<PAGE>
Filed Pursuant to Rule 424(b)(5)
File No.
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 14, 1997)
8,000,000 PREFERRED SECURITIES
NSP FINANCING I
7 7/8% TRUST ORIGINATED PREFERRED SECURITIES-SM- ("TOPrS-SM-")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
NORTHERN STATES POWER COMPANY
(A MINNESOTA CORPORATION)
The 7 7/8% Trust Originated Preferred Securities (the "Preferred
Securities") offered hereby represent preferred undivided beneficial interests
in the assets of NSP Financing I, a statutory business trust formed under the
laws of the State of Delaware ("NSP Financing" or the "Trust"). Northern States
Power Company, a Minnesota corporation (the "Company"), will directly or
indirectly 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 NSP Financing. NSP Financing exists for
the sole purpose of issuing the Preferred Securities and Common Securities and
investing the proceeds thereof in an equivalent amount of 7 7/8% Junior
Subordinated Debentures due 2037 (the "Junior Subordinated Debentures") of the
Company. The Junior Subordinated Debentures and the Preferred Securities in
respect of which this Prospectus Supplement is being delivered shall be referred
to herein as the "Offered Securities." The Junior Subordinated Debentures when
issued will be unsecured obligations of the Company and will be subordinate and
junior in right to certain other indebtedness of the Company, as described
herein. 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" BEGINNING ON PAGE S-4 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF
DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
The Preferred Securities have been approved for listing on the New York
Stock Exchange, Inc. (the "New York Stock Exchange"). Trading of the Preferred
Securities on the New York Stock Exchange is expected to commence within a
30-day period after the initial delivery of the Preferred Securities. See
"Underwriting."
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC
OFFERING UNDERWRITING PROCEEDS TO
PRICE (1) COMMISSION (2) TRUST (3)(4)
<S> <C> <C> <C>
Per Preferred Security...................... $25.00 (3) $25.00
Total....................................... $200,000,000 (3) $200,000,000
</TABLE>
(1) Plus accrued distributions, if any, from January 31, 1997.
(2) NSP Financing and the Company have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debentures, the
Company has agreed to pay to the Underwriters as compensation (the
"Underwriters' Compensation") for their arranging the investment therein of
such proceeds, $.7875 per Preferred Security (or $6,300,000 in the
aggregate); PROVIDED, that such compensation for sales of 10,000 or more
Preferred Securities to a single purchaser will be $.50 per Preferred
Security. Therefore, to the extent of such sales, the actual amount of
Underwriters' Compensation will be less than the aggregate amount specified
in the preceding sentence. See "Underwriting."
(4) Expenses of the offering which are payable by the Company are estimated to
be $475,000.
--------------------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company, on or about January 31,
1997.
--------------------------
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
DAIN BOSWORTH
INCORPORATED
PIPER JAFFRAY INC.
--------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JANUARY 28, 1997.
-SM-"TRUST ORIGINATED PREFERRED SECURITIES" AND "TOPrS" ARE SERVICE MARKS OF
MERRILL LYNCH & CO., INC.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 7 7/8% of the liquidation amount of $25 per
Preferred Security, accruing 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 March 31, 1997 ("distributions"). The payment of distributions
out of moneys held by NSP Financing and payments on liquidation of NSP Financing
or the redemption of Preferred Securities, as set forth below, are guaranteed by
the Company (the "Guarantee") to the extent described herein and under the
caption "Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. The Guarantee covers payments of distributions and other payments on
the Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal or other payments on the Junior Subordinated
Debentures held by NSP Financing as its sole asset. The Guarantee, when taken
together with the Company's obligations under the Junior Subordinated Debentures
and the Indenture (as defined below) and its obligations under the Declaration
(as defined below), including its liabilities to pay costs, expenses, debts and
liabilities of NSP Financing (other than with respect to the Trust Securities),
provide a full and unconditional guarantee on a subordinated basis of amounts
due on the Preferred Securities. See "Risk Factors -- Rights Under the
Guarantee" herein. The obligations of the Company under the Guarantee are
subordinate and junior in right of payment to all other liabilities of the
Company and 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 Junior
Subordinated Debentures are subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined herein) of the Company, which
aggregated approximately $1.6 billion at September 30, 1996, and rank PARI PASSU
with the Company's other general unsecured creditors. The Junior Subordinated
Debentures purchased by NSP Financing may be subsequently distributed PRO RATA
to holders of the Preferred Securities and Common Securities in connection with
the dissolution of NSP Financing, upon the occurrence of certain events.
The distribution rate and the distribution payment date and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment date and other payment dates on the Junior Subordinated
Debentures, which will be the sole assets of NSP Financing. As a result, if
principal or interest is not paid on the Junior Subordinated Debentures, no
amounts will be paid on the Preferred Securities. If the Company does not make
principal or interest payments on the Junior Subordinated Debentures, NSP
Financing will not have sufficient funds to make distributions on the Preferred
Securities, in which event, the Guarantee will not apply to such distributions
until NSP Financing has sufficient funds available therefor.
The Company has the right to defer payments of interest on the Junior
Subordinated Debentures by extending the interest payment period on the Junior
Subordinated Debentures at any time for up to 20 consecutive quarters (each, an
"Extension Period"). If interest payments are so deferred, distributions on the
Preferred Securities will also be deferred. During such Extension Period,
distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at an annual rate of 7 7/8% per annum compounded
quarterly, and during any Extension Period, holders of Preferred Securities will
be required to include deferred interest income in their gross income for United
States federal income tax purposes in advance of receipt of the cash
distributions with respect to such deferred interest payments, regardless of
their normal accounting method. There could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures -- Option to Extend Interest
Payment Period." See "Risk Factors -- Option to Extend Interest Payment Period"
and "United States Federal Income Taxation -- Interest Income and Original Issue
Discount."
The Junior Subordinated Debentures are redeemable by the Company, in whole
or in part, from time to time, on or after January 31, 2002 or at any time in
certain circumstances upon the occurrence of a Tax Event (as defined herein). If
the Company redeems Junior Subordinated Debentures, NSP Financing must redeem
Trust Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Junior Subordinated Debentures so redeemed at $25 per
Preferred Security plus accrued and unpaid distributions thereon (the
"Redemption Price") to the date fixed for redemption. See "Description of the
Preferred Securities -- Mandatory Redemption." The Preferred Securities will be
redeemed upon maturity of the Junior Subordinated Debentures. The Junior
Subordinated Debentures mature on January 31, 2037. In addition, upon the
occurrence of a Special Event (as defined herein), unless the Junior
Subordinated Debentures are redeemed in the limited circumstances described
herein, NSP Financing shall be dissolved, with the result that the Junior
Subordinated Debentures will be distributed to the holders of the Preferred
Securities, on a pro rata basis, in lieu of any cash distribution. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution." In the case of the occurrence of a Special Event that is a Tax
Event, the Company will have the right in certain circumstances to redeem the
Junior Subordinated Debentures, which would result in the redemption by NSP
Financing of Trust Securities in the same amount on a PRO RATA basis. If the
Junior Subordinated Debentures are distributed to the holders of the Preferred
Securities, the Company will use its best efforts to have the Junior
Subordinated Debentures listed on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed. See "Description of the
Preferred Securities -- Special Event Redemption or Distribution" and
"Description of the Junior Subordinated Debentures."
In the event of the involuntary or voluntary dissolution, winding up or
termination of NSP Financing, the holders of the Preferred Securities will be
entitled to receive for each Preferred Security a liquidation amount of $25 plus
accrued and unpaid distributions thereon (including interest thereon) to the
date of payment, unless, in connection with such dissolution, winding up or
termination the Junior Subordinated Debentures are distributed to the holders of
the Preferred Securities. See "Description of the Preferred Securities --
Liquidation Distribution Upon Dissolution."
--------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
SUMMARY FINANCIAL INFORMATION
(Thousands of Dollars, except per share amounts)
NSP HISTORICAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
12 MONTHS ENDED ----------------------------------------
SEPTEMBER 30, 1996 1995 1994 1993
------------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income Statement Data:
Electric Revenues................................ $ 2,112,309 $ 2,142,770 $2,066,644 $ 1,974,916
Gas Revenues..................................... 484,685 425,814 419,903 429,076
Net Income....................................... 253,822 275,795 243,475 211,740
Earnings Available for Common Stock.............. 241,577 263,346 231,111 197,160
Earnings per Average Common Share................ $ 3.53 $ 3.91 $ 3.46 $ 3.02
Capitalization at September 30, 1996: AMOUNT PERCENTAGE
------------ ------------
Long-term Debt, due after one year............... $ 1,673,145 41.6%
Cumulative Preferred Stock (including premium)... 240,469 6.0%
Common Stockholders' Equity (including
premium)....................................... 2,105,488 52.4%
------------ ------------
Total...................................... $ 4,019,102 100.0%
------------ ------------
------------ ------------
</TABLE>
NEW NSP PRO FORMA INFORMATION(1)
(Unaudited)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
12 MONTHS ENDED ----------------------------------------
SEPTEMBER 30, 1996 1995 1994 1993
------------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income Statement Data:
Utility Operating Revenues....................... $ 2,380,071 $ 2,355,913 $2,282,962 $ 2,207,456
Utility Operating Income......................... 280,624 284,394 250,056 247,423
Net Income, after Preferred Dividend
Requirements................................... 191,025 190,411 160,658 157,324
Capitalization at September 30, 1996: AMOUNT PERCENTAGE
------------ ------------
Long-term Debt, due after one year............... $ 1,181,000 41.9%
Cumulative Preferred Stock (including premium)... 240,469 8.6%
Common Stockholders' Equity (including
premium)....................................... 1,395,000 49.5%
------------ ------------
Total...................................... $ 2,816,469 100.0%
------------ ------------
------------ ------------
</TABLE>
- ------------------------------
(1) The summarized New NSP unaudited pro forma financial information reflects
the adjustment of the historical financial statements of NSP to give effect to
the Transaction (as hereinafter described under the caption "Proposed Merger"),
including the reincorporation of NSP in Wisconsin, the merger of the Company's
subsidiary, Northern States Power Company, a Wisconsin corporation, into
Wisconsin Energy Company, and the transfer of ownership of all other current NSP
subsidiaries to Primergy Corporation. The unaudited pro forma income statement
data gives effect to the Transaction as if it had occurred at the beginning of
the period presented. The unaudited pro forma capitalization gives effect to the
Transaction as if it had occurred on that date. See the Company's 1995 Form 10-K
and Quarterly Report on Form 10-Q for the period ended September 30, 1996 for
further pro forma information and a description of the assumptions used to
prepare such pro forma information.
S-3
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF PREFERRED SECURITIES SHOULD CAREFULLY REVIEW THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN THE
ACCOMPANYING PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING MATTERS.
ABSENCE OF PRIOR PUBLIC MARKET
Prior to this offering, there has been no public market for the Preferred
Securities. Although application has been made to list the Preferred Securities
on the New York Stock Exchange, there can be no assurance that an active public
market will develop for the Preferred Securities or that, if such market
develops, the market price will equal or exceed the public offering price set
forth on the cover page of this Prospectus. The public offering price for the
Preferred Securities has been determined through negotiations between the
Company and the Underwriters. Prices for the Preferred Securities will be
determined in the marketplace and may be influenced by many factors, including
the liquidity of the market for the Preferred Securities, investor perceptions
of the Company and general industry and economic conditions.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND JUNIOR SUBORDINATED
DEBENTURES
The Company's obligations under the Guarantee are subordinate and junior in
right of payment to all liabilities of the Company and 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 Junior Subordinated Debentures are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of the Company and PARI PASSU with obligations to or rights of the
Company's other general unsecured creditors. No payment of principal of
(including redemption payments, if any), premium, if any, or interest on the
Junior Subordinated Debentures may be made if (i) any Senior Indebtedness of the
Company is not paid when due and any applicable grace period with respect to
such default has ended with such default not having been cured or waived or
ceasing to exist, or (ii) the maturity of any Senior Indebtedness has been
accelerated because of a default. As of September 30, 1996, Senior Indebtedness
aggregated approximately $1.6 billion. There are no terms in the Preferred
Securities, the Junior Subordinated Debentures or the Guarantee that limit the
Company's ability to incur additional indebtedness, including indebtedness that
ranks senior to the Junior Subordinated Debentures and the Guarantee. The Junior
Subordinated Debentures also will be effectively subordinated to all obligations
of the Company's subsidiaries. See "Description of the Preferred Securities
Guarantees -- Status of the Preferred Securities Guarantees" and "Description of
Subordinated Debt Securities" in the accompanying Prospectus, and "Description
of the Junior Subordinated Debentures -- Subordination" herein.
