cease to accumulate and all rights of
holders of such Preferred Securities so called for redemption will cease, except
25
<PAGE>
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 the 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 that is a Business Day (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 each case with the same force and effect as if made on such date fixed
for redemption. In the event that payment of the Redemption Price in respect of
the Preferred Securities is improperly withheld or refused and not paid either
by the Trust, or by the Company pursuant to the Guarantee, distributions on such
Preferred Securities will continue to accumulate at the then applicable rate
from the original redemption date to the 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 PRO RATA as described
below under "--Book-Entry Only Issuance-- The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries 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 DISSOLUTION
In the event of any Liquidation, the holders of the Preferred Securities on
the date of such Liquidation will be entitled to receive out of the assets of
the Trust available for distribution to holders of the Preferred Securities,
after satisfaction of liabilities to creditors of the Trust, distributions in an
amount equal to the aggregate of the stated liquidation amount of $25 per
Preferred Security plus accumulated and unpaid distributions thereon (including
interest thereon) to the date of payment (the "Liquidation Distribution"),
unless, in connection with such Liquidation, Subordinated Debentures in an
aggregate principal amount equal to the aggregate stated liquidation amount of
such Preferred Securities shall be distributed on a PRO RATA basis to the
holders of the Preferred Securities in exchange for such Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities must be paid on a PRO RATA basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
Liquidation 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 will terminate the earlier of (i)
December 31, 2053, the expiration of the term of the Trust, (ii) the filing of a
bankruptcy petition arising under federal or state laws by, or the insolvency
of, the Company or the holder of the Common Securities, (iii) the filing of a
certificate of dissolution or its equivalent with respect to the holder of the
Common Securities or the Company, the filing of a certificate of cancellation
with respect to the Trust, or the revocation of the charter of the holder of the
Common Securities or the Company and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iv) the entry of a decree of a
judicial dissolution of the holder of the Common Securities, the Company or the
Trust, (v) the redemption of all the Trust Securities in accordance with the
terms of the Trust Securities and (vi) the delivery of written direction to the
Property Trustee by the Company at any time (which direction is wholly optional
and within the discretion of the Company) to dissolve the Trust and distribute
the Subordinated Debentures to the holders of the Trust Securities.
26
<PAGE>
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"), provided that, pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities 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 the Property Trustee fails to enforce its rights under the Declaration or
the Subordinated Debentures, such holder may institute a legal proceeding
against the Company to enforce the Property Trustee's rights under the
Declaration or the Subordinated Debentures without first instituting any legal
proceeding against the Trustee or any other person or entity. Notwithstanding
the foregoing, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay the interest
on or principal of the Subordinated Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, the redemption
date), then a holder of Preferred Securities may institute a Direct Action for
enforcement of payment to such holder of the principal of or interest on the
Subordinated Debentures having an aggregate principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder on or
after the respective due dates specified in the Subordinated Debentures. In
connection with such Direct Action, the Company will be subrogated to the rights
of such holder of Preferred Securities under the Declaration to the extent of
any payment made by the Company to such holder of Preferred Securities in such
Direct Action. The holders of Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Subordinated
Debentures.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Subordinated Debentures will have the right under the
Indenture to declare the principal of and interest on the Subordinated
Debentures to be immediately due and payable. The Company and the Trust are each
required to file annually with the Property Trustee an officer's certificate as
to their compliance with all conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "Description of the Guarantee," and as otherwise required by law and the
Declaration, the holders of the Preferred Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances 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 (i) the right to direct the Property Trustee, as
registered holder of the Subordinated Debentures, to exercise the remedies
available under the Indenture with respect to the Subordinated Debentures, (ii)
waiving any past Indenture Event of Default that is waivable under the
Indenture, or (iii) exercising any right to rescind or annul a declaration that
the principal of all the Subordinated Debentures shall be due and payable;
PROVIDED, HOWEVER, that, where a consent or action under the Indenture would
require the consent or act of all of the holders of the Subordinated Debentures,
all of the holders of the Preferred Securities may direct the Property Trustee
to give such consent or take such action. If the Property Trustee fails to
enforce its rights under the
27
<PAGE>
Declaration or the Subordinated Debentures, a holder of Preferred Securities may
institute a legal proceeding directly against the Company to enforce the
Property Trustee's rights under the Declaration or the Subordinated Debentures
without first instituting any legal proceeding against the Property Trustee or
any other person or entity. Notwithstanding the foregoing, if a Declaration
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Company to pay the interest on or principal of the
Subordinated Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, the redemption date), then a holder of
Preferred Securities may institute a Direct Action for enforcement of payment to
such holder of the principal of or interest on the Subordinated Debentures
having an aggregate principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due dates
specified in the Subordinated Debentures. In connection with such Direct Action,
the Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in connection with such Direct
Action. The Property Trustee must notify all holders of the Preferred Securities
of any notice of default received from the Indenture Trustee with respect to the
Subordinated Debentures. Such notice will state that such Indenture Event of
Default also constitutes a Declaration Event of Default. Except with respect to
directing the time, method and place of conducting a proceeding for a remedy,
the Property Trustee will not take any of the actions described in clauses (i),
(ii) or (iii) above unless the Property Trustee has obtained an opinion of a
nationally recognized independent tax counsel experienced in such matters to the
effect that, as a result of such action, the Trust will not fail to be
classified as a grantor trust for United States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debentures, is required under the Indenture with respect to any
amendment, modification, waiver or termination of the Indenture, the
Subordinated Debentures, the Preferred Securities Guarantee or the Common
Securities Guarantee, the Property Trustee will request the direction of the
holders of the Trust Securities with respect to such amendment, modification,
waiver or termination and will vote with respect to such amendment,
modification, waiver or termination as directed by a majority in aggregate
liquidation amount of the Trust Securities voting together as a single class;
PROVIDED, HOWEVER, that where a consent under the Indenture would require the
consent of all of the holders of the Subordinated Debentures, the Property
Trustee may only give such consent at the direction of the holders of all of the
Trust Securities. The Property Trustee will be under no obligation to 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 a nationally
recognized independent tax counsel experienced in such matters to the effect
that for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust.
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 by the Property Trustee at the direction of the holders of the Preferred
Securities 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 the following information: (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 Debentures in
accordance with the Declaration and the terms of the Trust Securities.
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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, will not be entitled to vote or consent and will, for
purposes of such vote or consent, be treated as if such Preferred Securities
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" below.
Holders of the Preferred Securities will have no rights to appoint, remove
or replace, or to increase or decrease the number of, the Regular Trustees,
which voting rights are vested exclusively in the Company as the holder of all
of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority of the
Regular Trustees (and in certain circumstances the Property Trustee), provided
that, if any proposed amendment provides for, or the Regular Trustees otherwise
propose to effect, (i) any action that would adversely affect the powers,
preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration or otherwise, or (ii) a Liquidation other than
pursuant to the terms of the Declaration, then the holders of the Trust
Securities voting together as a single class will be entitled to vote on such
amendment or proposal and such amendment or proposal will not be effective
except with the approval of at least 66 2/3% in aggregate liquidation amount of
the Trust Securities affected thereby; provided that a reduction of the
aggregate liquidation amount or the distribution rate, a change in the payment
dates or maturities of the Preferred Securities or a reduction in the percentage
in aggregate liquidation amount of outstanding Preferred Securities, the consent
of the holders of which is required for an amendment to the Declaration, shall
not be permitted without the consent of each holder of the 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 will not be effective except with the approval of
66 2/3% in aggregate liquidation amount of such class of Trust Securities.
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 an "investment company" which is required to be
registered under the 1940 Act.
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,
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 (a) expressly assumes all of the obligations of the Trust under the Trust
Securities or (b) substitutes for the Preferred Securities other securities
having substantially the same terms as the Preferred Securities (the "Successor
Securities"), so long as the Successor Securities rank the same as the Preferred
Securities with respect to distributions and payments upon liquidation,
redemption and maturity, (ii) the Company expressly acknowledges a trustee of
such successor entity possessing the same powers and duties of the Property
Trustee as the holder of the Subordinated Debentures, (iii) the Preferred
Securities or any Successor Securities are listed, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or with another organization on which the Preferred Securities are then
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listed or quoted, (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, (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 of a nationally recognized independent counsel to the Trust
experienced in such matters to the effect that, (a) such merger, consolidation,
amalgamation or replacement does not adversely affect the rights, preferences
and privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect, 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 Guarantee.
Notwithstanding the foregoing, the Trust may not, except with the consent of
holders of 100% in aggregate 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 such successor entity to be classified as other than a
grantor trust for United States federal income tax purposes.
There are no provisions that afford the holders of the Preferred Securities
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company. There are
also no provisions that require the repurchase of the Preferred Securities upon
a change in control of the Company.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depositary will act as securities depository for the Preferred
Securities. The Preferred Securities will be issued only as fully-registered
securities registered in the name of Cede & Co. (the Depositary's nominee). One
fully-registered global Preferred Securities certificate, representing the total
aggregate number of Preferred Securities, will be issued and deposited with the
Depositary or its custodian.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred Securities
as represented by a global certificate.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary 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"). The Depositary is owned by a number of
its Direct Participants and by the New York Stock Exchange, the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the depository system is also available to others, such as securities brokers
and dealers, banks and trust companies that clear transactions through or
maintain a direct or indirect custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable to
the Depositary and its Participants are on file with the Commission.
Purchases of Preferred Securities within the depository system must be made
by or through Direct Participants, which will receive a credit for the Preferred
Securities on the Depositary's records. The
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ownership interest of each actual purchaser of each Preferred Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from the Depositary 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 the 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 the Depositary are registered in the name of the
Depositary's nominee, Cede & Co. The deposit of Preferred Securities with the
Depositary or its custodian and their registration in the name of Cede & Co.
effect no change in beneficial ownership. The Depositary has no knowledge of the
actual Beneficial Owners of the Preferred Securities. The Depositary'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.
So long as the Depositary, or its nominee, is the registered owner or holder
of a global certificate, the Depositary or such nominee, as the case may be,
will be considered the sole owner or holder of the Preferred Securities
represented thereby for all purposes under the Declaration and the Preferred
Securities. No beneficial owner of an interest in a global certificate
representing the Preferred Securities will be able to transfer that interest
except in accordance with the Depositary's applicable procedures, in addition to
those provided for under the Declaration.
The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Preferred Securities (including the
presentation of Preferred Securities for exchange as described below) only at
the direction of one or more Participants to whose account the beneficial
interests in the global certificate representing the Preferred Securities are
credited and only in respect of such portion of the aggregate liquidation amount
of Preferred Securities as to which such Participant or Participants has or have
been given such direction. If there is a Declaration Event of Default and a
majority in aggregate liquidation amount of the Preferred Securities so
determine, however, the Depositary will exchange the global certificate
representing the Preferred Securities for certificated Preferred Securities,
which it will distribute to its Participants.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, the Depositary will reduce the amount
of the interest of each Direct Participant in such Preferred Securities PRO RATA
in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither the Depositary nor Cede & Co. will
itself consent or vote with respect to Preferred Securities. Under its usual
procedures, the Depositary would mail an Omnibus Proxy to the Trust as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co. 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). The Company and the Trust believe that the arrangements
among the Depositary, Direct and Indirect Participants and Beneficial Owners
will enable the Beneficial Owners to exercise rights equivalent in substance to
the rights that can be directly exercised by a holder of a beneficial interest
in the Trust.
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Distribution payments on the Preferred Securities will be made to the
Depositary. The Depositary's practice is to credit Direct Participants' accounts
on the relevant payment date in accordance with their respective holdings shown
on the Depositary's records unless the Depositary has reason to believe that it
will not receive payment on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the account of customers in
bearer form or registered in "street name," and such payments will be the
responsibility of such Participants and not of the Depositary, the Trust or the
Company, subject to any statutory or regulatory requirements to the contrary
that may be in effect from time to time. Payment of distributions to the
Depositary is the responsibility of the Trust, disbursement of such payments to
Direct Participants is the responsibility of the Depositary, 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 certificate
representing the Preferred Securities will not be entitled to receive physical
delivery of Preferred Securities. Accordingly, each Beneficial Owner must rely
on the procedures of the Depositary to exercise any rights under the Preferred
Securities.
The Depositary may discontinue providing its services as securities
depository 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 depository is not obtained, definitive Preferred Securities
certificates are required to be printed and delivered. The Regular Trustees
(after consultation with the Company) may decide to discontinue use of the
system of book-entry transfers through the Depositary (or any successor
depository) with respect to the Preferred Securities. If a Declaration Event of
Default has occurred, the holders of a majority in aggregate liquidation amount
of the Preferred Securities may also determine to discontinue use of the system
of book-entry transfers through the Depositary with respect to the Preferred
Securities. In any such event, definitive certificates for the Preferred
Securities will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
and the Trust believe to be reliable but neither the Company nor the Trust takes
responsibility for the accuracy thereof. Neither the Company, the Trust nor any
Trustee will have any responsibility for the performance by the Depositary or
its Direct Participants or Indirect Participants under the rules and procedures
governing the Depositary.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities, undertakes to perform only such duties as are specifically
set forth in the Declaration and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Property Trustee is 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. The holders of Preferred Securities will not be required to offer such
indemnity in the event such holders, by exercising their voting rights, direct
the Property Trustee to take any action following a Declaration Event of
Default.
PAYING AGENT
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 such indemnity as
the Regular Trustees may require) in respect of any tax or other governmental
charges that may be imposed in relation to it.
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Neither the Regular Trustees nor the Trust shall 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 (i) required to register as an
"investment company" under the 1940 Act or (ii) characterized as other than a
grantor trust for United States federal income tax purposes. The Company is
authorized and directed to conduct its affairs so that the Subordinated
Debentures will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Company and the Regular
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust of the Trust, the Declaration or the charter of
the Company, that each of the Company and the Regular Trustees determines in its
discretion to be necessary or desirable to achieve such end, as long as such
action does not adversely affect the interests of the holders of the Preferred
Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a summary of the specific terms of the Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities and the Indenture pursuant to which the
Subordinated Debentures will be issued. The Indenture will be qualified as an
indenture under the Trust Indenture Act. IBJ Schroder will act as Indenture
Trustee. The terms of the Indenture will be those set forth in the Indenture and
those made part of the Indenture by the Trust Indenture Act. The following
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Indenture, the form of which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part and
the Trust Indenture Act.
GENERAL
The Subordinated Debentures will be issued as unsecured indebtedness of the
Company under the Indenture. The Subordinated Debentures will be limited in
aggregate principal amount to approximately $72.2 million, such amount being the
sum of the aggregate stated liquidation amount of the Trust Securities.
The Subordinated Debentures are not subject to a sinking fund provision. The
entire principal amount of the Subordinated Debentures will mature and become
due and payable, together with any accrued and unpaid interest thereon including
Compound Interest and Additional Interest, if any, on September 30, 2038,
subject to the one-time election of the Company to extend the scheduled maturity
date of the Subordinated Debentures to a date not later than September 30, 2047,
which election is subject to the Company's satisfying certain financial
conditions. See "--Option to Extend Maturity Date." Any reference herein to
interest on the Subordinated Debentures shall be deemed to include any
Additional Interest or Compound Interest.