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act. The Guarantee Trustee will act as indenture trustee under the Guarantee for
the purposes of compliance with the provisions of the Trust Indenture Act. 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 accrued and unpaid distributions that are required to be paid
on the Preferred Securities, to the extent the Trust has funds available
therefor, (ii) the Redemption Price, including all accrued and unpaid
distributions with respect to Preferred Securities called for redemption by the
Trust, to the extent the Trust has funds available therefor, and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Junior Subordinated
Debentures to the holders of Preferred Securities or a redemption of all the
Preferred Securities), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid distributions on the Preferred Securities to the date
of the payment, to the extent the Trust has funds available therefor, or (b) the
amount of assets of the Trust
S-4
<PAGE>
remaining available for distribution to holders of the Preferred Securities in
liquidation of the Trust. The holders of a majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee or
to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee. Notwithstanding the foregoing, if the Company has
failed to make a payment under the Guarantee, any holder of Preferred Securities
may institute a legal proceeding directly against the Company to enforce its
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 Junior
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 rely on the enforcement (1) by the Institutional
Trustee of its rights as registered holder of the Junior Subordinated Debentures
against the Company pursuant to the terms of the Junior Subordinated Debentures
or (2) by such holder of its right against the Company to enforce payments on
Junior Subordinated Debentures. See "Description of the Preferred Securities
Guarantees" and "Description of Subordinated Debt Securities" in the
accompanying Prospectus. 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 Institutional Trustee of its rights as a holder of the Junior
Subordinated Debentures against the Company. In addition, the holders of a
majority in 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 Institutional Trustee or to direct the exercise of any
trust or power conferred upon the Institutional Trustee under the Declaration,
including the right to direct the Institutional Trustee to exercise the remedies
available to it as a holder of the Junior Subordinated Debentures. The Indenture
provides that the Debt Trustee (as defined herein) shall give holders of the
Junior Subordinated Debentures notice of all uncured defaults or events of
default within 30 days after occurrence. However, except in the case of a
default or an event of default in payment on the Junior Subordinated Debentures,
the Debt Trustee is protected in withholding such notice if its officers or
directors in good faith determine that withholding of such notice is in the
interest of the holders.
If the Institutional Trustee fails to enforce its rights under the Junior
Subordinated Debentures, a holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce the Institutional Trustee's
rights under the Junior Subordinated Debentures without first instituting any
legal proceeding against the Institutional 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 or principal on the Junior Subordinated Debentures on
the date such interest or principal is otherwise payable, then a holder of
Preferred Securities may directly institute a proceeding against the Company for
payment. See "Description of the Junior Subordinated Debentures -- Indenture
Events of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture (as such term is defined in
"Description of the Junior Subordinated Debentures" herein) to defer payments of
interest on the Junior Subordinated Debentures by extending the interest payment
period at any time, and from time to time, on the Junior Subordinated
Debentures. As a consequence of such an extension, quarterly distributions on
the Preferred Securities would be deferred (but despite such deferral would
continue to accrue with interest thereon compounded
S-5
<PAGE>
quarterly) by NSP Financing during any such extended interest payment period.
Such right to extend the interest payment period for the Junior Subordinated
Debentures is limited to a period not exceeding 20 consecutive quarters. In the
event that the Company exercises this right to defer interest payments, then (a)
the Company shall not declare or pay dividends on, or make a distribution with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or acquisitions
of shares of common stock of the Company ("Company Common Stock") in connection
with the satisfaction by the Company of its obligations under any employee
benefit plans or the satisfaction by the Company of its obligations pursuant to
any contract or security requiring the Company to purchase shares of Company
Common Stock, (ii) as a result of a reclassification of Company capital stock or
the exchange or conversion of one class or series of the Company's capital stock
for another class or series of Company capital stock or (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such Company capital stock or the security
being converted or exchanged (or make any guarantee payments with respect to the
foregoing), (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company that rank PARI PASSU with or junior
to the Junior Subordinated Debentures and (c) the Company shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Preferred Securities Guarantee). 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 thereof, may not exceed 20 consecutive quarters or extend beyond the
maturity date of the Junior 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. See
"Description of the Preferred Securities -- Distributions" and "Description of
the Junior Subordinated Debentures -- Option to Extend Interest Payment Period."
The Company believes that the likelihood that it will exercise its right to
defer payments of interest is remote and that, therefore, the Preferred
Securities should not be considered to be issued with original issue discount
("OID") unless it actually exercises such deferral right. There is no assurance
that the Internal Revenue Service will agree with such position. See "United
States Federal Income Taxation -- Interest Income and Original Issue Discount."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities,
regardless of its regular method of accounting, will accrue income (as OID) for
United States federal income tax purposes in respect of the deferred interest
allocable to its Preferred Securities. As a result, during an Extension Period,
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 NSP Financing 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 Junior Subordinated Debentures. However, should
the Company determine to exercise such right in the future, the market price of
the Preferred Securities is likely to be affected. A holder that disposes of its
Preferred Securities during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its
Preferred Securities. In addition, as a result of the existence of the Company's
right to defer interest payments, the market price of the Preferred Securities
(which represent an undivided beneficial interest in the Junior Subordinated
Debentures) may be more volatile than other securities on which OID accrues that
do not have such rights. See "United States Federal Income Taxation -- Interest
Income and Original Issue Discount."
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes (the
"Proposed Legislation") that would, among other things, generally deny corporate
issuers a deduction for interest in respect of
S-6
<PAGE>
certain debt obligations, such as the Junior Subordinated Debentures, issued on
or after December 7, 1995. On March 29, 1996, Senate Finance Committee Chairman
William V. Roth, Jr. and House Ways and Means Committee Chairman Bill Archer
issued a joint statement (the "Joint Statement") indicating their intent that
the Proposed Legislation, if adopted by either of the tax-writing committees of
Congress, would have an effective date that is no earlier than the date of
"appropriate Congressional action." Based upon the Joint Statement, as of the
date hereof the Company expects that if the Proposed Legislation were to be
enacted, such legislation would not apply to the Junior Subordinated Debentures.
There can be no assurance, however, that the Proposed Legislation, if enacted,
will not apply to the Preferred Securities or that other legislation enacted
after the date hereof will not otherwise adversely affect the ability of the
Company to deduct the interest payable on the Junior Subordinated Debentures.
Accordingly, there can be no assurance that a Tax Event will not occur. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event (as defined herein), NSP Financing
shall be dissolved, except in the limited circumstance described below, with the
result that the Junior Subordinated Debentures would be distributed to the
holders of the Trust Securities in connection with the liquidation of the Trust.
In the case of a Special Event that is a Tax Event, in certain circumstances,
the Company shall have the right to redeem the Junior Subordinated Debentures,
in whole or in part, in lieu of a distribution of the Junior Subordinated
Debentures by the Trust; in which event the Trust will redeem the Trust
Securities on a PRO RATA basis to the same extent as the Junior Subordinated
Debentures are redeemed by the Company. See "Description of the Preferred
Securities -- Special Event Redemption or Distribution."
Under current United States federal income tax law, a distribution of Junior
Subordinated Debentures upon the dissolution of NSP Financing would not be a
taxable event to holders of the Preferred Securities. Upon occurrence of a
Special Event, however, a dissolution of NSP Financing in which holders of the
Preferred Securities receive cash would be a taxable event to such holders. See
"United States Federal Income Taxation -- Receipt of Junior Subordinated
Debentures or Cash Upon Liquidation of NSP Financing."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution or liquidation of the Trust
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Junior Subordinated Debentures that a holder of Preferred Securities may
receive on dissolution and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby. Because holders of Preferred Securities may receive Junior Subordinated
Debentures upon the occurrence of a Special Event, prospective purchasers of
Preferred Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein and in the
accompanying Prospectus. See "Description of the Preferred Securities -- Special
Event Redemption or Distribution" and "Description of the Junior Subordinated
Debentures -- General."
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, NSP Trustees, which voting rights are vested exclusively in the
holder of the Common Securities. See "Description of the Preferred Securities --
Voting Rights."
S-7
<PAGE>
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 Junior
Subordinated Debentures. A holder who uses the accrual method of accounting for
tax purposes (and a cash method holder, if the Junior Subordinated Debentures
are deemed to have been issued with OID) and who disposes of his Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income (i.e.,
interest or, possibly, OID), and to add such amount to his adjusted tax basis in
his PRO RATA share of the underlying Junior Subordinated Debentures deemed
disposed of. To the extent the selling price is less than the holder's adjusted
tax basis (which will include all accrued but unpaid interest included in
income), a holder will recognize a capital loss except to the extent the
purchase price reflects accrued interest not otherwise required to be included
in the holder's income, which will be ordinary income. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "United States Federal Income
Taxation -- Interest Income and Original Issue Discount" and "-- Sales of
Preferred Securities."
S-8
<PAGE>
[LOGO]
Northern States Power Company (the "Company") was incorporated in 1909 under
the laws of Minnesota. Its executive offices are located at 414 Nicollet Mall,
Minneapolis, Minnesota 55401. (Phone 612-330-5500). The Company's subsidiaries
include Northern States Power Company, an operating public utility incorporated
in Wisconsin ("NSP - Wisconsin"), NRG Energy, Inc. ("NRG"), a Delaware
corporation, Viking Gas Transmission Company, a Delaware corporation ("Viking")
and several other subsidiaries. The Company and its subsidiaries collectively
are referred to herein as NSP.
NSP is predominantly an operating public utility engaged in the generation,
transmission and distribution of electricity throughout a 49,000 square mile
service area and the transportation and distribution of natural gas in
approximately 156 communities within this area. Viking is a regulated natural
gas transmission company that operates a 500-mile interstate gas pipeline. NRG
is primarily engaged in managing several of NSP's non-regulated energy
subsidiaries.
The Company serves customers in Minnesota, North Dakota and South Dakota.
NSP-Wisconsin serves customers in Wisconsin and Michigan. Of the approximately
three million people served by the Company and NSP - Wisconsin, the majority are
concentrated in the Minneapolis-St. Paul Metropolitan Area. In 1995, about 63
percent of NSP's electric retail revenue was derived from sales in the
Minneapolis-St. Paul Metropolitan Area and about 55 percent of retail gas
revenues came from sales in the St. Paul area. NSP's electric generation for
1995 was provided for by coal (57%), nuclear (38%), and renewable and other
fuels (5%). NSP currently operates three nuclear units that were placed in
service in 1971, 1973 and 1974. NSP has no additional nuclear units under
construction.
PROPOSED MERGER
As explained in the accompanying Prospectus, on April 28, 1995, the Company
and Wisconsin Energy Corporation ("WEC") entered into an Agreement and Plan of
Merger (the "Merger Agreement"), which provides for a strategic business
combination involving the Company and WEC in a "merger-of-equals" transaction
(the "Transaction") to form Primergy Corporation ("Primergy"). Pursuant to the
Transaction, the Company will reincorporate in Wisconsin for regulatory reasons.
This reincorporation will be accomplished by the merger of the Company into
Northern Power Wisconsin Corp., a Wisconsin corporation and wholly-owned
subsidiary of the Company ("New NSP"), with New NSP being the surviving
corporation and succeeding to the business of the Company as an operating public
utility. Following such merger, a wholly-owned subsidiary of WEC will be merged
with and into New NSP, with New NSP being the surviving corporation and becoming
a subsidiary of Primergy. It is anticipated that, following the Transaction, the
Company's Wisconsin utility subsidiary, NSP - Wisconsin, will be merged into
WEC's present principal utility subsidiary and that NRG and the Company's other
subsidiaries will become subsidiaries of Primergy.
The Federal Energy Regulatory Commission (FERC), the Minnesota Public
Utilities Commission (MPUC), and the Public Service Commission of Wisconsin
(PSCW), among others, must approve the Transaction before it can be completed.
NSP and WEC are hopeful that the FERC will rule on the pending merger
application in the first quarter of 1997. The reports of the administrative law
judges will be made to the MPUC in February 1997, and thereafter the MPUC may
deliberate and decide the case at that time. The PSCW was scheduled to commence
deliberations on the Transaction on January 21, 1997 but has been delayed
pending resolution of allegations regarding possible improper communications
between a PSCW commissioner and a WEC representative. In each of these
proceedings, various intervenors and members of the regulatory staffs have taken
positions on certain issues substantially different from those being requested
by NSP and WEC. Under the Merger Agreement, completion of the Transaction is
conditioned
S-9
<PAGE>
upon, among other things, the prior receipt of all necessary regulatory
approvals without the imposition of materially adverse terms. NSP cannot predict
at this time whether this condition will be met. For a further discussion of the
Transaction, including pro forma financial information, see the Company's 1995
Form 10-K and Part II, Item 5 - Other Information of the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1996.
Following the completion of the Transaction, the Junior Subordinated
Debentures and the Company's outstanding Senior Indebtedness will be obligations
of New NSP, as a subsidiary of Primergy, and will continue to be subject to the
Indenture as described in this Prospectus. However, as described above, New NSP
is not expected to retain any of the Company's subsidiaries and the Junior
Subordinated Debentures will not be an obligation of Primergy or any other
subsidiary of Primergy. For the twelve months ended September 30, 1996 and the
year ended December 31, 1995, the Company's subsidiaries constituted 5% and 13%
of NSP's consolidated net income, respectively, and represented 12% of NSP's
consolidated assets and 18% of NSP's consolidated liabilities including
long-term debt at September 30, 1996.
NSP FINANCING I
NSP Financing is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, dated as of December 23, 1996, executed
by the Company, as sponsor (the "Sponsor"), and the trustees of NSP Financing
(the "NSP Trustees") and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware on December 23, 1996. Such
declaration will be amended and restated in its entirety (as so amended and
restated, the "Declaration") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the purchasers
thereof will own all of the Preferred Securities. See "Description of the
Preferred Securities -- Book-Entry Only Issuance-The Depository Trust Company."
The Company will directly or indirectly acquire Common Securities in an
aggregate liquidation amount equal to 3% of the total capital of NSP Financing.
NSP Financing exists for the exclusive purposes of (i) issuing the Trust
Securities representing undivided beneficial interests in the assets of the
Trust, (ii) investing the gross proceeds of the Trust Securities in the Junior
Subordinated Debentures and (iii) engaging in only those other activities
necessary or incidental thereto. NSP Financing has a term of approximately
forty-five (45) years, but may terminate earlier as provided in the Declaration.