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, such
Subordinated Debentures will initially be issued as a Global Security (as
defined below). As described herein, under certain limited circumstances,
Subordinated Debentures may be issued in certificated form in exchange for a
Global Security. See "--Book-Entry and Settlement" and "--The Depositary." In
the event that Subordinated Debentures are issued in certificated form, such
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Subordinated Debentures will be issued in denominations of $25 and integral
multiples thereof and may be transferred or exchanged at the offices described
below. Payments on Subordinated Debentures issued as a Global Security will be
made to the Depositary, a successor depository or, in the event that no
depository is used, to a paying agent for the Subordinated Debentures. In the
event Subordinated Debentures are issued in certificated form, principal and
interest will be payable, the transfer of the Subordinated Debentures will be
registrable and Subordinated Debentures will be exchangeable for Subordinated
Debentures of other denominations of a like aggregate principal amount at the
corporate trust office of the Indenture Trustee; provided that, payment of
interest may be made at the option of the Company by check mailed to the address
of the persons entitled thereto. Notwithstanding the foregoing, (i) so long as
the holder of the Subordinated Debentures is the Property Trustee, the payment
of principal of and interest on the Subordinated Debentures held by the Property
Trustee will be made in immediately available funds at such place and to such
account as may be designated by the Property Trustee and (ii) so long as the
Subordinated Debentures are represented by a Global Security, the payment of
principal of and interest on the Subordinated Debentures will be made in
immediately available funds to the Depositary.
INTEREST
The Subordinated Debentures will bear interest at the rate of 7 3/4% per
annum from the original date of issuance, payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year (each, an "Interest
Payment Date"), commencing December 31, 1998, to the person in whose name the
Subordinated Debentures are registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment Date.
In the event the Subordinated Debentures cease to be in book-entry only form or
are not held by the Property Trustee, the Company has the right to select record
dates, which must be at least one Business Day prior to the 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 for which interest is computed,
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
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.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Indenture Event of Default has occurred and is continuing, the
Company has the right under the Indenture at any time, and from time to time,
during the term of the Subordinated Debentures to defer payments of interest by
extending the interest payment period on the Subordinated Debentures for a
period not exceeding 20 consecutive quarters and not beyond the Stated Maturity
of the Subordinated Debentures, at the end of which Extension Period, the
Company must pay all interest then accrued and unpaid together with interest
thereon compounded quarterly at the rate specified for the Subordinated
Debentures to the extent permitted by applicable law ("Compound Interest");
provided that, during any such Extension Period, the Company shall not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of its capital stock or (ii)
make any payment of principal of, or interest or premium, if any, on or repay,
repurchase or redeem, or make any sinking fund payment with respect to, any
indebtedness of the Company (including other junior subordinated debt
securities) that ranks PARI PASSU with or junior in right of payment to the
Subordinated Debentures or make any guarantee payments with respect to the
foregoing (other than (a) dividends or distributions in common stock of the
Company, (b) redemptions or purchases of any rights pursuant to the Company's
Stock Purchase Rights Plan, or any successor to such Stock Purchase Rights Plan,
and the declaration of a dividend of such rights or the issuance of preferred
stock under such plans in the future,
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(c) payments under the Guarantee, (d) purchases of common stock related to the
issuance of common stock under the Company's Stock Purchase and Dividend
Reinvestment Plan and any of the Company's benefit plans for its directors,
officers or employees and (e) purchases of common stock required to prevent the
loss or secure the renewal or reinstatement of any government license or
franchise held by the Company or any of its subsidiaries).
Prior to the termination of any such Extension Period, the Company may
further defer payments of interest by extending the interest payment period;
PROVIDED, HOWEVER, that such Extension Period, including all such previous and
further extensions within such Extension Period, may not exceed 20 consecutive
quarters or the Stated Maturity of the Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may commence a new Extension Period, subject to the terms described in
this section. As a result, there could be multiple Extension Periods of varying
lengths throughout the term of the Subordinated Debentures. No interest during
an Extension Period, except at the end thereof, is due and payable. The Company
has no present intention of exercising its right to defer payments of interest
by extending the interest payment period on the Subordinated Debentures.
Moreover, because of the consequences of exercising such right, including a
prohibition on the payment of dividends with respect to the Company's capital
stock, the Company believes that the likelihood of such exercise is remote.
If the Property Trustee is the sole holder of the Subordinated Debentures,
the Company is required to give the Regular Trustees and the Property Trustee
written notice of its selection of such Extension Period one Business Day prior
to the earlier of (i) the next date distributions on the Preferred Securities
are payable and (ii) the date the Regular Trustees are required to give notice
to the New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Preferred Securities of the record date or
the date such distributions are payable, but in any event at least one Business
Day prior to such record date. The Regular Trustees must give notice of the
Company's selection of such Extension Period to the holders of the Preferred
Securities. If the Property Trustee is not the sole holder of the Subordinated
Debentures, the Company must give the holders of the Subordinated Debentures
written notice of its selection of such Extension Period ten Business Days prior
to the earlier of (i) the next Interest Payment Date and (ii) the date on which
the Company is required to give notice to the New York Stock Exchange (or other
applicable self-regulatory organization) or to holders of the Subordinated
Debentures of the record or such Interest Payment Date.
OPTION TO EXTEND MATURITY DATE
The maturity date of the Subordinated Debentures is September 30, 2038 which
date may be extended once to a date not later than September 30, 2047 by the
Company if (i) the Company is not in bankruptcy or otherwise insolvent, (ii) an
Indenture Event of Default has not occurred and is continuing, (iii) the Company
has made timely payments on the Subordinated Debentures for the immediately
preceding 18 months without deferrals of interest, (iv) the Trust is not in
arrears on payments of distributions on the Preferred Securities, (v) the
Subordinated Debentures are rated not less than BBB- by Standard & Poor's
Ratings Services or Fitch IBCA, Inc. or the equivalent by any other nationally
recognized statistical rating organization, and (vi) the final maturity of the
Subordinated Debentures is not later than the 49th anniversary of the issuance
of the Preferred Securities. Pursuant to the Declaration, the Regular Trustees
are required to give notice of the Company's election to extend the maturity
date to the holders of the Preferred Securities.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Subordinated Debentures, in
whole or in part, from time to time, on or after October 6, 2003, or at any time
in whole upon the occurrence of a Special Event as described under "Description
of the Preferred Securities--Redemptions--Special Event Redemption of the
Subordinated Debentures," upon not less than 30 nor more than 60 days' notice,
at the Debenture
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Redemption Price. The proceeds of any such redemption will be used by the Trust
to redeem the Preferred Securities in accordance with their terms.
DISTRIBUTION OF THE SUBORDINATED DEBENTURES
The Company will have the right at any time to dissolve the Trust and, in
such event, cause the Subordinated Debentures to be distributed to the holders
of the Preferred Securities in liquidation of the Trust after satisfaction of
liabilities to creditors of the Trust, if any, as provided by applicable law. If
the Subordinated Debentures are distributed to the holders of the Preferred
Securities in liquidation of the Trust, the Company will use its best efforts to
cause the Subordinated Debentures to be listed on the New York Stock Exchange or
on such other exchange as the Preferred Securities are then listed.
After the date for any distribution of Subordinated Debentures upon a
Liquidation, (i) the Preferred Securities 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 Global Certificate representing the
Subordinated Debentures 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 Debentures having an aggregate
principal amount equal to the aggregate stated liquidation amount of such
Preferred Securities until such certificates are presented to the Company or its
agent for transfer or reissuance. See "--Book-Entry and Settlement."
The Company cannot predict the market prices for the Subordinated Debentures
that may be distributed in exchange for the Preferred Securities if a
Liquidation were to occur. The Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Subordinated Debentures that an investor may receive if a Liquidation
were to occur, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby.
Under current United States federal income tax law, a distribution of
Subordinated Debentures upon a Liquidation would not be a taxable event to
holders of the Preferred Securities. If, however, a Liquidation occurred and it
was determined that the Trust was subject to United States federal income tax
with respect to amounts received or accrued on the Subordinated Debentures at
the time of such Liquidation, then the distribution of the Subordinated
Debentures would be a taxable event to holders of Preferred Securities. Under
current United States federal income tax law, the redemption of the Subordinated
Debentures upon the occurrence of a Special Event or a Liquidation in which
holders of the Preferred Securities receive cash would be a taxable event to
such holders. See "Certain Federal Income Tax Consequences--Distribution of
Subordinated Debentures or Cash On Liquidation of the Trust."
RANKING
The obligations of the Company under the Subordinated Debentures are
subordinate and junior in right of payment to all present and future Senior
Indebtedness and rank PARI PASSU with (i) all notes, debentures and other
evidences of indebtedness of the Company that shall contain or have applicable
thereto subordination provisions substantially identical in effect to the
subordination provisions set forth in the Indenture applicable to the
Subordinated Debentures providing for such indebtedness being junior and
subordinate in right of payment to all Senior Indebtedness and (ii) obligations
to, or rights of, the Company's other general unsecured creditors. As of June
30, 1998, the Company had approximately $1,023 million aggregate principal
amount of Senior Indebtedness outstanding (including approximately $427 million
aggregate principal amount of secured indebtedness outstanding under the
Mortgage Indenture) and approximately $613 million of obligations that rank PARI
PASSU with the Subordinated Debentures (including approximately $119 million
aggregate principal amount of junior subordinated debt securities, accounts
payable, accrued liabilities, including taxes, interest and deposits, and
deferred credits and other liabilities, all arising in the ordinary course of
business, and excluding commitments or
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contingencies in respect of existing or future obligations for, among other
things, construction expenditures, fuel and purchased power obligations and
operating lease obligations).
SUBORDINATION
The Indenture provides that the Subordinated Debentures are subordinated and
junior in right of payment to all present and future Senior Indebtedness of the
Company. No payment of principal of (including redemption payments) or interest
on the Subordinated Debentures may be made (i) if any Senior Indebtedness of the
Company is not paid when due, and such default has not been cured or waived or
ceased to exist, or (ii) if the maturity of any Senior Indebtedness of the
Company 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, premium, if any,
and interest due or to become due on all Senior Indebtedness of the Company must
be paid in full before the holders of Subordinated Debentures are entitled to
receive or retain any payment. Upon satisfaction of all claims of all Senior
Indebtedness then outstanding, the rights of the holders of the Subordinated
Debentures will be subrogated to the rights of the holders of Senior
Indebtedness of the Company to receive payments or distributions applicable to
Senior Indebtedness until all amounts owing on the Subordinated Debentures are
paid in full.
The term "Senior Indebtedness" means, with respect to the Company, principal
of and premium and interest, if any, on Debt of the Company, except for (i) any
Debt that is by its terms subordinated to or PARI PASSU with the Subordinated
Debentures, (ii) any Debt (including all other debt securities and guarantees in
respect of those debt securities) initially issued to any trust, or a trustee of
such trust, partnership, or other entity affiliated with the Company that is,
directly or indirectly, a financing vehicle of the Company in connection with
the issuance by such entity of preferred securities or other similar securities
that contain or have applicable thereto subordination provisions substantially
identical in effect to the subordination provisions set forth in the Indenture
applicable to the Subordinated Debentures providing for such indebtedness being
junior and subordinate in right of payment to all Senior Indebtedness, (iii) any
Debt of the Company which when incurred and without respect to any election
under Section 1111(b) of the United States Bankruptcy Code, was without recourse
to the Company, (iv) any Debt of the Company to any of its subsidiaries, (v)
Debt to any employee of the Company, (vi) any liability for taxes and (vii) Debt
or monetary obligations to trade creditors created or assumed by the Company or
any of its subsidiaries in the ordinary course of business in connection with
the obtaining of goods, materials or services. "Debt" means with respect to the
Company whether recourse is to all or a portion of the assets of the Company and
whether or not contingent, (i) every obligation of the Company for money
borrowed, (ii) every obligation of the Company evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of the Company with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of the
Company, (iv) every obligation of the Company issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business), (v) every
capital lease obligation of the Company and (vi) every obligation of the type
referred to in clauses (i) through (v) of another person and all dividends of
another person the payment of which, in either case, the Company has guaranteed
or is responsible or liable for, directly or indirectly, as obligor or
otherwise.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company. As of June 30, 1998, Senior Indebtedness of
the Company aggregated approximately $1,023 million (including approximately
$427 million aggregate principal amount of indebtedness outstanding under the
Company's Indenture of Mortgage and Deed of Trust dated October 1, 1953 entered
into with Bankers Trust Company, as amended and supplemented from time to time
(the "Mortgage Indenture")). The Subordinated Debentures also will be
effectively subordinated to all obligations of any subsidiaries of the Company.
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CERTAIN COVENANTS
If (i) there has occurred any event that would constitute an Indenture Event
of Default or (ii) the Company is in default with respect to its payment of any
obligations under the Guarantee or the Preferred Securities, then the Company
shall not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or (ii) make any payment of principal of, or interest or premium,
if any, on or repay, repurchase or redeem, or make any sinking fund payment with
respect to, any indebtedness of the Company (including other junior subordinated
debt securities) that ranks PARI PASSU with or junior in right of payment to the
Subordinated Debentures or make any guarantee payments with respect to the
foregoing (other than (a) dividends or distributions in common stock of the
Company, (b) redemptions or purchases of any rights pursuant to the Company's
Stock Purchase Rights Plan, or any successor to such Stock Purchase Rights Plan,
and the declaration of a dividend of such rights or the issuance of preferred
stock under such plans in the future, (c) payments under the Guarantee, (d)
purchases of common stock related to the issuance of common stock under the
Company's Stock Purchase and Dividend Reinvestment Plan and any of the Company's
benefit plans for its directors, officers or employees and (e) purchases of
common stock required to prevent the loss or secure the renewal or reinstatement
of any government license or franchise held by the Company or any of its
subsidiaries).
For so long as the Trust Securities remain outstanding, the Company will
covenant (i) to maintain 100% record or beneficial ownership of the Common
Securities; PROVIDED, HOWEVER, that any permitted successor of the Company under
the Indenture may succeed to the Company's ownership of such Common Securities,
(ii) to not cause, as Sponsor, or permit, as holder of the Common Securities,
the dissolution or winding-up of the Trust, except in connection with a
distribution of the Subordinated Debentures held by the Trust as provided in the
Declaration and (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 Debentures to the holders of Trust Securities in liquidation of the
Trust, the redemption of all the Trust Securities, 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 tax purposes.
If at any time the Trust is 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 such case,
the Company will pay as additional interest on the Subordinated Debentures
("Additional Interest") such additional amounts as shall be required so that the
net amounts received and retained by the Trust after paying such taxes, duties,
assessments or other governmental charges will be not less than the amounts the
Trust would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any holders of the Subordinated
Debentures, may consolidate with or merge into, or transfer or lease its assets
substantially as an entirety to, any person, and any other person may
consolidate with or merge into, or transfer or lease its assets substantially as
an entirety to, the Company, provided (i) that the person (if other than the
Company) formed by such consolidation or into which the Company is merged or
which acquires or leases the properties and assets of the Company substantially
as an entirety is a person organized and existing under the laws of any United
States jurisdiction and assumes the Company's obligations on the Subordinated
Debentures and under the Indenture, (ii) that after giving effect to such
transaction no Indenture Event of Default, and no event which, after notice or
lapse of time or both, would become an Indenture Event of Default, shall have
happened and be continuing, and (iii) that certain other conditions are met.