Pursuant to the Declaration, the number of NSP Trustees will initially be
three. Two of the NSP Trustees (the "Regular Trustees") will be persons who are
employees or officers of or who are affiliated with the Company. The third
trustee will be a financial institution that is unaffiliated with the Company,
which trustee will serve as institutional or property trustee under the
Declaration and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Institutional Trustee" or the
"Property Trustee"). Initially, Wilmington Trust Company, a Delaware banking
corporation, will be the Institutional Trustee until removed or replaced by the
holder of the Common Securities. For the purpose of compliance with the
provisions of the Trust Indenture Act, Wilmington Trust Company will also act as
trustee (the "Guarantee Trustee") under the Guarantee and as Delaware Trustee
for the purposes of the Trust Act, until removed or replaced by the holder of
the Common Securities. See "Description of the Preferred Securities Guarantees"
in the accompanying Prospectus. See "Description of the Preferred Securities --
Voting Rights" herein.
The Institutional Trustee will hold title to the Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities and the
Institutional Trustee will have the power to exercise all rights, powers and
privileges under the Indenture (as defined herein) as the holder of the Junior
Subordinated Debentures. In addition, the Institutional 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 Junior
Subordinated Debentures for the benefit of the holders of the Trust Securities.
The Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders
S-10
<PAGE>
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 direct or indirect holder of all the Common
Securities, will have the right to appoint, remove or replace any NSP Trustee
and to increase or decrease the number of NSP Trustees; provided, that the
number of NSP Trustees shall be at least three, a majority of which shall be
Regular Trustees. The Company will pay all fees and expenses related to NSP
Financing and the offering of the Trust Securities. See "Description of the
Junior 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 Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities."
The trustee in the State of Delaware is Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890. The
principal place of business of the Trust shall be c/o Northern States Power
Company, 414 Nicollet Mall, Minneapolis, Minnesota 55401.
NSP'S RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock dividends
for NSP on a historical and pro forma basis for the periods indicated.
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------
1996 1995 1994 1993 1992 1991
------------- ---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
NSP Ratio of Earnings to Fixed
Charges.......................... 3.7 3.9 4.0 4.0 3.2 3.9
New NSP Pro Forma Ratio of Earnings
to Fixed Charges................. 4.3 4.2 4.2 4.0 3.1 4.0
NSP Ratio of Earnings to Combined
Fixed Charges and Preferred Stock
Dividends........................ 3.4 3.6 3.6 3.5 2.8 3.4
New NSP Pro Forma Ratio of Earnings
to Combined Fixed Charges and
Preferred Stock Dividends........ 3.8 3.7 3.7 3.5 2.7 3.4
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, (i)
earnings consist of income from continuing operations before accounting change
plus fixed charges, federal and state income taxes, deferred income taxes and
investment tax credits and less undistributed equity in earnings of
unconsolidated investees; and (ii) fixed charges consist of interest on
long-term debt, other interest charges, the interest component on leases and
amortization of debt discount, premium and expense. Preferred dividends
represent dividends paid on all preferred shares outstanding during the periods
and have been increased to an amount representing the pre-tax earnings which
would be required to cover such dividend requirements.
The New NSP unaudited pro forma ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for each of the
years in the five-year period ended December 31, 1995, and the twelve months
ended September 30, 1996, give effect to the Transaction as if it had occurred
at January 1, 1991. See the Notes to Unaudited Pro Forma Condensed Financial
Statements of New NSP in the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 1996 for a description of the assumptions used to
prepare the unaudited pro forma ratios of earnings to fixed charges.
Assuming that variable interest rate debt continues at interest rates
applicable on September 30, 1996, the annual interest requirements on long-term
debt of NSP outstanding at September 30, 1996 was $119,641,000.
S-11
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, NSP Financing will be treated as a
subsidiary of NSP and, accordingly, the accounts of NSP Financing will be
included in the consolidated financial statements of NSP. The Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of NSP entitled "Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust Holding Solely Company Junior Subordinated
Deferrable Debentures" and appropriate disclosures about the Preferred
Securities, the Guarantee and the Junior Subordinated Debentures will be
included in the notes to the consolidated financial statements. For financial
reporting purposes, NSP will record Distributions payable on the Preferred
Securities as an expense.
USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Securities will be
invested by NSP Financing in Junior Subordinated Debentures of the Company
issued pursuant to the Indenture described herein. The Company intends to use
approximately $41,278,000 of the net proceeds from the sale of the Junior
Subordinated Debentures in connection with the redemption of 200,000 shares of
the Company's Cumulative Preferred Stock, $6.80 Series, par value $100 per
share, and 200,000 shares of the Company's Cumulative Preferred Stock, $7.00
Series, par value $100 per share, at redemption prices of $103.19 and $103.20
per share, respectively, plus in each case, accrued dividends to the date of
redemption. The balance of the net proceeds from the sale of the Junior
Subordinated Debentures will be used by the Company to repay outstanding
short-term borrowings.
Short-term borrowings of the Company aggregated $362 million as of December
31, 1996.
S-12
<PAGE>
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 Institutional Trustee, Wilmington Trust Company, an
independent trustee, will act as indenture trustee for the Preferred Securities
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 material 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 copy of which is
filed as an exhibit to the Registration Statement of which this Prospectus
Supplement 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, directly or
indirectly, by the Company. The Common Securities rank PARI PASSU, and payments
will be made thereon on a pro rata basis, with the Preferred Securities, except
that upon the occurrence and during the continuance 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 Institutional Trustee will own
the Junior 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 of the Trust, are guaranteed by the Company to the extent described
under "Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. The Guarantee will be held by Wilmington Trust Company, 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 vote to direct the
Institutional Trustee to enforce the Institutional Trustee's rights under the
Junior Subordinated Debentures. See "-- Voting Rights."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 7 7/8% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon at
the rate per annum of 7 7/8% thereof compounded quarterly. The term
"distribution" as used herein includes any such interest payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from January 31, 1997, and will be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, commencing March 31, 1997,
when, as and if available for payment. Distributions will be made by the
Institutional Trustee, except as otherwise described below.
The Company has the right under the Indenture to defer payments of interest
on the Junior Subordinated Debentures by extending the interest payment period
from time to time on the Junior Subordinated Debentures, which, if exercised,
would defer quarterly distributions on the Preferred Securities (though such
distributions would continue to accrue with interest since interest would
continue to accrue on the Junior Subordinated Debentures) during any such
extended interest payment period. Such right to extend the interest payment
period for the Junior Subordinated Debentures is limited to a period not
exceeding 20 consecutive quarters or beyond the maturity date of the Junior
Subordinated
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<PAGE>
Debentures. In the event that the Company exercises this right, then (a) the
Company shall not declare or pay dividends on, make distributions with respect
to, or redeem, purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock (other than (i) purchases or acquisitions of shares
of Company Common Stock in connection with the satisfaction by the Company of
its obligations under any employee benefit plans or the satisfaction by the
Company of its obligations pursuant to any contract or security requiring the
Company to purchase shares of Company Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock or (iii) the purchase of fractional interests in
shares of Company's capital stock pursuant to the conversion or exchange
provisions of such Company capital stock or the security being converted or
exchanged) or make any guarantee payments with respect to the foregoing), (b)
the Company shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by the Company that rank PARI PASSU with or junior to such
Junior Subordinated Debentures and (c) the Company shall not make any guarantee
payments with respect to the foregoing (other than pursuant to the Preferred
Securities Guarantee). 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
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
date of the Junior 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. See "Description of
the Junior Subordinated Debentures -- Interest" and "-- Option to Extend
Interest Payment Period." If distributions are deferred, the deferred
distributions and accrued interest thereon shall be paid to holders of record of
the Preferred Securities as they appear on the books and records of the Trust on
the applicable record date.
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 Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures." The payment of
distributions out of moneys held by the Trust is guaranteed by the Company to
the extent set forth under the caption "Description of the Preferred Securities
Guarantees" in the accompanying Prospectus.
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 Institutional Trustee who will hold
amounts received in respect of the Junior 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,
each such payment will be made as described under the subcaption "Book-Entry
Only Issuance-The Depository Trust Company" below. In the event that the
Preferred Securities do not continue to remain in book-entry only form, the
Regular Trustees shall have the right to select relevant record dates, which
shall be more than one Business Day but less than 60 Business Days prior to the
relevant payment dates. In the event that any date on which distributions are to
be made on the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such record date.
A "Business Day" shall mean any day other than Saturday, Sunday or any other day
on which banking institutions in New York City (in the State of New York) are
permitted or required by any applicable law to close.
S-14
<PAGE>
MANDATORY REDEMPTION
The Junior Subordinated Debentures will mature on January 31, 2037 and may
be redeemed, in whole or in part, at any time on or after January 31, 2002, or
at any time in certain circumstances upon the occurrence of a Tax Event (as
defined herein). Upon the repayment of the Junior Subordinated Debentures,
whether at maturity or upon redemption, the proceeds from such repayment or
payment shall simultaneously be applied to redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Junior Subordinated Debentures so repaid or redeemed at the Redemption Price;
PROVIDED, that holders of Trust Securities shall be given not less than 30 nor
more than 60 days notice of such redemption, except in the case of payments upon
maturity. See "Description of the Junior Subordinated Debentures -- Optional
Redemption." 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 under the subcaption "Book-Entry Only Issuance-The Depository
Trust Company" below.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that, as a result of (a) any
amendment to, or change (including any announced prospective change) in the laws
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to or
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 such date), there is more than an
insubstantial risk that (i) the Trust would be subject to United States federal
income tax with respect to income accrued or received on the Junior Subordinated
Debentures, (ii) interest payable to the Trust on the Junior Subordinated
Debentures would not be deductible by the Company for United States federal
income tax purposes or (iii) the Trust would be subject to more than a DE
MINIMIS amount of other taxes, duties or other governmental charges, which
change or amendment becomes effective on or after the date of this Prospectus
Supplement.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion from independent counsel experienced in practice under the
1940 Act (as defined herein) to the effect that, as a result of the occurrence
of a change in law or regulation or a written change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), there is more than
an insubstantial risk that the Trust is or will be considered an "investment
company" which is required to be registered under the Investment Company Act of
1940, as amended (the "1940 Act"), which Change in 1940 Act Law becomes
effective on or after the date of this Prospectus Supplement.
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, the Trust
shall, except in the limited circumstances described below, be dissolved with
the result that the Junior Subordinated Debentures with an aggregate principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and accrued and unpaid interest
equal to accrued and unpaid distributions on, the Trust Securities, would be
distributed to the holders of the Trust Securities in liquidation of such
holders' interests in the Trust on a PRO RATA basis within 90 days following the
occurrence of such Special Event; PROVIDED, however, that in the case of the
occurrence of a Tax Event, that such dissolution and distribution shall be
conditioned on (i) the Regular Trustees' receipt of an opinion of nationally
recognized independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on published revenue rulings of
the Internal Revenue Service, to the effect that the holders of the Trust
Securities will not recognize any gain or loss for United States federal income
tax purposes as a result of such dissolution and distribution of Junior
Subordinated Debentures and (ii) the Company being unable to avoid such Tax
Event within such 90 day period by taking some ministerial action or pursuing
some other reasonable
S-15
<PAGE>
measure that will have no adverse effect on the Trust, the Company or the
holders of the Trust Securities. Furthermore, if after receipt of a Dissolution
Tax Opinion by the Regular Trustees (i) the Company has received an opinion (a
"Redemption Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters that, as a result of a Tax Event, there is more than
an insubstantial risk that the Company would be precluded from deducting the
interest on the Junior Subordinated Debentures for United States federal income
tax purposes, even after the Junior Subordinated Debentures were distributed to
the holders of Trust Securities in liquidation of such holders' interests in the
Trust as described above, or (ii) the Regular Trustees shall have been informed
by such tax counsel that it cannot deliver a No Recognition Opinion to the
Trust, the Company shall have the right, upon not less than 30 nor more than 60
days notice, to redeem the Junior Subordinated Debentures, in whole or in part,
for cash within 90 days following the occurrence of such Tax Event, and,
following such redemption, Trust Securities with an aggregate liquidation amount
equal to the aggregate principal amount of the Junior Subordinated Debentures so
redeemed shall be redeemed by the Trust at the Redemption Price on a PRO RATA
basis; PROVIDED, HOWEVER, that if at the time there is available to the Company
or the Trust the opportunity to eliminate, within such 90 day period, the Tax
Event by taking some ministerial action, such as filing a form or making an
election or pursuing some other similar reasonable measure that has no adverse
effect on the Trust, the Company or the holders of the Trust Securities, the
Company or the Trust will pursue such measure in lieu of redemption.
If the Junior Subordinated Debentures are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to cause the Junior
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 Junior Subordinated Debentures upon
dissolution of the Trust, (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 registered global certificate or
certificates representing the Junior 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
Junior Subordinated Debentures having an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on such Preferred Securities until such certificates are
presented to the Company or its agent for transfer or reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Preferred Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Junior Subordinated Debentures that an investor may receive if a
dissolution and liquidation of the Trust were to occur, may trade at a discount
to the price that the investor paid to purchase the Preferred Securities offered
hereby.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
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), then, by 12:00 noon, New York City time, on
the redemption date, provided that the Company has paid to the Property Trustee
a sufficient amount of cash in connection with the related redemption or
maturity of the Junior Subordinated Debentures, the Trust will irrevocably
deposit with the Depositary funds sufficient to pay the applicable Redemption
Price and will give the Depositary irrevocable instructions and authority to pay
the Redemption Price to the holders of the Preferred Securities. See
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"-- Book-Entry Only Issuance-The Depository Trust Company" below. If notice of
redemption shall have been given and funds deposited as required, then,
immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of such Preferred
Securities so called for redemption will cease, except the right of the holders
of such Preferred Securities to receive the Redemption Price but without
interest on such Redemption Price. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
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 the
event that payment of the Redemption Price in respect of Preferred Securities is
improperly withheld or refused and not paid either by the Trust, or by the
Company pursuant to the Guarantee, distributions on such Preferred Securities
will continue to accrue 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 the subcaption "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 voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $25 per
Preferred Security plus accrued and unpaid distributions thereon to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Junior Subordinated Debentures in an aggregate stated principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and accrued and unpaid interest
equal to accrued and unpaid distributions on, the Preferred Securities have been
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 shall be paid on a PRO RATA basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution PRO RATA with the holders of the Preferred Securities, except that
if a Declaration Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities with regard to
such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on January 31,
2042, the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company, (iii) upon the filing of a certificate of dissolution or its equivalent
with respect to the Company, or the revocation of the charter of the Company and
the expiration of 90 days after the date of revocation without a reinstatement
thereof, (iv) upon the consent of the holders of at least a majority in
liquidation amount of the Trust Securities affected thereby voting together as a
single class, (v) upon the distribution of Junior Subordinated Debentures upon
the occurrence of a Special Event, (vi) upon the entry of a decree of a judicial
dissolution of the Company or the Trust, or (vii) upon the redemption of all the
Trust Securities.