There are no provisions in the Subordinated Debentures or the Indenture that
limit or restrict the Company's business or operations, the pledging of the
Company's assets or the incurrence of indebtedness
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by the Company or that may afford holders protection in the event of a highly
leveraged transaction or leveraged buyout involving the Company.
INDENTURE EVENTS OF DEFAULT
The following are Indenture Events of Default: (i) failure to pay principal
of the Subordinated Debentures when due and payable; PROVIDED, HOWEVER, that a
valid extension of the maturity of the Subordinated Debentures shall not
constitute a default in the payment of principal for this purpose; (ii) failure
to pay any interest on any Subordinated Debenture when due and payable,
continued for 10 days; PROVIDED, HOWEVER, that a valid extension of the interest
payment period by the Company for the Subordinated Debentures shall not
constitute a default in the payment of interest for this purpose; (iii) failure
to perform any other covenant of the Company in the Indenture, continued for 60
days after written notice by the Indenture Trustee or holders of at least 25% in
aggregate principal amount of the Subordinated Debentures as provided in the
Indenture; (iv) certain events of bankruptcy, insolvency or reorganization of
the Company; or (v) a Liquidation, except in connection with the distribution of
Subordinated Debentures to the holders of Trust Securities in liquidation of the
Trust, the redemption of all of the Trust Securities, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.
If an Indenture Event of Default with respect to the Subordinated Debentures
shall occur and be continuing, either the Indenture Trustee or the holders of at
least 25% in aggregate principal amount of the Subordinated Debentures by notice
as provided in the Indenture may declare the principal amount of the
Subordinated Debentures to be due and payable immediately. At any time after a
declaration of acceleration with respect to the Subordinated Debentures has been
made, however, but before a judgment or decree based on such acceleration has
been obtained, the holders of a majority in aggregate principal amount of the
Subordinated Debentures may, under certain circumstances, rescind and annul such
acceleration. For information as to waiver of defaults, see "--Modification and
Waiver."
The Indenture provides that, subject to the duty of the Indenture Trustee
during an Indenture Event of Default to act with the required standard of care,
the Indenture Trustee will be under no obligation to exercise any of its rights
or powers under the Indenture at the request or direction of any of the holders,
unless such holders shall have offered to the Indenture Trustee reasonable
security or indemnity. Subject to certain provisions in the Indenture, the
holders of a majority in aggregate principal amount of the Subordinated
Debentures will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee, or
exercising any trust or power conferred on the Indenture Trustee, with respect
to the Subordinated Debentures. No such limitations shall apply, however, to a
suit instituted by a holder of a Subordinated Debenture for the enforcement of
the payment of the principal of and interest on such Subordinated Debenture on
or after the applicable due dates specified in such Subordinated Debenture.
The Company will be required to furnish to the Indenture Trustee annually a
statement as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance.
An Indenture Event of Default also constitutes a Declaration Event of
Default. If any Indenture Event of Default occurs and is continuing, the
Property Trustee, as the holder of the Subordinated Debentures, will have the
right to declare the principal of and the interest on the Subordinated
Debentures 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 Debentures. 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 Debentures. The Company has
acknowledged in the Indenture that if the Property Trustee fails to enforce its
rights under the Subordinated Debentures, a holder of Preferred Securities may
institute a legal proceeding directly against the Company to enforce the
Property Trustee's rights under the
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Subordinated Debentures without first instituting any legal proceeding against
the Property Trustee or any other person or entity, and that notwithstanding the
foregoing, if an Indenture Event of Default has occurred and is continuing and
is attributable to the failure of the Company to pay interest on or principal of
the Subordinated Debentures on the date such interest or principal is otherwise
payable, a holder of Preferred Securities may then institute a Direct Action for
payment on or after the respective due dates specified in the Subordinated
Debentures. See "Description of the Preferred Securities--Declaration Events of
Default" and "--Voting Rights."
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Indenture Trustee with the consent of the holders of a majority in aggregate
principal amount of the Subordinated Debentures, PROVIDED, HOWEVER, that no such
modification or amendment may, without the consent of the holder of each
Subordinated Debenture (i) change the Stated Maturity of the Subordinated
Debentures; (ii) reduce the principal amount of or the rate of interest on the
Subordinated Debentures; (iii) impair the right to institute suit for the
enforcement of any payment on or with respect to the Subordinated Debentures on
or after the Stated Maturity or redemption date thereof; or (iv) reduce the
percentage in principal amount of outstanding Subordinated Debentures, the
consent of the holders of which is required for modification or amendment of the
Indenture, for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults. In addition, the Company and the Trustee may
execute, without the consent of the holders of the Subordinated Debentures, one
or more supplemental indentures in order to (i) evidence the succession of
another company or person to the obligations of the Company under the Indenture
and the assumption by any such successor of the covenants of the Company
contained in the Indenture, (ii) add to the covenants of the Company or
surrender any right or power conferred upon the Company in the Indenture, (iii)
add any additional Indenture Events of Default, (iv) provide for the appointment
of a successor trustee and add to or change any of the provisions of the
Indenture to provide for or facilitate the administration of the trusts of the
Indenture by the Indenture Trustee, or (v) cure any ambiguity in or correct or
supplement any provision of the Indenture which may be inconsistent with any
other provision therein, or make any other provisions with respect to matters or
questions arising thereunder, provided that the actions described in this clause
(v) shall not adversely affect the interests of holders of the Subordinated
Debentures (except for holders consenting to such changes).
The holders of a majority in aggregate principal amount of the outstanding
Subordinated Debentures may, on behalf of the holders of the Subordinated
Debentures, waive compliance by the Company with certain covenants of the
Indenture. The holders of a majority in aggregate principal amount of the
outstanding Subordinated Debentures may, on behalf of the holders of all
Subordinated Debentures, waive any past default under the Indenture, except a
default in the payment of the principal of or interest on the Subordinated
Debentures or in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holders of the
outstanding Subordinated Debentures affected.
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be deemed to be
discharged from its obligations with respect to the Subordinated Debentures
(except in each case for certain obligations with respect to provisions for
payment of the Subordinated Debentures and obligations to register the transfer
or exchange of the Subordinated Debentures, replace stolen, lost or mutilated
Subordinated Debentures, maintain certain agencies and hold moneys for payments
in trust) if, among other conditions, the Company (i) deposits with the
Indenture Trustee, in trust, moneys or Governmental Obligations, in an amount
sufficient to pay all the principal of and interest on the Subordinated
Debentures on the dates such payment are due in accordance with the terms of the
Subordinated Debentures and (ii) delivers to the Indenture Trustee an opinion of
counsel to the effect that, based upon the Company's receipt from, or the
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publication by, the Internal Revenue Service of a ruling, or based upon a change
in law, the holders of the Subordinated Debentures 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.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with a
Liquidation, the Subordinated Debentures will be issued in the form of one
global security registered in the name of the Depositary or its nominee (each, a
"Global Security"). Except under the limited circumstances described below,
Subordinated Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Subordinated Debentures
in definitive form. See "--Discontinuance of the Depositary's Services." The
Global Securities described above may not be 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 depository
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 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
Debentures 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 Debentures is 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, or, 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.
THE DEPOSITARY
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, the
Depositary will act as securities depositary for the Subordinated Debentures.