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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 Institutional 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 Institutional
Trustee with respect to certain matters under the Declaration, and therefore the
Indenture. 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 or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, then a holder of Preferred Securities may
directly institute a proceeding against the Company for payment. See "Effect of
Obligations under the Junior Subordinated Debentures and the Guarantee."
Upon the occurrence of a Declaration Event of Default, the Institutional
Trustee as the sole holder of the Junior Subordinated Debentures will have the
right under the Indenture to declare the principal of and interest on the Junior
Subordinated Debentures to be immediately due and payable. The Company and the
Trust are each required to file annually with the Institutional Trustee an
officer's certificate as to its compliance with all conditions and covenants
under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act and the Trust Indenture Act
and under the caption "Description of the Preferred Securities Guarantees --
Modification of the Preferred Securities Guarantees; Assignment" in the
accompanying Prospectus, 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 Institutional 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 Institutional Trustee,
or direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration including the right to direct the Institutional
Trustee, as holder of the Junior Subordinated Debentures, to (i) exercise the
remedies available under the Indenture with respect to the Junior Subordinated
Debentures, (ii) waive any past Indenture Event of Default that is waivable
under Section 513 of the Indenture (as defined herein), or (iii) exercise any
right to rescind or annul a declaration that the principal of all the Junior
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
holders of more than a majority in principal amount of the Junior Subordinated
Debentures (a "Super-Majority") affected thereby, only the holders of at least
such Super-Majority in aggregate liquidation amount of the Preferred Securities
may direct the Institutional Trustee to give such consent or take such action.
If the Institutional Trustee fails to enforce its rights under the Junior
Subordinated Debentures or the Declaration, a record holder of Preferred
Securities may, after such holder's written request to the Institutional Trustee
to enforce such rights, institute a legal proceeding directly against the
Company to enforce the Institutional Trustee's rights under the Junior
Subordinated Debentures or the Declaration without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity. The
Institutional Trustee shall notify all holders of the Preferred Securities of
any notice of default received from the Debt Trustee with respect to the Junior
Subordinated Debentures. Such notice shall 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 Institutional Trustee shall not take any of the actions described in clauses
(i), (ii) or
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(iii) above unless the Institutional Trustee has obtained an opinion of tax
counsel to the effect that such action will not cause more than an insubstantial
risk that the Trust will not be classified as a grantor trust for United States
federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Junior Subordinated Debentures, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the direction of the holders of the Trust Securities with
respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a majority
in 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 a Super-Majority, the Institutional Trustee may only give such
consent at the direction of the holders of at least the proportion in
liquidation amount of the Trust Securities which the relevant Super-Majority
represents of the aggregate principal amount of the Junior Subordinated
Debentures outstanding. The Institutional Trustee shall be under no obligation
to take any such action in accordance with the directions of the holders of the
Trust Securities unless the Institutional Trustee has obtained an opinion of tax
counsel to the affect 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 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 Junior Subordinated Debentures in
accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if 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 or remove
the NSP Trustees, who may be appointed, removed or replaced solely by the
Company as the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Company and
the Regular Trustees (and in certain circumstances the Institutional Trustee or
the Delaware 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)
the dissolution, winding-up or termination of the Trust other than pursuant to
the terms of the Declaration, then the holders of the Trust Securities voting
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together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least a majority in liquidation amount of the Trust Securities
affected thereby; PROVIDED, that, if any amendment or proposal referred to in
clause (i) above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a majority in liquidation amount of such class of
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 Institutional Trustee 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 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 (x)
expressly assumes all of the obligations of the Trust under the Trust Securities
or (y) 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 rank with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Company expressly acknowledges a trustee of
such successor entity possessing the same powers and duties as the Institutional
Trustee as the holder of the Junior 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
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 (other
than with respect to any dilution of the holders' interest in the new entity),
(vi) such successor entity has a purpose identical to that of the Trust, (vii)
prior to such merger, consolidation, amalgamation or replacement, the Company
has received an opinion 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 (other than with respect to any
dilution of the holders' interest in the new entity), (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 (C) following such merger, consolidation, amalgamation or replacement, the
Trust (or the successor entity) will continue to be classified as a grantor
trust for United States federal income tax purposes, and (viii) the Company
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee and the Common
Securities Guarantee. Notwithstanding the foregoing, the Trust shall not, except
with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it, if such consolidation, amalgamation, merger or
replacement would cause the Trust or the Successor Entity to be classified as
other than a grantor trust for United States federal income tax purposes.
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BOOK-ENTRY ONLY ISSUANCE-THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Preferred Securities certificates,
representing the total aggregate number of Preferred Securities, will be issued
and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred Securities
as represented by a global certificate.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others, such as securities brokers and
dealers, banks and trust companies that clear transactions through or maintain a
direct or indirect custodial relationship with a Direct Participant either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
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 DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in 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 DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Preferred
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Securities in accordance with its procedures. Although voting with respect to
the Preferred Securities is limited, in those cases where a vote is required,
neither DTC nor Cede & Co. will itself consent or vote with respect to Preferred
Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to the
Trust as soon as possible after the record date. The Omnibus Proxy assigns Cede
& Co. 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 DTC, Direct and Indirect Participants, and Beneficial
Owners will enable the Beneficial Owners to exercise rights equivalent in
substance to the rights that can be directly exercised by a holder of a
beneficial interest in the Trust.
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as 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 Participant and not of DTC, 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
DTC is the responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates are required to be
printed and delivered. Additionally, the Regular Trustees (with the consent of
the Company) may decide to discontinue use of the system of book-entry transfers
through DTC (or any successor depositary) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and NSP Financing believe to be
reliable, but neither the Company nor NSP Financing takes responsibility for the
accuracy thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Preferred Securities will be made by the Underwriters in
immediately available funds. All payments of principal and interest will be made
by the Trust in immediately available funds. Secondary trading in preferred
securities of corporate issuers is generally settled in clearinghouse or next-
day funds. In contrast, the Preferred Securities will trade in DTC's Same-Day
Funds Settlement System until maturity or until the Preferred Securities are
issued in certificated form, and secondary market trading activity in the
Preferred Securities will therefore be required by DTC to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Preferred
Securities.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the
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Institutional 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 Institutional
Trustee to take any action it is empowered to take under the Declaration
following a Declaration Event of Default. The Institutional Trustee also serves
as trustee under the Guarantee.
PAYING AGENT
In addition, in the event that the Preferred Securities do not remain in
book-entry only form, the following provisions would apply:
The Institutional Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time. Registration of transfers of
Preferred Securities will be effected without charge by or on behalf of the
Trust, but upon payment (with the giving of such indemnity as the Trust or the
Company may require) in respect of any tax or other government charges that may
be imposed in relation to it. The Trust will not be required to register or
cause to be registered the transfer of Preferred Securities after such Preferred
Securities have been called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an "investment
company" under the 1940 Act or 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 Junior 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 or the articles of incorporation of the
Company, that each of the Company and the Regular Trustees determine in their
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 GUARANTEE
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth therein, to pay in full, to the holders of the
Preferred Securities issued by the Trust, the Guarantee Payments (as defined in
the accompanying Prospectus) (except to the extent paid by the Trust), as and
when due, regardless of any defense, right of set-off or counterclaim which the
Trust may have or assert. 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 qualified as an indenture under the Trust
Indenture Act. Wilmington Trust Company will act as indenture trustee under the
Guarantee. The terms of the Guarantee will be those set forth in such Guarantee
and those made part of such Guarantee by the Trust Indenture Act. The Guarantee
will be held by the Guarantee Trustee for the benefit of the holders of the
Preferred Securities. Notwithstanding the foregoing, if the Company has failed
to make a payment under the Guarantee, any holder of Preferred Securities may
institute a legal proceeding directly against the
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Company to enforce its rights under the Guarantee without first instituting a
legal proceeding directly against the Trust, the Guarantee Trustee or any other
person or entity. A summary description of the Guarantee appears in the
accompanying Prospectus under the caption "Description of the Preferred
Securities Guarantees."
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Junior
Subordinated Debentures in which the Trust will invest the proceeds from the
issuance and sale of the Trust Securities. This description supplements the
description of the general terms and provisions of the Junior Subordinated
Debentures set forth in the accompanying Prospectus under the caption
"Description of Subordinated Debt Securities." The following description does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the description in the accompanying Prospectus and the
Subordinated Debt Securities Indenture, dated as of January 30, 1997 (the "Base
Indenture") between the Company and Norwest Bank Minnesota, National
Association, as Trustee (the "Debt Trustee"), as supplemented by a Supplemental
Indenture, dated as of January 31, 1997 (the Base Indenture, as so supplemented,
is hereinafter referred to as the "Indenture"), the form of which is
incorporated by reference as an Exhibit to the Registration Statement of which
this Prospectus Supplement and the accompanying Prospectus form a part. Certain
capitalized terms used herein are defined in the Indenture.
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Special Event, Junior Subordinated Debentures may be
distributed to the holders of the Trust Securities in liquidation of the Trust.
See "Description of the Preferred Securities -- Special Event Redemption or
Distribution."
If the Junior Subordinated Debentures are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the Junior
Subordinated Debentures listed on the New York Stock Exchange or on such other
national securities exchange or similar organization on which the Preferred
Securities are then listed or quoted.
GENERAL
The Junior Subordinated Debentures will be issued as unsecured debt under
the Indenture. The Junior Subordinated Debentures will be limited in aggregate
principal amount to $206,190,000, such amount being the sum of the aggregate
stated liquidation of the Preferred Securities and the capital contributed by
the Company in exchange for the Common Securities (the "Company Payment").
The Junior Subordinated Debentures are not subject to a sinking fund
provision. The entire principal amount of the Junior Subordinated Debentures
will mature and become due and payable, together with any accrued and unpaid
interest thereon including Compound Interest (as defined herein) and Additional
Interest (as defined herein), if any, on January 31, 2037.
If Junior Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, such Junior
Subordinated Debentures will initially be issued as a Global Security (as
defined herein). As described herein, under certain limited circumstances,
Junior Subordinated Debentures may be issued in certificated form in exchange
for a Global Security. See "-- Book-Entry and Settlement" below. In the event
that Junior Subordinated Debentures are issued in certificated form, such Junior
Subordinated Debentures will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Junior Subordinated Debentures issued as a Global Security will be
made to DTC, a successor depositary or, in the event that no depositary is used,
to a Paying Agent for the Junior Subordinated Debentures. In the event Junior
Subordinated Debentures are issued in certificated form, principal and interest
will be payable, the transfer of the Junior Subordinated Debentures will be
registrable and Junior Subordinated Debentures will be exchangeable for Junior
Subordinated Debentures of other denominations of a like
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aggregate principal amount at the corporate trust office of the Debt Trustee in
Minneapolis, Minnesota;
PROVIDED, that at the option of the Company payment of interest may be made by
check mailed to the address of the holder entitled thereto or by wire transfer
to an account appropriately designated by the holder entitled thereto.
Notwithstanding the foregoing, so long as the holder of any Junior Subordinated
Debentures is the Property Trustee, the payment of principal and interest on the
Junior Subordinated Debentures held by the Property Trustee will be made at such
place and to such account as may be designated by the Property Trustee.
The Indenture does not contain provisions that afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged
transaction involving the Company.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures are
subordinated and junior in right of payment to all Senior Indebtedness of the
Company and PARI PASSU with the Company's trade creditors. No payment of
principal (including redemption and sinking fund payments), premium, if any, or
interest on the Junior Subordinated Debentures may be made (i) if any Senior
Indebtedness of the Company is not paid when due, and any applicable grace
period with respect to such default has ended 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, 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 Junior 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 Junior Subordinated Debentures will be subrogated to the rights
of the holders of Indebtedness of the Company to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Junior Subordinated Debentures are paid in full.
The term "Senior Indebtedness" means the principal of and premium, if any,
and interest on the following, whether outstanding on the date of execution of
the Indenture or thereafter incurred or created: (i) (A) indebtedness of the
Company for money borrowed and (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which the Company is
responsible or liable; (ii) all capitalized lease obligations of the Company;
(iii) all obligations of the Company issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations under
any title retention agreement (but excluding trade accounts payable arising in
the ordinary course of business); (iv) all obligations of the Company for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of the Company to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by the Company of a demand for reimbursement following payment
on the letter of credit); (v) all obligations of the type referred to in clauses
(i) through (iv) of other persons and all dividends of other persons for the
payment of which, in either case, the Company is responsible or liable as
obligor, guarantor or otherwise; and (vi) all obligations of the type referred
to in clauses (i) through (v) of other persons secured by any lien on any
property or asset of the Company (whether or not such obligation is assumed by
the Company), except for (1) any such indebtedness that is by its terms
subordinated to or pari passu with the Junior Subordinated Debentures and (2)
any indebtedness (including all other debt securities and guarantees in respect
of those debt securities) initially issued to any other 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.
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The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company. As of September 30, 1996, Senior Indebtedness
of the Company aggregated approximately $1.6 billion. The Junior Subordinated
Debentures also will be effectively subordinated to all obligations of the
Company's subsidiaries.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Junior Subordinated
Debentures, in whole or in part, from time to time, on or after January 31,
2002, or at any time in certain circumstances upon the occurrence of a Special
Event as described under the caption "Description of the Preferred Securities --
Special Event Redemption or Distribution," upon not less than 30 nor more than
60 days notice, at a redemption price equal to 100% of the principal amount to
be redeemed plus any accrued and unpaid interest, including Additional Interest,
if any, to the redemption date. If a partial redemption of the Preferred
Securities resulting from a partial redemption of the Junior Subordinated
Debentures would result in the delisting of the Preferred Securities, the
Company may only redeem the Junior Subordinated Debentures in whole.
INTEREST
Each Junior Subordinated Debenture shall bear interest at the rate of 7 7/8%
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 March 31, 1997, to the person in whose name such
Junior Subordinated Debenture is registered, subject to certain exceptions, at
the close of business on the Business Day next preceding such Interest Payment
Date. In the event the Junior Subordinated Debentures shall not continue to
remain in book-entry only form, the Company shall have the right to select
record dates, which shall be more than 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 Junior
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.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes (the
"Proposed Legislation") that would, among other things, generally deny corporate
issuers a deduction for interest in respect of certain debt obligations, such as
the Junior Subordinated Debentures, issued on or after December 7, 1995. On
March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and House
Ways and Means Committee Chairman Bill Archer issued a joint statement (the
"Joint Statement") indicating their intent that the Proposed Legislation, if
adopted by either of the tax-writing committees of Congress, would have an
effective date that is no earlier than the date of "appropriate Congressional
action." Based upon the Joint Statement, it is expected that if the Proposed
Legislation were to be enacted, such legislation would not apply to the Junior
Subordinated Debentures. There can be no assurances, however, that the effective
date guidance contained in the Joint Statement will be incorporated into the
Proposed Legislation, if enacted, or that other legislation enacted after the
date hereof will not otherwise adversely affect the ability of the Company to
deduct the interest payable on the Junior Subordinated Debentures. Accordingly,
there can be no assurance that a Tax Event will not occur. See "Description of
the Preferred Securities -- Special Event Redemption or Distribution."
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OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, during
the term of the Junior Subordinated Debentures to defer payments of interest by
extending the interest payment period for a period not exceeding 20 consecutive
quarters, at the end of which Extension Period, the Company shall pay all
interest then accrued and unpaid (including any Additional Interest, as herein
defined) together with interest thereon compounded quarterly at the rate
specified for the Junior Subordinated Debentures to the extent permitted by
applicable law ("Compound Interest"); PROVIDED, that during any such Extension
Period, (a) the Company shall not declare or pay dividends on, make any
distribution with respect to, or redeem, purchase, acquire or make a liquidation
payment with respect to any of its capital stock (other than (i) purchases or
acquisitions of shares of Company Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security requiring the Company to purchase shares of Company Common Stock,
(ii) as a result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital stock or (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such Company capital stock or the security
being converted or exchanged) or make any guarantee payments with respect to the
foregoing, (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company that rank PARI PASSU with or junior
to the Junior Subordinated Debentures and (c) the Company shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Preferred Securities Guarantee). 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, may not exceed 20
consecutive quarters or extend beyond the maturity of the Junior 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 set forth in this section. No interest during an Extension Period,
except at the end thereof, shall be due and payable. The Company has no present
intention of exercising its right to defer payments of interest by extending the
interest payment period on the Junior Subordinated Debentures. If the
Institutional Trustee shall be the sole holder of the Junior Subordinated
Debentures, the Company shall give the Regular Trustees and the Institutional
Trustee notice of its selection of such Extension Period one Business Day prior
to the earlier of (i) the date distributions on the Preferred Securities are
payable or (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
distribution is payable. The Regular Trustees shall give notice of the Company's
selection of such Extension Period to the holders of the Preferred Securities.
If the Institutional Trustee shall not be the sole holder of the Junior
Subordinated Debentures, the Company shall give the holders of the Junior
Subordinated Debentures notice of its selection of such Extension Period ten
Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the
date upon 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
Junior Subordinated Debentures of the record or payment date of such related
interest payment.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as additional interest ("Additional Interest")
such additional amounts as shall be required so that the net amounts received
and retained by the Trust after paying any such taxes, duties, assessments or
other governmental charges will be not less than the amounts the Trust would
have received had no such taxes, duties, assessments or other governmental
charges been imposed.
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CERTAIN COVENANTS
If (i) there shall have occurred any event that would constitute an
Indenture Event of Default or (ii) the Company shall be in default with respect
to its payment of any obligations under the Guarantee, then (a) the Company
shall not declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock (other than (i) purchases or acquisitions of shares of its
common stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security requiring the Company to
purchase shares of its common stock, (ii) as a result of a reclassification of
the Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock, or (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged) or make any
guarantee payments with respect to the foregoing, and, (b) the Company shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Company that rank PARI PASSU with or junior to the Junior Subordinated
Debentures.
The Company will covenant (i) to directly or indirectly maintain 100%
ownership of the Common Securities of the Trust; PROVIDED, HOWEVER, that any
permitted successor of the Company under the Indenture may succeed to the
Company ownership of such Common Securities, and (ii) to use its reasonable
efforts to cause the Trust (x) to remain a statutory business trust, except in
connection with the distribution of Junior Subordinated Debentures to the
holders of Trust Securities in liquidation of the Trust, the redemption of all
of the Trust Securities of the Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration, and (y) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Junior Subordinated Debentures, will
have the right to declare the principal of and the interest on the Junior
Subordinated Debentures (including any Compound Interest and Additional
Interest, if any) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Junior Subordinated Debentures. See "Description of the
Subordinated Debt Securities -- Events of Default and Notice Thereof" in the
accompanying Prospectus for a description of the Events of Default. An Indenture
Event of Default also constitutes a Declaration Event of Default. The holders of
Preferred Securities in certain circumstances have the right to direct the
Institutional Trustee to exercise its rights as the holder of the Junior
Subordinated Debentures. See "Description of the Preferred Securities --
Declaration Events of Default" and "-- Voting Rights." Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Company to pay interest or principal on
the Junior Subordinated Debentures on the date such interest or principal is
otherwise payable, the Company acknowledges that then a holder of Preferred
Securities may institute a Direct Action for payment on or after the respective
due date specified in the Junior Subordinated Debentures. Notwithstanding any
payments made to such holder of Preferred Securities by the Company in
connection with a Direct Action, the Company shall remain obligated to pay the
principal of or interest on the Junior Subordinated Debt Securities held by NSP
Financing or the Institutional Trustee of NSP Financing, and the Company shall
be subrogated to the rights of the holder of such Preferred Securities with
respect to payments on the Preferred Securities to the extent of any payments
made by the Company to such holder in any Direct Action. The holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Junior Subordinated Debentures.
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BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust as
a result of the occurrence of a Special Event, the Junior Subordinated
Debentures will be issued in the form of one or more global certificates (each a
"Global Security") registered in the name of the Depositary or its nominee.
Except under the limited circumstances described below, Junior Subordinated
Debentures represented by the Global Security will not be exchangeable for, and
will not otherwise be issuable as, Junior Subordinated Debentures in definitive
form. 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 depositary
or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
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 Junior Subordinated Debentures
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the Depositary or its nominee or to a
successor Depositary or its nominee. Accordingly, each Beneficial Owner must
rely on the procedures of the Depositary 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 Junior Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, DTC will act
as securities depositary for the Junior Subordinated Debentures. For a
description of DTC 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 Supplement, the
description therein of DTC's book-entry system and DTC's practices as they
relate to purchases, transfers, notices and payments with respect to the
Preferred Securities apply in all material respects to any debt obligations
represented by one or more Global Securities held by DTC. The Company may
appoint a successor to DTC or any successor depositary in the event DTC or such
successor depositary is unable or unwilling to continue as a depositary for the
Global Securities.
None of the Company, the Trust, the Institutional Trustee, any paying agent
and any other agent of the Company or the Debt Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Junior 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 shall be exchangeable for Junior 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 depositary for such Global Security and no successor depositary
shall have been 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 depositary and no successor
depositary shall have been appointed, (iii) the Company, in its sole discretion,
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Event of Default with respect to such Junior Subordinated
Debentures. Any Global Security that is exchangeable pursuant to the
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<PAGE>
preceding sentence shall be exchangeable for Junior 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.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by,
and construed in accordance with, the internal laws of the State of Minnesota.
MISCELLANEOUS
The Company will pay all fees and expenses related to (i) the offering of
the Trust Securities and the Junior Subordinated Debentures, (ii) the
organization, maintenance and dissolution of the Trust, (iii) the retention of
the NSP Trustees and (iv) the enforcement by the Institutional Trustee of the
rights of the holders of the Preferred Securities.
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<PAGE>
EFFECT OF OBLIGATIONS UNDER THE
JUNIOR 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 Junior
Subordinated Debentures.
As long as payments of interest and other payments are made when due on the
Junior 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 Junior 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 Junior Subordinated Debentures will match the distribution rate and
distribution and other payment dates for the Preferred Securities; (iii) the
Company shall pay all, and the Trust shall not be obligated to pay, directly or
indirectly, all costs, expenses, debt, and obligations of the Trust (other than
with respect to the Trust Securities); and (iv) the Declaration further provides
that the NSP Trustees shall not take or cause or permit the Trust to, among
other things, engage in any activity that is not consistent with the purposes of
the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. If the Company does not make interest payments on the Junior
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 does not apply to any payment of distributions unless and until
the Trust has sufficient funds for the payment of such distributions. The
Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal on the Junior Subordinated Debentures held by
the Trust as its sole asset.
If the Company fails to make interest or other payments on the Junior
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 under the captions "Description of
the Preferred Securities -- Book-Entry Only Issuance-The Depository Trust
Company" and "-- Voting Rights," may direct the Institutional Trustee to enforce
its rights under the Junior Subordinated Debentures. 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 or principal on the Junior Subordinated
Debentures on the date such interest or principal is otherwise payable, then a
holder of Preferred Securities may directly institute a proceeding against the
Company for payment. The Company, under the Guarantee, acknowledges that the
Guarantee Trustee shall 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.
Notwithstanding the foregoing, if the Company has failed to make a payment under
the Guarantee, any holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce its 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
Junior Subordinated Debentures and the Indenture and its obligations under the
Declaration, including its obligations to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities),
provide a full and unconditional guarantee on a subordinated basis of amounts
due on the Preferred Securities. See "Description of the Preferred Securities
Guarantees -- General" in the accompanying Prospectus.
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UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of Preferred
Securities by a "U.S. Holder". A "U.S. Holder" is a person who is a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized under the laws of the United States or any state thereof or
the District of Columbia or an estate or trust the income of which is subject to
United States federal income taxation regardless of source. This summary does
not address the federal income tax consequences to persons and entities other
than U.S. Holders. Non-U.S. Holders should consult their own tax advisors.
Unless otherwise stated, this summary deals only with Preferred Securities held
as capital assets by holders who purchase the Preferred Securities upon original
issuance ("Initial Holders"). It does not deal with special classes of holders
such as banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, or persons that will hold the Preferred Securities as a position, in
a "straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. Dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of Preferred
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the Preferred Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder and administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change, possibly on
a retroactive basis.
CLASSIFICATION OF NSP FINANCING
In connection with the issuance of the Preferred Securities, Gardner, Carton
& Douglas, special tax counsel to the Company and the Trust, will render its
opinion generally to the effect that, under then current law and assuming full
compliance with the terms of the Declaration and the Indenture (and certain
other documents), and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Preferred Securities generally will be considered the owner of an undivided
interest in the Junior Subordinated Debentures, and each holder will be required
to include in its gross income the items of income realized including any OID
accrued with respect to its allocable share of those Junior Subordinated
Debentures in accordance with its method of accounting.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Recently adopted Treasury regulations (the "Regulations") generally provide
that stated interest on a debt instrument issued on or after August 13, 1996, is
not "qualified stated interest" and, therefore, will give rise to OID unless
such interest is unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed rate. Interest is
considered to be unconditionally payable only if reasonable legal remedies exist
to compel timely payment or the debt instrument otherwise provides terms and
conditions that make the likelihood of late payment (other than late payment
that occurs within a reasonable grace period) or non-payment a "remote
contingency."
The Company has the right under the terms of the Junior Subordinated
Debentures to defer any interest payment from time to time for a period not
exceeding 20 consecutive quarterly interest payment periods. Unless the
likelihood of exercise of such right is remote, the Junior Subordinated
Debentures would be issued with OID. During any Extension Period the terms of
the Junior Subordinated Debentures provide that the Company shall not declare or
pay any dividend on, or repurchase, redeem or otherwise
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acquire any of its capital stock. See "Description of Junior Subordinated
Debentures -- Option to Extend Interest Payment Period." The Company currently
believes that the adverse impact that the imposition of such restrictions would
have on the Company make the likelihood of its exercising its right to defer
remote.
Based on the foregoing, the Company believes that the stated interest on the
Junior Subordinated Debentures should be considered unconditionally payable for
purposes of the Regulations and that Junior Subordinated Debentures should not
be considered to be issued with OID at the time of their original issuance.
Accordingly, a holder of the Preferred Securities should include in gross income
the interest on the Preferred Securities in accordance with such holders'
regular method of tax accounting. There can be no assurance, however, that the
IRS will agree with such determination.