For a description of the Depositary and the specific terms of the depositary
arrangements, see "Description of the Preferred Securities--Book-Entry Only
Issuance--The Depository Trust Company." As of the date of this Prospectus, the
description of the Depositary's book-entry system and the Depositary'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 the Depositary. The Company
may appoint a successor to the Depositary or any successor depository in the
event the Depositary or such successor depository is unable or unwilling to
continue as a depository for the Global Security.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture 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 Debentures or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security is exchangeable for Subordinated Debentures 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
depository for such Global Security and no successor depository shall have been
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appointed, (ii) the Depositary at any time ceases to be a clearing agency
registered under the Exchange Act, at which time the Depositary is required to
be so registered to act as such depository and no successor depository shall
have been appointed, (iii) the Company, in its sole discretion, determines that
such Global Security is so exchangeable or (iv) there shall have occurred an
Indenture Event of Default with respect to such Subordinated Debentures. Any
Global Security that is exchangeable pursuant to the preceding sentence is
exchangeable for Subordinated Debentures 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.
MISCELLANEOUS
The Indenture provides that the Company will pay all debts and obligations
of the Trust (other than with respect to the Trust Securities), including all
fees and expenses related to (i) the offering of the Trust Securities and the
Subordinated Debentures, (ii) the organization, maintenance and dissolution of
the Trust, (iii) the retention of the Regular Trustees and (iv) the enforcement
by the Property Trustee of the rights of the holders of the Preferred
Securities. The payment of such fees and expenses will be fully and
unconditionally guaranteed by the Company.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the laws of the State of New York.
REGARDING THE INDENTURE TRUSTEE
The Indenture contains certain limitations on the right of the Indenture
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize for its own account on certain property received
in respect of any such claim as security or otherwise. The Indenture Trustee
will be permitted to engage in certain other transactions; however, if it
acquires any conflicting interest and there is a default under the Subordinated
Debentures, it must eliminate such conflict or resign.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by the Company for the benefit of the holders of
the Preferred Securities. The Guarantee will be qualified as an indenture under
the Trust Indenture Act. IBJ Schroder will act as Guarantee Trustee. The terms
of the Guarantee will be those set forth in the Guarantee and those made part of
the Guarantee by the Trust Indenture Act. This 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 Guarantee, which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part and
the Trust Indenture Act. The Guarantee will be held by the Guarantee Trustee for
the benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth herein, to pay in full to the holders of the
Preferred Securities, the Guarantee Payments (as defined herein) (except to the
extent paid by the Trust), as and when due, regardless of any defense, right of
set-off or counterclaim that the Trust may have or assert. The following
payments with respect to the Preferred Securities (the "Guarantee Payments"), to
the extent not paid or made by the Trust, will be subject to the Guarantee
(without duplication): (i) any accrued and unpaid distributions that are
required to be paid on the Preferred Securities to the extent the Trust shall
have funds available therefor, (ii) the Redemption Price to the extent the Trust
shall have funds available therefor with respect to any Preferred Securities
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called for redemption by the Trust and (iii) upon a Liquidation (other than in
connection with the distribution of the Subordinated Debentures to the holders
of the Preferred Securities or the redemption of all the Preferred Securities
upon the redemption or Stated Maturity of the Subordinated Debentures) the
lesser of (a) the Liquidation Distribution to the extent the Trust shall have
funds available therefor and (b) the amount of assets of the Trust remaining
available for distribution to holders of the 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 Guarantee will be a full and unconditional guarantee on a subordinated
basis with respect to the Preferred Securities from the time of issuance, but
will not apply to any payment of distributions, except to the extent the Trust
shall have funds available therefor as a result of payments of interest on or
principal of the Subordinated Debentures by the Company. If the Company does not
make interest payments on the Subordinated Debentures purchased by the Trust,
the Trust will not pay distributions on the Preferred Securities and will not
have funds available therefor.
The Company has also agreed to irrevocably and unconditionally guarantee the
obligations of the Trust with respect to the Common Securities (the "Common
Securities Guarantee") to the same extent as the Guarantee, except that, upon an
Indenture Event of Default, holders of Preferred Securities under the Guarantee
will have priority over holders of Common Securities under the Common Securities
Guarantee to receive Guarantee Payments.
STATUS OF THE GUARANTEE
The Company's obligations under the Guarantee are subordinate and junior in
right of payment to all liabilities of the Company and rank PARI PASSU with the
most senior preferred stock issued, from time to time, if any, by the Company.
The Guarantee will constitute a guarantee of payment and not of collection (i.e.
the guaranteed party may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against any other person or entity). There are no terms in the
Guarantee that limit the Company's ability to incur additional indebtedness,
including indebtedness that ranks senior to the Guarantee.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company will covenant that, so long as any Preferred
Securities issued by the Trust remain outstanding, if there shall have occurred
any event that would constitute an event of default under the Guarantee or a
Declaration Event of Default, then the Company shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or (ii) make any
payment of principal of, or interest or premium, if any, on or repay, repurchase
or redeem, or make any sinking fund payment with respect to, any indebtedness of
the Company (including other junior subordinated debt securities) that ranks
PARI PASSU with or junior in right of payment to the Subordinated Debentures or
make any guarantee payments with respect to the foregoing (other than (a)
dividends or distributions in common stock of the Company, (b) redemptions or
purchases of any rights pursuant to the Company's Stock Purchase Rights Plan, or
any successor to such Stock Purchase Rights Plan, and the declaration of a
dividend of such rights or the issuance of preferred stock under such plans in
the future, (c) payments under the Guarantee, (d) purchases of common stock
related to the issuance of common stock under the Company's Stock Purchase and
Dividend Reinvestment Plan and any of the Company's benefit plans for its
directors, officers or employees and (e) purchases of common stock required to
prevent the loss or secure the renewal or reinstatement of any government
license or franchise held by the Company or any of its subsidiaries).
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MODIFICATIONS OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
Guarantee may be amended only with the prior approval of the holders of not less
than 66 2/3 in aggregate liquidation amount of the Preferred Securities then
outstanding. See "Description of the Preferred Securities--Voting Rights." All
guarantees and agreements contained in the Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall inure
to the benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to make any of the payments required by the Guarantee or to perform its
other obligations thereunder. 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 Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee.
Any holder of Preferred Securities may institute a legal proceeding directly
against the Company to enforce the Guarantee Trustee's rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity.
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Guarantee and as to any default in such performance. The Company is
also required to file annually with the Guarantee Trustee an officer's
certificate as to the Company's compliance with all conditions under the
Guarantee.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of all Preferred Securities, upon full payment
of the amounts payable upon liquidation of the Trust or upon distribution of the
Subordinated Debentures to the holders of the Preferred Securities. The
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 restore payment of
any sums paid under such Preferred Securities or the Guarantee.
GOVERNING LAW
The Guarantee shall be governed by, and construed in accordance with, the
laws of the State of New York.
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<PAGE>
EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust and to invest the proceeds from such issuance and sale in the
Subordinated Debentures.
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because of the following factors: (i)
the aggregate principal amount of Subordinated Debentures will be equal to the
sum of the aggregate stated liquidation amount of the Trust Securities, (ii) the
interest rate and the interest and other payment dates on the Subordinated
Debentures will match the distribution rate and the distribution and other
payment dates for the Preferred Securities, (iii) the Company is required to pay
all, and the Trust is not obligated to pay, directly or indirectly, any, costs
and expenses of the Trust, and (iv) the Declaration provides that the Regular
Trustees will not cause or permit the Trust to, among other things, engage in
any activity that is not inconsistent 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 and to the extent set forth under
"Description of the Guarantee." If the Company does not make interest payments
on the Subordinated Debentures purchased by the Trust, it is expected that the
Trust will not have sufficient funds to pay distributions on the Preferred
Securities. The Guarantee is a full and unconditional guarantee on a
subordinated basis from the time of its issuance but 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
Debentures when due (taking account of 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-- Book-Entry
Only Issuance--The Depository Trust Company" and "--Voting Rights," may direct
the Property Trustee to enforce its rights under the Subordinated Debentures. If
the Property Trustee fails to enforce its rights under the Declaration or the
Subordinated Debentures, a holder of Preferred Securities may institute a legal
proceeding against the Company to enforce the Property Trustee's rights under
the Declaration or the Subordinated Debentures without first instituting any
legal proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest on or principal of the Subordinated Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), then a holder of Preferred Securities may institute a Direct
Action for enforcement of payment to such holder of the principal of or interest
on the Subordinated Debentures having an aggregate principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder on or
after the respective due dates specified in the Subordinated Debentures.