Under the Regulations, if the Company exercised its option to defer any
payment of interest, the Junior Subordinated Debentures would at that time be
treated as issued with OID and all interest thereafter payable will be treated
as OID as long as the Junior Subordinated Debentures remain outstanding. In such
event, a holder will be required to include in gross income as OID an amount
equal to the interest accrued during each calendar quarter in an Extension
Period on an economic accrual basis regardless of such holder's regular method
of tax accounting. As a result, during any period in which the Company has
elected to extend the interest payment period a holder will be required to
include OID in gross income prior to the receipt of a corresponding cash
payment.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF NSP
FINANCING
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Special Event Redemption or Distribution," Junior
Subordinated Debentures may be distributed to holders in exchange for the
Preferred Securities and in liquidation of the Trust. Under current law, such a
distribution from a grantor trust, for United States federal income tax
purposes, would be treated as a non-taxable event to each holder and each holder
would receive an aggregate tax basis in the Junior Subordinated Debentures equal
to such holder's aggregate tax basis in its Preferred Securities. A holder's
holding period in the Junior Subordinated Debentures so received in liquidation
of the Trust would include the period during which the Preferred Securities were
held by such holder.
Under certain circumstances described herein (see "Description of the
Preferred Securities -- Special Event Redemption or Distribution"), the Junior
Subordinated Debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Preferred Securities.
Under current law, such a redemption of the Junior Subordinated Debentures
would, for United States federal income tax purposes, constitute a taxable
disposition of the redeemed Preferred Securities, and a holder could recognize
gain or loss as if it sold such redeemed Preferred Securities for cash. See "--
Sales of Preferred Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between its adjusted tax basis in the Preferred Securities and
the amount realized on the sale of such Preferred Securities (other than with
respect to accrued and unpaid interest that has not yet been included in income,
which will be treated as ordinary income). A holder's adjusted tax basis in the
Preferred Securities generally will be its initial purchase price increased by
accrued interest including any OID previously includible in such holder's gross
income to the date of disposition (and the accrual of market discount, if any,
if an election to accrue market discount in income currently is made) and
decreased by payments received on the Preferred Securities. Except to the extent
noted above and subject to the market discount rules of the Code, such gain or
loss generally will be a capital gain or loss and generally will be a long-term
capital gain or loss if the Preferred Securities have been held for more than
one year.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debentures. A holder who uses the
S-33
<PAGE>
accrual method of accounting for tax purposes (and a cash method holder, if the
Junior Subordinated Debentures are deemed to have been issued with OID) and who
disposes of his Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest on
the Junior Subordinated Debentures through the date of disposition in income as
ordinary income (i.e., interest or, possibly, OID) and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, all OID and, with respect to an
accrual method taxpayer, accrued but unpaid interest) a holder will recognize a
capital loss except to the extent the purchase price reflects accrued interest
not otherwise required to be included in the holder's income, which accrued
interest will be ordinary income. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United States federal
income tax purposes.
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the Preferred
Securities will be reported to holders on Forms 1099, which forms should be
mailed to holders of Preferred Securities by January 31 following each calendar
year.
The Trust will be obligated to report annually to Cede & Co., as holder of
record of the Preferred Securities, the OID related to the Junior Subordinated
Debentures that accrued during the year. The Trust currently intends to report
such information on Form 1099 prior to January 31 following each calendar year
even though the Trust is not legally required to report to record holders until
April 15 following each calendar year. The Underwriters (as defined herein) have
indicated to the Trust that, to the extent that they hold Preferred Securities
as nominees for beneficial holders, they currently expect to report to such
beneficial holders on Forms 1099 by January 31 following each calendar year.
Under current law, holders of Preferred Securities who hold as nominees for
beneficial holders will not have any obligation to report information regarding
the beneficial holders to the Trust. The Trust, moreover, will not have any
obligation to report to beneficial holders who are not also record holders.
Thus, beneficial holders of Preferred Securities who hold their respective
Preferred Securities through the Underwriters will receive Forms 1099 reflecting
the income on their respective Preferred Securities from such nominee holders
rather than the Trust.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States federal income tax, provided the
required information is provided to the Service.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes (the
"Proposed Legislation") that would, among other things, generally deny corporate
issuers a deduction for interest in respect of certain debt obligations, such as
the Junior Subordinated Debentures, issued on or after December 7, 1995. On
March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and House
Ways and Means Committee Chairman Bill Archer issued a joint statement (the
"Joint Statement") indicating their intent that the Proposed Legislation, if
adopted by either of the tax-writing committees of Congress, would
have an effective date that is no earlier than the date of "appropriate
Congressional action." Based upon the Joint Statement, it is expected that if
the Proposed Legislation were to be enacted, such legislation would not apply to
the Junior Subordinated Debentures. There can be no assurances, however, that
the effective date guidance contained in the Joint Statement will be
incorporated into the Proposed Legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Company to deduct the interest payable on the Junior
Subordinated Debentures.
S-34
<PAGE>
Accordingly, there can be no assurance that a Tax Event will not occur. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution."
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
S-35
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Trust has agreed to sell to each of the Underwriters
named below, and each of the Underwriters, has severally agreed to purchase the
number of Preferred Securities set forth opposite its name below. In the
Purchase 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. In the event of
default by an Underwriter, the Purchase Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may be
increased or the Purchase Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SECURITIES
----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................................... 1,100,000
Goldman, Sachs & Co.............................................................. 1,000,000
Bear, Stearns & Co. Inc.......................................................... 1,000,000
Dean Witter Reynolds Inc......................................................... 1,000,000
A.G. Edwards & Sons, Inc......................................................... 1,000,000
Dain Bosworth Incorporated....................................................... 1,000,000
Piper Jaffray Inc................................................................ 1,000,000
Robert W. Baird & Co. Incorporated............................................... 100,000
Alex. Brown & Sons Incorporated.................................................. 100,000
Cowen & Company.................................................................. 100,000
EVEREN Securities, Inc........................................................... 100,000
The Ohio Company................................................................. 100,000
Oppenheimer & Co., Inc........................................................... 100,000
Prudential Securities Incorporated............................................... 100,000
Tucker Anthony Incorporated...................................................... 100,000
Wheat, First Securities, Inc..................................................... 100,000
----------
Total.................................................................. 8,000,000
----------
----------
</TABLE>
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price, as set forth on the cover
page of this Prospectus Supplement, and in part to certain securities dealers at
such price less a concession not in excess of $.50 per Preferred Security,
provided that such concession for sales of 10,000 or more Preferred Securities
to any single purchaser will be $.30 per Preferred Security. The Underwriters
may allow, and such dealers may reallow, a discount not in excess of $.40 per
Preferred Security to certain other brokers and dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures of the
Company, the Purchase Agreement provides that the Company will agree to pay as
compensation ("Underwriters' Compensation") to the Underwriters for the
Underwriters' arranging the investment therein of such proceeds, an amount in
United States federal (same day) funds of $.7875 per Preferred Security (or
$6,300,000 in the aggregate) for the accounts of the several Underwriters,
provided that such compensation for sales of 10,000 or more Preferred Securities
to any single purchaser will be $.50 per Preferred Security. Therefore, to the
extent of such sales, the actual amount of Underwriters' Compensation will be
less than the aggregate amount specified in the preceding sentence.
S-36
<PAGE>
During a period of 30 days from the date of the Prospectus Supplement,
neither the Trust nor the Company will, without the prior written consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated, directly or indirectly,
sell, offer to sell, grant any option for the sale of, or otherwise dispose of,
any Preferred Securities, any security convertible into or exchangeable into or
exercisable for Preferred Securities or the Junior Subordinated Debentures or
any debt securities substantially similar to the Junior Subordinated Debentures
or any equity securities substantially similar to the Preferred Securities
(except for the Junior Subordinated Debentures and the Preferred Securities
offered hereby).
The Preferred Securities have been approved for listing on the NYSE under
the symbol "NSPprT". Trading of the Preferred Securities on the New York Stock
Exchange is expected to commence within a 30 day period after the initial
delivery of the Preferred Securities. The Underwriters 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 Underwriters will
have no obligation to make a market in the Preferred Securities, however, and
may cease market making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the 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 of 100 or more Preferred Securities to a minimum of 400 beneficial
holders.
The Company and the Trust have agreed to indemnify the Underwriters against,
or contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act
of 1933, as amended.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, the Company and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
The validity of the Indenture, the Guarantee and the Junior Subordinated
Debentures and certain matters relating thereto will be passed upon on behalf of
the Company by Gary R. Johnson, Vice President, General Counsel and Corporate
Secretary for the Company. Certain matters of Delaware law relating to the
validity of the Preferred Securities will be passed upon for NSP Financing by
Richards, Layton & Finger, Wilmington, Delaware, special counsel to the Company
and NSP Financing. Certain United States federal income taxation matters will be
passed upon for the Company and NSP Financing by Gardner, Carton & Douglas,
special tax counsel to the Company and NSP Financing. Certain legal matters will
be passed upon for the Underwriters by Gardner, Carton & Douglas, Chicago,
Illinois. Mr. Johnson is a full-time employee and officer of the Company and
owns 2,790.389 shares of the Company as of November 30, 1996. Gardner, Carton &
Douglas from time to time renders legal services to the Company.
S-37
<PAGE>
PROSPECTUS
$200,000,000
NORTHERN STATES POWER COMPANY
(A MINNESOTA CORPORATION)
SUBORDINATED DEBT SECURITIES
---------------------
NSP FINANCING I
NSP FINANCING II
PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
NORTHERN STATES POWER COMPANY
(A MINNESOTA CORPORATION)
---------------------
Northern States Power Company, a Minnesota corporation, (the "Company") may
offer, from time to time, unsecured subordinated debt securities (the
"Subordinated Debt Securities") consisting of debentures, notes and other
unsecured evidence of indebtedness in one or more series and in amounts, at
prices and on terms to be determined at or prior to the time of sale.
NSP Financing I and NSP Financing II (each, an "NSP Trust"), statutory
business trusts formed under the laws of the State of Delaware, may offer, from
time to time, preferred securities, representing undivided beneficial interests
in the assets of the respective NSP Trust ("Preferred Securities"). The payment
of periodic cash distributions ("distributions") with respect to Preferred
Securities of each of the NSP Trusts out of moneys held by each of the NSP
Trusts, and payment on liquidation, redemption or otherwise with respect to such
Preferred Securities, will be guaranteed by the Company to the extent described
herein (each a "Guarantee"). See "Description of the Preferred Securities
Guarantees" below. The Company's obligations under the Preferred Securities
Guarantees are subordinate and junior in right of payment to all other
liabilities of the Company and rank PARI PASSU with the most senior preferred
stock, if any, issued from time to time by the Company. Subordinated Debt
Securities may be issued and sold from time to time in one or more series to an
NSP Trust, or a trustee of such NSP Trust, in connection with the investment of
the proceeds from the offering of Preferred Securities and Common Securities (as
defined herein) of such NSP Trust. The Subordinated Debt Securities purchased by
an NSP Trust may be subsequently distributed pro rata to holders of Preferred
Securities and Common Securities in connection with the dissolution of such NSP
Trust upon the occurrence of certain events as may be described in an
accompanying Prospectus Supplement.
Specific terms of the particular Subordinated Debt Securities, the Preferred
Securities and the related Preferred Securities Guarantees, in respect of which
this Prospectus is being delivered (the "Offered Securities") will be set forth
in an accompanying Prospectus Supplement or Supplements, together with the terms
of the offering of the Offered Securities, the initial price thereof and the net
proceeds from the sale thereof. The Prospectus Supplement will set forth with
regard to the particular Offered Securities, without limitation, the following:
(i) in the case of Subordinated Debt Securities, the designation, aggregate
principal amount, denomination, maturity, any exchange, conversion, redemption
or sinking fund provisions, interest rate (which may be fixed or variable), the
time and method of calculating interest payments, the right of the Company, if
any, to defer payment of interest on the Subordinated Debt Securities and the
maximum length of such deferral period, public offering price, ranking as senior
or subordinated debt, any listing on a securities exchange and other specific
terms of the offering, and (ii) in the case of Preferred Securities, the
designation, number of securities, liquidation preference per security, initial
public offering price, any listing on a securities exchange, dividend rate (or
method of calculation thereof), dates on which dividends shall be payable and
dates from which dividends shall accrue, any voting rights, any redemption,
exchange or sinking fund provisions, any other rights, preferences, privileges,
limitations or restrictions relating to the Preferred Securities of a specific
series and the terms upon which the proceeds of the sale of the Preferred
Securities will be used to purchase a specific series of Subordinated Debt
Securities of the Company. The Offered Securities may be offered in amounts, at
prices and on terms to be determined at the time of the offering, PROVIDED,
HOWEVER, that the aggregate offering price to the public of the Offered
Securities will be limited to $200,000,000.
The Company and/or each of the NSP Trusts may sell the Offered Securities
directly, through agents designated from time to time or through underwriters or
dealers. See "Plan of Distribution." If any agents of the Company and/or any NSP
Trust or any underwriters or dealers are involved in the sale of the Offered
Securities, the names of such agents, underwriters or dealers and any applicable
commissions and discounts will be set forth in the related Prospectus
Supplement.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.
------------------------------
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.