The Company, under the Guarantee, acknowledges that the Guarantee Trustee
will enforce the Guarantee on behalf of the holders of the Preferred Securities.
If the Company fails to make payments under the Guarantee, the Guarantee
provides a mechanism whereby the holders of the Preferred Securities may direct
the Guarantee Trustee to enforce its rights thereunder. In any event, any holder
of Preferred Securities may institute a legal proceeding directly against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity.
The Guarantee, when taken together with the Company's obligations under the
Subordinated Debentures, the Indenture and the Declaration, including its
covenant in the Indenture to pay costs,
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expenses, debts and obligations of the Trust (other than with respect to the
Trust Securities), provide a full and unconditional guarantee of amounts due on
the Preferred Securities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences of the purchase, ownership and disposition of Preferred Securities.
Unless otherwise stated, this summary addresses only Preferred Securities held
as capital assets by United States Holders (as defined below) that purchase
Preferred Securities on their original issuance at their original offering
price, and does not address all the tax consequences that may be relevant to
holders subject to special tax treatment, such as banks, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, persons whose "functional
currency" is other than the United States dollar, persons who hold Preferred
Securities as part of a hedging or conversion transaction or a straddle or
persons who "mark to market" their securities.
As used herein, "United States Holder" means a holder that is (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income of which is subject to
United States federal income tax regardless of its source or (iv) a trust the
administration of which is subject to the primary supervision of a United States
court and for which one or more United States persons have the authority to
control all substantial decisions.
The statements of law or legal conclusions set forth in this summary
constitute the opinion of Winthrop, Stimson, Putnam & Roberts, special tax
counsel to the Company and the Trust. This summary is based upon the Internal
Revenue Code of 1986, as amended, and regulations, rulings and judicial
decisions thereunder as of the date hereof, all of which are subject to change,
possibly on a retroactive basis.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS, IN
LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS TO THE UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF PREFERRED
SECURITIES, AS WELL AS THE CONSEQUENCES OF ANY OTHER UNITED STATES FEDERAL,
STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE TRUST
Under current law and assuming compliance with the terms of the Declaration
and certain other documents, the Trust will be classified as a grantor trust and
not as an association taxable as a corporation for United States federal income
tax purposes. As a result, each beneficial owner of Preferred Securities will be
treated as owning an undivided beneficial interest in the Subordinated
Debentures. Accordingly, each United States Holder will be required to include
in gross income its PRO RATA portion of interest or OID, if any, accrued with
respect to the Subordinated Debentures whether or not the cash is actually
distributed to the holders. See "--Payments of Interest" and "--Original Issue
Discount." No amount included in income with respect to the Preferred Securities
will be eligible for the dividends received deduction for domestic corporate
holders.
PAYMENTS OF INTEREST
Except as set forth below, stated interest on the Subordinated Debentures
will generally be taxable to a United States Holder as ordinary income at the
time it is paid or accrued, in accordance with such United States Holder's
method of accounting for United States federal income tax purposes.
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<PAGE>
ORIGINAL ISSUE DISCOUNT
Under the Indenture, the Company has the right to defer payments of interest
on the Subordinated Debentures by extending the interest payment period on the
Subordinated Debentures at any time for up to 20 consecutive quarters with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity of the Subordinated Debentures. The Company has no
present intention of exercising such right. Moreover, because of the
consequences of exercising such right, including a prohibition on the payment of
dividends with respect to the Company's capital stock, the Company believes that
the likelihood of such exercise is remote. Consequently, under United States
Treasury regulations that define OID, the Company believes, and intends to take
the position, that the Subordinated Debentures will not be issued with OID. It
should be noted that those regulations have not been addressed in any rulings or
other interpretations by the IRS. Accordingly, no assurances can be given that
the IRS will not take a contrary position or that a court will not sustain that
position.
Should the Company exercise its right to defer payments of interest, as
described above, the Subordinated Debentures would at that time be treated as
reissued with OID. As a result, a United States Holder would, in effect, be
required to accrue interest income even if such United States Holder used the
cash method of accounting for United States federal income tax purposes.
Consequently, in the event that the payment of interest were deferred, a United
States Holder would be required to include OID in income on an economic accrual
basis notwithstanding that the Company would not make interest payments on the
Subordinated Debentures, and the Trust would not make distributions on the
Preferred Securities, during such period.
DISTRIBUTION OF SUBORDINATED DEBENTURES OR CASH ON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under "Description of the
Preferred Securities--Liquidation Distribution Upon Dissolution" and
"Description of the Subordinated Debentures--Distribution of the Subordinated
Debentures," Subordinated Debentures may be distributed to holders in exchange
for Preferred Securities upon a Liquidation. Under current United States federal
income tax law, a distribution of Subordinated Debentures upon a Liquidation
would not be a taxable event to the holders, and each holder would have an
aggregate tax basis in the Subordinated Debentures equal to such holder's
aggregate tax basis in its Preferred Securities. A holder's holding period in
the Subordinated Debentures received in the Liquidation would include the period
during which the Preferred Securities were held by such holder. If, however, a
Liquidation occurred and it was determined that the Trust was subject to United
States federal income tax with respect to amounts received or accrued on the
Subordinated Debentures at the time of such Liquidation, then the distribution
of the Subordinated Debentures would be a taxable event to United States
Holders. In that event, gain or loss would be recognized in an amount equal to
the difference between the fair market value of the Subordinated Debentures
received in the Liquidation and the United States Holder's aggregate tax basis
in its Preferred Securities. In such a case, the holding period of the
Subordinated Debentures received in the Liquidation would not include the period
during which the Preferred Securities were held.
Under certain circumstances, as described under "Description of the
Preferred Securities--Redemptions" and "Description of the Subordinated
Debentures--Optional Redemption," the Subordinated Debentures may be redeemed
for cash and the proceeds of such redemption distributed to holders in
redemption of their Preferred Securities. Under current United States federal
income tax law, such a redemption would be a taxable event and a United States
Holder would recognize gain or loss as if it had sold such redeemed Preferred
Securities for cash. See "--Sales of Preferred Securities."
SALES OF PREFERRED SECURITIES
Gain or loss will be recognized by a United States Holder on a sale or other
disposition (including a redemption for cash) of Preferred Securities in an
amount equal to the difference between the amount
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realized (which, for this purpose, will exclude amounts attributable to accrued
and unpaid interest not previously included in income as interest or OID, which
will be taxable as ordinary income) and the United States Holder's adjusted tax
basis in the Preferred Securities sold or redeemed. A holder's adjusted tax
basis in its Preferred Securities will generally be the initial purchase price,
increased by any OID included in income and decreased by subsequent payments
received on the Preferred Securities. Such gain or loss will generally be
long-term capital gain or loss if the Preferred Securities sold or redeemed have
been held for more than one year. Long-term capital gains of individuals are
eligible for reduced rates of United States federal income taxation.
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 Debentures. A holder who disposes of Preferred Securities between
record dates for payments of distributions thereon (and consequently does not
receive a distribution from the Trust for the period prior to such distribution)
will nevertheless be required to include in gross income for United States
federal income tax purposes such holder's ratable share of accrued but unpaid
interest (or OID) on the Subordinated Debentures through the date of disposition
as ordinary income. To the extent the selling price (which may not fully reflect
the value of accrued but unpaid interest (or OID)) 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.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Interest and OID, if any, paid or accrued on the Preferred Securities held
of record by United States Holders (other than corporations and other exempt
holders) will be reported annually to the IRS. It is anticipated that such
interest or OID will be reported to holders on Form 1099 and delivered by
January 31 following each calendar year. "Backup" withholding at a rate of 31%
will apply to payments made on, and proceeds from the sale of, Preferred
Securities unless the United States Holder furnishes its taxpayer identification
number in the manner prescribed in applicable Treasury regulations, certifies
that such number is correct, certifies as to no loss of exemption from backup
withholding and meets certain other conditions. Any withheld amount generally
will be allowed as a credit against the United States Holder's United States
federal income tax liability, provided the required information is timely filed
with the IRS.
On October 16, 1997, the United States Treasury Department issued
regulations concerning the information reporting and backup withholding rules.
These regulations are generally effective for payments made after December 31,
1999. In general, they do not alter significantly the substantive requirements
of the rules pertaining to backup withholding and information reporting, but,
rather, modify certification procedures and forms and clarify reliance
standards. Prospective investors should consult their own tax advisors regarding
these regulations.
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
relating to the Preferred Securities dated the date hereof (the "Underwriting
Agreement"), the Company and the Trust have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Bear, Stearns
& Co. Inc., PaineWebber Incorporated, Prudential Securities Incorporated, EVEREN
Securities, Inc. and Credit Suisse First Boston Corporation are acting as
representatives (the "Representatives"), has severally agreed to purchase the
respective number of Preferred Securities set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
- -------------------------------------------------- ----------
<S> <C>
Bear, Stearns & Co. Inc........................... 428,000
PaineWebber Incorporated.......................... 428,000
Prudential Securities Incorporated................ 428,000
EVEREN Securities, Inc............................ 428,000
Credit Suisse First Boston Corporation............ 428,000
ABN AMRO Incorporated............................. 40,000
A.G. Edwards & Sons, Inc. ........................ 40,000
BancAmerica Securities, Inc....................... 40,000
BT Alex Brown Incorporated........................ 40,000
CIBC Oppenheimer Corp............................. 40,000
Dain Rauscher Incorporated........................ 40,000
Donaldson, Lufkin & Jenrette Securities
Corporation..................................... 40,000
First Chicago Capital Markets, Inc. .............. 40,000
Legg Mason Wood Walker, Incorporated ............. 40,000
Lehman Brothers Inc............................... 40,000
NationsBanc Montgomery Securities LLC............. 40,000
SG Cowen Securities Corporation................... 40,000
Blaylock & Partners, L.P. ........................ 20,000
Craigie Incorporated.............................. 20,000
Fleet Securities, Inc............................. 20,000
Muriel Siebert & Co., Inc. ....................... 20,000
Olde Discount Corporation......................... 20,000
Piper Jaffray Inc. ............................... 20,000
Ramirez & Co., Inc. .............................. 20,000
Sutro & Co. Incorporated.......................... 20,000
Wedbush Morgan Securities......................... 20,000
----------
Total............................................. 2,800,000
----------
----------
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all the Preferred
Securities offered hereby if any of the Preferred Securities are purchased.
The Company and the Trust have been advised by the Representatives that the
Underwriters propose 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 $0.5000
per Preferred Security. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $0.4000 per Preferred Security to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
Because the proceeds of the sale of the Preferred Securities will be
invested in the Subordinated Debentures, the Underwriting Agreement provides
that the Company will pay as Underwriters' Compensation to the Underwriters for
their arranging the investment therein of such proceeds, $0.7875 per Preferred
Security (or $2,205,000 in the aggregate) for the accounts of the several
Underwriters, provided that, such compensation for sales of 100,000 or more
Preferred Securities to a single purchaser will be
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<PAGE>
$0.5000 per Preferred Security. Therefore, to the extent of such sales, the
actual amount of such compensation will be less than the aggregate amount
specified in the preceding sentence.
During the period of 30 days from the date of this Prospectus, neither the
Trust nor the Company will, without the prior written consent of the
Representatives, directly or indirectly, sell, offer to sell, grant any option
for the sale of, or otherwise dispose of, any beneficial interests in the assets
of the Trust, or any preferred securities or any other securities of the Trust
or the Company that are substantially similar to the Preferred Securities,
including any guarantee of such securities, or any securities convertible into
or exchangeable for or that represent the right to receive beneficial interests
in the assets of the Trust, preferred securities or any such substantially
similar securities of either the Trust or the Company (except for the
Subordinated Debentures and the Preferred Securities offered hereby).
Prior to this offering there has been no public market for the Preferred
Securities. The Preferred Securities have been 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 the 30-day period after the initial delivery of the Preferred Securities.
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 to a
minimum of 400 beneficial holders. The Representatives have advised the Trust
that they intend to make a market in the Preferred Securities prior to the
commencement of trading on the New York Stock Exchange. The Representatives will
have no obligation to make a market in the Preferred Securities, however, and
may cease market-making activities, if commenced, at any time.
During and after the offering, the Underwriters may purchase and sell the
Preferred Securities in the open market. These transactions may include
overallotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the offering. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the Preferred Securities sold in
the offering for their account may be reclaimed by the syndicate if such
Preferred Securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Preferred Securities that may be higher than the price that
might otherwise prevail in the open market; and these activities, if commenced,
may be discontinued at any time. These transactions may be effected on the New
York Stock Exchange, in the over-the-counter market or otherwise.
The Company and the Trust have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain matters of Delaware law relating to the legality of the Preferred
Securities, and the formation of the Trust will be passed upon by Richards,
Layton & Finger, P.A., special Delaware counsel to the Company and the Trust.
The legality of the Guarantee and the Subordinated Debentures will be passed
upon for the Company by Best Best & Krieger LLP. The validity of the Preferred
Securities, the Guarantee and the Subordinated Debentures will be passed upon
for the Underwriters by Winthrop, Stimson, Putnam & Roberts. Certain matters
relating to United States federal income tax considerations will be passed upon
for the Company and the Trust by their special tax counsel, Winthrop, Stimson,
Putnam & Roberts.
EXPERTS
The financial statements and financial statement schedule of the Company
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................................... 5
Incorporation of Certain Information by Reference....................... 5
Summary................................................................. 7
Risk Factors............................................................ 11
The Mergers............................................................. 15
The Trust............................................................... 18
Selected Financial and Operating Information............................ 19
Capitalization.......................................................... 21
Use of Proceeds......................................................... 22
Accounting Treatment.................................................... 22
Description of the Preferred Securities................................. 22
Description of the Subordinated Debentures.............................. 33
Description of the Guarantee............................................ 42
Effect of Obligations under the Subordinated Debentures and the
Guarantee............................................................. 45
Certain Federal Income Tax Consequences................................. 46
Underwriting............................................................ 49
Legal Matters........................................................... 50
Experts................................................................. 50
</TABLE>
2,800,000 PREFERRED SECURITIES
NVP CAPITAL III
7 3/4% TRUST ISSUED PREFERRED SECURITIES
(LIQUIDATION AMOUNT
$25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
NEVADA POWER COMPANY
-----------------------
PROSPECTUS
-----------------------
BEAR, STEARNS & CO. INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
INCORPORATED
EVEREN SECURITIES, INC.
CREDIT SUISSE FIRST BOSTON
REPRESENTATIVES OF THE UNDERWRITERS
SEPTEMBER 28, 1998
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