The date of this Prospectus is January 14, 1997.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY
REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN OR
THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
NSP TRUSTS OR BY ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS AND ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
This Prospectus and the documents incorporated by reference herein,
including statements regarding the anticipated impact of the proposed merger,
contain certain forward-looking statements and information that are subject to
certain risks, uncertainties and assumptions. Such forward-looking statements
are intended to be identified in this document by the words "anticipate",
"estimate", "expect", "objective", "possible", "potential" and similar
expressions. Actual results may vary materially. Factors that could cause actual
results to differ materially include, but are not limited to: general economic
conditions, including their impact on capital expenditures; business conditions
in the energy industry; competitive factors; unusual weather; regulatory
decisions regarding the proposed combination of the Company and Wisconsin Energy
Company; and the other risk factors listed in Exhibit 99.01 to the Company's
report on Form 10-Q for the quarter ended September 30, 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). Such reports, proxy statements and other
information on file can be inspected and copied at the SEC's Public Reference
Room, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well as
the following Regional Offices of the SEC: Seven World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained from
the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549, at prescribed rates. In addition, reports, proxy
statements and other information may also be inspected at the office of the
Library of the New York Stock Exchange, 20 Broad Street, New York, New York, at
the office of the Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois, and at the office of the Pacific Stock Exchange, 301 Pine Street, San
Francisco, California, on which exchanges the Company's common stock is listed.
In addition, electronically filed documents, including reports, proxy and
information statements and other information regarding the Company, can be
obtained from the SEC's Web site at http://www.sec.gov. The Company is not
required to, and does not, provide Annual Reports to holders of its debt
securities unless specifically requested by a holder.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company and the NSP Trusts with the SEC under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
Offered Securities. This Prospectus does not contain all of the information set
forth in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company, the NSP Trusts, and the Offered
Securities. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the SEC or incorporated by reference herein are not necessarily complete,
and in each instance reference is made to the copy of such document so filed for
a more complete description of the matter involved. Each such statement is
qualified in its entirety by such reference.
No separate financial statements of any of the NSP Trusts have been included
herein. The Company does not consider that such financial statements would be
material to holders of the Preferred Securities because (i) all of the voting
securities of each of the NSP Trusts will be owned, directly or indirectly, by
the
<PAGE>
Company, a reporting company under the Exchange Act, (ii) each of the NSP Trusts
has no independent operations but exists for the sole purpose of issuing
securities representing undivided beneficial interests in the assets of such NSP
Trust and investing the proceeds thereof in Subordinated Debt Securities issued
by the Company, and (iii) the Company's obligations described herein and in any
accompanying prospectus supplement under the Declarations of each Trust, the
Guarantee issued with respect to Preferred Securities issued by that Trust, the
Subordinated Debt Securities purchased by that Trust and the related Indenture,
taken together, constitute a full and unconditional guarantee of payments due on
the Trust Securities. See "Description of the Subordinated Debt Securities" and
"Description of the Preferred Securities Guarantees."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC pursuant to the
1934 Act are incorporated by reference herein and made a part hereof:
1. Annual Report on Form 10-K for the year ended December 31, 1995.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1996; June 30, 1996 and September 30, 1996.
3. The Company's Current Reports on Form 8-K dated January 18, 1996; March 1,
1996; April 18, 1996; July 9, 1996; July 19, 1996; September 4, 1996;
November 15, 1996 and January 8, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date hereof and prior to the termination
of the offering of the Offered Securities pursuant hereto shall be deemed to be
incorporated by reference in this Prospectus or in any Prospectus Supplement and
to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference in this Prospectus or in any Prospectus Supplement
shall be deemed to be modified or superseded for purposes of this Prospectus or
any Prospectus Supplement to the extent that a statement contained in this
Prospectus or in any Prospectus Supplement or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
Prospectus or in any Prospectus Supplement modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus or any
Prospectus Supplement.
THE COMPANY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A
COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF
ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED
HEREIN BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS
ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUESTS
SHOULD BE DIRECTED TO: ASSISTANT SECRETARY, NORTHERN STATES POWER COMPANY, 414
NICOLLET MALL, MINNEAPOLIS, MINNESOTA 55401, (612-330-5994).
3
<PAGE>
[LOGO]
Northern States Power Company (the "Company") was incorporated in 1909 under
the laws of Minnesota. Its executive offices are located at 414 Nicollet Mall,
Minneapolis, Minnesota 55401. (Phone 612-330-5500). The Company's subsidiaries
include Northern States Power Company, an operating public utility incorporated
in Wisconsin ("NSP - Wisconsin"), NRG Energy, Inc. ("NRG"), a Delaware
corporation, and Viking Gas Transmission Company, a Delaware corporation
("Viking") and several other subsidiaries. The Company and its subsidiaries
collectively are referred to herein as NSP.
NSP is predominantly an operating public utility engaged in the generation,
transmission and distribution of electricity throughout a 49,000 square mile
service area and the transportation and distribution of natural gas in
approximately 156 communities within this area. Viking is a regulated natural
gas transmission company that operates a 500-mile interstate gas pipeline. NRG
is primarily engaged in managing several of NSP's non-regulated energy
subsidiaries.
The Company serves customers in Minnesota, North Dakota and South Dakota.
NSP - Wisconsin serves customers in Wisconsin and Michigan. Of the approximately
three million people served by the Company and NSP - Wisconsin, the majority are
concentrated in the Minneapolis-St. Paul Metropolitan Area. In 1995, about 63
percent of NSP's electric retail revenue was derived from sales in the
Minneapolis-St. Paul Metropolitan Area and about 55 percent of retail gas
revenues came from sales in the St. Paul area. NSP's electric generation for
1995 was provided for by coal (57%), nuclear (38%), and renewable and other
fuels (5%). NSP currently operates three nuclear units that were placed in
service in 1971, 1973 and 1974. NSP has no additional nuclear units under
construction.
PROPOSED MERGER
On April 28, 1995, the Company and Wisconsin Energy Corporation ("WEC")
entered into an Agreement and Plan of Merger (the "Merger Agreement"), which
provides for a strategic business combination involving the Company and WEC in a
"merger-of-equals" transaction (the "Transaction") to form Primergy Corporation
("Primergy"). Pursuant to the Transaction, the Company will reincorporate in
Wisconsin for regulatory reasons. This reincorporation will be accomplished by
the merger of the Company into Northern Power Wisconsin Corp., a Wisconsin
corporation and wholly-owned subsidiary of the Company ("New NSP"), with New NSP
being the surviving corporation and succeeding to the business of the Company as
an operating public utility. Following such merger, a wholly-owned subsidiary of
WEC will be merged with and into New NSP, with New NSP being the surviving
corporation and becoming a subsidiary of Primergy. It is anticipated that,
following the Transaction, the Company's Wisconsin utility subsidiary, NSP -
Wisconsin, will be merged into WEC's present principal utility subsidiary and
that NRG and the Company's other subsidiaries will become subsidiaries of
Primergy.
The goal of the Company and WEC was to receive approvals from all required
regulatory authorities by the end of 1996. However, all necessary regulatory
approvals were not obtained by the end of 1996, and as a result, the Transaction
was not completed during 1996. The Company and WEC will continue to pursue
regulatory approvals and completion of the Transaction as soon as possible in
1997.
Under the Merger Agreement, completion of the Transaction is conditioned
upon the prior receipt of all necessary regulatory approvals without the
imposition of materially adverse terms.
Following the completion of the Transaction, the Junior Subordinated
Debentures and the Company's outstanding Senior Indebtedness will be obligations
of New NSP, as a subsidiary of Primergy, and will continue to be subject to the
Indenture as described in this Prospectus. However, as described above, New NSP
is not expected to retain any of the Company's subsidiaries and the Junior
Subordinated Debentures
4
<PAGE>
will not be an obligation of Primergy or any other subsidiary of Primergy. For
the twelve months ended September 30, 1996 and the year ended December 31, 1995,
the Company's subsidiaries constituted 5% and 13% of NSP's consolidated net
income, respectively, and represented 12% of NSP's consolidated assets and 18%
of NSP's consolidated liabilities including long-term debt at September 30,
1996. For a further discussion of the Transaction, including pro forma financial
information and the status of the required regulatory approvals, see the
Company's current and periodic reports filed with the Commission that are
incorporated by reference herein.
THE NSP TRUSTS
Each of NSP I and NSP II is a statutory business trust formed under Delaware
law pursuant to (i) a separate declaration of trust (each a "Declaration")
executed by the Company, as sponsor for such trust (the "Sponsor") and the NSP
Trustees (as defined herein) for such trust and (ii) the filing of a certificate
of trust with the Delaware Secretary of State on December 23, 1996. Each NSP
Trust exists for the exclusive purposes of (i) issuing the Preferred Securities
and common securities representing undivided beneficial interests in the assets
of such Trust (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities"), (ii) investing the gross proceeds of the
Trust Securities in the Subordinated Debt Securities and (iii) engaging in only
those other activities necessary or incidental thereto. All of the Common
Securities will be directly or indirectly owned by the Company. The Common
Securities will rank PARI PASSU, and payments will be made thereon pro rata,
with the Preferred Securities except that upon an event of default under the
Declaration, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Preferred Securities.
The Company will, directly or indirectly, acquire Common Securities in an
aggregate liquidation amount equal to 3% of the total capital of each NSP Trust.
Each NSP Trust has a term of approximately forty-five (45) years, but may
earlier terminate as provided in the Declaration. Each NSP Trust's business and
affairs will be conducted by the trustees (the "NSP Trustees") appointed by the
Company, as the direct or indirect holder of all the Common Securities. The
holder of the Common Securities will be entitled to appoint, remove or replace
any of, or increase or reduce the number of, the NSP Trustees of an NSP Trust.
The duties and obligations of the NSP Trustees shall be governed by the
Declaration of such NSP Trust. A majority of the NSP Trustees (the "Regular
Trustees") of each NSP Trust will be persons who are employees or officers of or
affiliated with the Company. In certain limited circumstances set forth in a
Prospectus Supplement, the holders of a majority of the Preferred Securities
will be entitled to appoint one additional Regular Trustee, who need not be an
employee or officer of or otherwise affiliated with the Company. One NSP Trustee
of each NSP Trust will be a financial institution which will be unaffiliated
with the Company and which shall act as property trustee and as indenture
trustee for purposes of the Trust Indenture Act of 1939 (the "Trust Indenture
Act"), pursuant to the terms set forth in a Prospectus Supplement (the "Property
Trustee" or the "Institutional Trustee"). In addition, unless the Property
Trustee maintains a principal place of business in the State of Delaware, and
otherwise meets the requirements of applicable law, one NSP Trustee of each NSP
Trust will have its principal place of business or reside in the State of
Delaware (the "Delaware Trustee"). The Company will pay all fees and expenses
related to the NSP Trusts and the offering of Trust Securities. The office of
the Delaware Trustee for each NSP Trust in the State of Delaware is Wilmington
Trust Company, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890. The principal place of business of each NSP Trust shall be c/o
Northern States Power Company, 414 Nicollet Mall, Minneapolis, Minnesota 55401;
telephone (612) 330-5500.
5
<PAGE>
USE OF PROCEEDS
Each NSP Trust will use the proceeds received from the sale of its Preferred
Securities to purchase Subordinated Debt Securities from the Company. Unless
otherwise indicated in a Prospectus Supplement with respect to the proceeds from
the sale of the particular Offered Securities to which such Prospectus
Supplement relates, the Company intends to add the net proceeds from the sale of
Offered Securities to its general funds, to be used for general corporate
purposes, which may include the purchase or redemption of one or more series of
its preferred stock, capital expenditures, investment in subsidiaries, working
capital, repayment of short-term borrowings and other business opportunities.
Short-term borrowings of the Company aggregated $362 million at December 31,
1996.
NSP'S RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock dividends
for NSP on a historical and pro forma basis for the periods indicated.
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------
1996 1995 1994 1993 1992 1991
------------- ---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
NSP Ratio of Earnings to Fixed
Charges.......................... 3.7 3.9 4.0 4.0 3.2 3.9
New NSP Pro Forma Ratio of Earnings
to Fixed Charges................. 4.3 4.2 4.2 4.0 3.1 4.0
NSP Ratio of Earnings to Combined
Fixed
Charges and Preferred Stock
Dividends........................ 3.4 3.6 3.6 3.5 2.8 3.4
New NSP Pro Forma Ratio of Earnings
to Combined Fixed Charges and
Preferred Stock Dividends........ 3.8 3.7 3.7 3.5 2.7 3.4
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, (i)
earnings consist of income from continuing operations before accounting change
plus fixed charges, federal and state income taxes, deferred income taxes and
investment tax credits and less unconsolidated equity in earnings of
unconsolidated investees; and (ii) fixed charges consist of interest on
long-term debt, other interest charges, the interest component on leases and
amortization of debt discount, premium and expense. Preferred dividends
represent dividends paid on all preferred shares outstanding during the periods
and have been increased to an amount representing the pre-tax earnings which
would be required to cover such dividend requirements.
The New NSP unaudited pro forma ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for each of the
years in the five-year period ended December 31, 1995, and the twelve months
ended September 30, 1996, give effect to the Transaction as if it had occurred
at January 1, 1991. See the Notes to Unaudited Pro Forma Condensed Financial
Statements of New NSP in the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 1996 for a description of the assumptions used to
prepare the unaudited pro forma ratios of earnings to fixed charges.
Assuming that variable interest rate debt continues at interest rates
applicable on September 30, 1996, the annual interest requirements on long-term
debt of NSP outstanding at September 30, 1996 was $119,641,000.
6
<PAGE>
DESCRIPTION OF SUBORDINATED DEBT SECURITIES
THE FOLLOWING DESCRIPTION SETS FORTH CERTAIN GENERAL TERMS AND PROVISIONS OF
THE SUBORDINATED DEBT SECURITIES TO WHICH ANY PROSPECTUS SUPPLEMENT MAY RELATE.
THE PARTICULAR TERMS OF THE SUBORDINATED DEBT SECURITIES OFFERED BY ANY
PROSPECTUS SUPPLEMENT AND THE EXTENT, IF ANY, TO WHICH SUCH GENERAL PROVISIONS
MAY APPLY TO THE SUBORDINATED DEBT SECURITIES SO OFFERED WILL BE DESCRIBED IN
THE PROSPECTUS SUPPLEMENT RELATING TO SUCH SUBORDINATED DEBT SECURITIES.
The Subordinated Debt Securities may be issued from time to time, in one or
more series and will be issued under an Indenture, as supplemented from time to
time, (as so supplemented, the "Indenture") between the Company and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee").
The following summaries of certain provisions of the Subordinated Debt
Securities and the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by express reference to, all the provisions
of the Indenture, including the definitions therein of certain terms. Certain
capitalized terms herein are defined in the Indenture.
GENERAL
The Subordinated Debt Securities will be unsecured subordinated obligations
of the Company.
The Indenture does not limit the aggregate principal amount of Subordinated
Debt Securities which may be issued thereunder and provides that Subordinated
Debt Securities may be issued thereunder, from time to time, in one or more
series.
Reference is made to the Prospectus Supplement relating to the Subordinated
Debt Securities being offered for, among other things, the following terms
thereof: (1) the title of the Subordinated Debt Securities; (2) any limit on the
aggregate principal amount of such Subordinated Debt Securities; (3) the date or
dates on which such Subordinated Debt Securities will mature; (4) the rate or
rates (which may be fixed or variable) per annum at which such Subordinated Debt
Securities will bear interest or the method by which such rate or rates shall be
determined and the date from which such interest will accrue or the method by
which such date or dates shall be determined; (5) the dates on which such
interest will be payable and the Regular Record Dates for such Interest Payment
Dates; (6) the dates, if any, on which, and the price or prices at which, such
Subordinated Debt Securities may, pursuant to any mandatory or optional sinking
fund provisions, be redeemed by the Company and other detailed terms and
provisions of such sinking funds; (7) the date, if any, after which, and the
price or prices at which, the Offered Debt Securities may, pursuant to any
optional redemption provisions, be redeemed at the option of the Company or of
the Holder thereof and other detailed terms and provisions of such optional
redemption; (8) the right of the Company, if any, to defer payment of interest
on the Subordinated Debt Securities and the maximum length of any such deferral
period; and (9) any other terms of such Subordinated Debt Securities (which
terms shall not be inconsistent with the appropriate Indenture). For a
description of the terms of such Subordinated Debt Securities, reference must be
made to both the Prospectus Supplement relating thereto and to the description
of Subordinated Debt Securities set forth herein.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the principal of, and any premium or interest on, the Subordinated Debt
Securities will be payable, and the Subordinated Debt Securities will be
exchangeable and transfers thereof will be registrable, at the Place of Payment,
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the person entitled thereto as it appears in the
Security Register.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities will be issued in United States dollars in fully
registered form, without coupons, in denominations of $1,000 or any integral
multiple thereof. No service charge will be made for any transfer or exchange of
the Offered Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
7
<PAGE>
For purposes of the descriptions contained herein, certain defined terms
have the following meanings:
"Indebtedness" of any Person means, without duplication, (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capitalized Lease Obligations of such Person; (iii) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all obligations under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit); (v) all obligations of the type referred to in clauses
(i) through (iv) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable as
obligor, guarantor or otherwise; and (vi) all obligations of the type referred
to in clauses (i) through (v) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured.
"Capitalized Lease Obligations" means an obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation determined in accordance with such
principles.
"Senior Indebtedness" means, with respect to the Company, Indebtedness of
the Company, except for (1) any such Indebtedness that is by its terms
subordinated to or PARI PASSU with the Subordinated Debt Securities and (2) any
Indebtedness (including all other debt securities and guarantees in respect of
those debt securities) initially issued to any other 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.
RESTRICTIONS
The Indenture provides that the Company shall not, other than pursuant to
the Transaction, consolidate with, merge with or into any other corporation
(whether or not the Company shall be the surviving corporation), or sell,
assign, transfer or lease all or substantially all of its properties and assets
as an entirety or substantially as an entirety to any Person or group of
affiliated Persons, in one transaction or a series of related transactions,
unless: (1) either the Company shall be the continuing Person or the Person (if
other than the Company) formed by such consolidation or with which or into which
the Company is merged or the Person (or group of affiliated Persons) to which
all or substantially all the properties and assets of the Company are sold,
assigned, transferred or leased is a corporation (or constitute corporations)
organized under the laws of the United States or any State thereof or the
District of Columbia and expressly assumes, by indentures supplemental to the
Indenture executed and delivered to the Trustee in form satisfactory to the
Trustee, all the obligations of the Company under the Subordinated Debt
Securities and Indenture; (2) immediately before and after giving effect to such
transaction or series of related transactions or series of transactions, no
Event of Default, and no Default, with respect to the Subordinated Debt
Securities shall have occurred and be continuing; and (3) the Company shall have
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or sale, assignment, transfer or
lease and such supplemental indentures comply with the Indenture.
8
<PAGE>
EVENTS OF DEFAULT AND NOTICE THEREOF
The following are Events of Default under the Indenture with respect to the
Subordinated Debt Securities of any series: (1) failure to pay interest on any
Subordinated Debt Securities of that series when due, continued for 30 days;
however, if the Company is permitted by the terms of the Subordinated Debt
Securities of the applicable series to defer the payment in question, the date
on which such payment is due and payable shall be the date on which the Company
is required to make payment following such deferral, if such deferral has been
elected pursuant to the terms of the Subordinated Debt Securities; (2) failure
to pay the principal of (or premium, if any, on) any Subordinated Debt
Securities of that series when due and payable at Maturity, upon redemption or
otherwise; however, if the Company is permitted by the terms of the Subordinated
Debt Securities, of the applicable series to defer the payment in question, the
date on which such payment is due and payable shall be the date on which the
Company is required to make payment following such deferral, if such deferral
has been elected pursuant to the terms of the Subordinated Debt Securities; (3)
failure to observe or perform any other covenant, warranty or agreement
contained in the Subordinated Debt Securities of that series or in the Indenture
(other than a covenant, agreement or warranty included in the Indenture solely
for the benefit of Subordinated Debt Securities of a series other than that
series), continued for a period of 60 days after notice has been given to the
Company by the applicable Trustee or Holders of at least 25% in aggregate
principal amount of the Outstanding Subordinated Debt Securities of that series;
(4) failure to pay at final maturity, or acceleration of, Indebtedness of the
Company, having an aggregate principal amount of more than 1% of the Company's
consolidated total assets (determined as of its most recent fiscal year-end),
unless cured within 10 days after notice has been given to the Company by the
Trustee or Holders of at least 10% in aggregate principal amount of the
Outstanding Subordinated Debt Securities of that series; (5) certain events of
bankruptcy, insolvency or reorganization relating to the Company; and (6) any
other Event of Default with respect to Subordinated Debt Securities of that
series specified in the Prospectus Supplement relating thereto.
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to Subordinated Debt
Securities of any series, give the Holders of Subordinated Debt Securities of
that series notice of all uncured Defaults or Events of Default known to it (the
term "Default" includes any event which after notice or passage of time or both
would be an Event of Default); provided, however, that, except in the case of an
Event of Default or a Default in payment on any Subordinated Debt Securities of
any series, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or directors or
responsible officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders of Subordinated Debt Securities
of that series.
If an Event of Default with respect to Subordinated Debt Securities of any
series (other than due to events of bankruptcy, insolvency or reorganization)
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Outstanding Subordinated Debt Securities of
that series, by notice in writing to the Company (and to the Trustee if given by
the Holders of at least 25% in aggregate principal amount of the Subordinated
Debt Securities of that series), may declare the unpaid principal of and accrued
interest to the date of acceleration on all the Outstanding Subordinated Debt
Securities of that series to be due and payable immediately and, upon any such
declaration, the Subordinated Debt Securities of that series shall become
immediately due and payable.
In addition, in the case of a Junior Subordinated Debenture issued to an NSP
Trust, if an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal, then a
holder of Preferred Securities of such NSP Trust may directly institute a
proceeding against the Company for payment.
9
<PAGE>
If an Event of Default occurs due to bankruptcy, insolvency or
reorganization, all unpaid principal of and accrued interest on the Outstanding
Subordinated Debt Securities of any series will become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder of any Subordinated Debt Security of that series.
Any such declaration with respect to Subordinated Debt Securities of any
series may be annulled and past Events of Default and Defaults (except, unless
theretofore cured, an Event of Default or a Default in payment of principal of
or interest on the Subordinated Debt Securities of that series) may be waived by
the Holders of a majority of the principal amount of the Outstanding
Subordinated Debt Securities of that series, upon the conditions provided in the
Indenture.
The Indenture provides that the Company shall periodically file statements
with the Trustees regarding compliance by the Company with certain of the
respective covenants thereof and shall specify any Event of Default or Defaults
with respect to Subordinated Debt Securities of any series, in performing such
covenants, of which the signers may have knowledge.
MODIFICATION OF INDENTURE; WAIVER
The Indenture may be modified by the Company and the Trustee without the
consent of any Holders with respect to certain matters, including (i) to cure
any ambiguity, defect or inconsistency or to correct or supplement any provision
which may be inconsistent with any other provision of the Indenture and (ii) to
make any change that does not materially adversely affect the interests of any
Holder of Subordinated Debt Securities of any series. In addition, under the
Indenture, certain rights and obligations of the Company and the rights of
Holders of the Subordinated Debt Securities may be modified by the Company and
the Trustee with the written consent of the Holders of at least a majority in
aggregate principal amount of the Outstanding Subordinated Debt Securities of
each series affected thereby; but no extension of the maturity of any
Subordinated Debt Securities of any series, reduction in the interest rate or
extension of the time for payment of interest, change in the optional redemption
or repurchase provisions in a manner adverse to any Holder of Subordinated Debt
Securities of any series, other modification in the terms of payment of the
principal of, or interest on, any Subordinated Debt Securities of any series, or
reduction of the percentage required for modification, will be effective against
any Holder of any Outstanding Subordinated Debt Security of any series affected
thereby without the Holder's consent. The Indenture does not limit the aggregate
amount of Subordinated Debt Securities of the Company which may be issued
thereunder.
The Holders of a majority in aggregate principal amount of the Outstanding
Subordinated Debt Securities of any series may on behalf of the Holders of all
Subordinated Debt Securities of that series waive, insofar as that series is
concerned, compliance by the Company with certain restrictive covenants of the
Indenture. The Holders of not less than a majority in aggregate principal amount
of the Outstanding Subordinated Debt Securities of any series may on behalf of
the Holders of all Subordinated Debt Securities of that series waive any past
Event of Default or Default under the Indenture with respect to that series,
except an Event of Default or a Default in the payment of the principal of, or
premium, if any, or any interest on any Subordinated Debt Security of that
series or in respect of a provision which under the Indenture cannot be modified
or amended without the consent of the Holder of each Outstanding Subordinated
Debt Security of that series affected.
DEFEASANCE
The Company may terminate its substantive obligations in respect of
Subordinated Debt Securities of any series (except for its obligations to pay
the principal of (and premium, if any, on) and the interest on the Subordinated
Debt Securities of that series) by (i) depositing with the Trustee, under the
terms of an irrevocable trust agreement, money or U.S. Government Obligations
sufficient to pay all remaining indebtedness on the Subordinated Debt Securities
of that series, (ii) delivering to the Trustee either an
10
<PAGE>
Opinion of Counsel or a ruling directed to the Trustee from the Internal Revenue
Service to the effect that the Holders of the Subordinated Debt Securities of
that series will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and termination of obligations, and (iii)
complying with certain other requirements set forth in the Indenture.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
Subordinated Debt Securities will be subordinated in right of payment to the
prior payment in full of all Senior Indebtedness of the Company and PARI PASSU
with the Company's trade creditors. No payment on account of principal of,
premium, if any, or interest on the Subordinated Debt Securities and no
acquisition of, or payment on account of any sinking fund for, the Subordinated
Debt Securities may be made unless full payment of amounts then due for
principal, premium, if any, and interest then due on all Senior Indebtedness by
reason of the maturity thereof (by lapse of time, acceleration or otherwise) has
been made or duly provided for in cash or in a manner satisfactory to the
Holders of such Senior Indebtedness. In addition, the Indenture provides that if
a default has occurred giving the holders of such Senior Indebtedness the right
to accelerate the maturity thereof, or an event has occurred which, with the
giving of notice, or lapse of time, or both, would constitute such an event of
default, then unless and until such event shall have been cured or waived or
shall have ceased to exist, no payment on account of principal, premium, if any,
or interest on the Subordinated Debt Securities and no acquisition of, or
payment on account of a sinking fund for, the Subordinated Debt Securities may
be made. The Company shall give prompt written notice to the Trustee of any
default under any Senior Indebtedness or under any agreement pursuant to which
Senior Indebtedness may have been issued. The Indenture provisions described in
this paragraph, however, do not prevent the Company from making a sinking fund
payment with Subordinated Debt Securities acquired prior to the maturity of
Senior Indebtedness or, in the case of default, prior to such default and notice
thereof. Upon any distribution of its assets in connection with any dissolution,
liquidation or reorganization of the Company, all Senior Indebtedness must be
paid in full before the Holders of the Subordinated Debt Securities are entitled
to any payments whatsoever. As a result of these subordinated provisions, in the
event of the Company's insolvency, holders of the Subordinated Debt Securities
may recover ratably less than senior creditors of the Company.
BOOK-ENTRY DEBT SECURITIES
The Subordinated Debt Securities of a series may be issued in whole or in
part in the form of one or more Global Securities (as such term is defined
below) that will be deposited with, or on behalf of, a Depositary ("Depositary")
or its nominee identified in the applicable Prospectus Supplement. In such a
case, one or more Global Securities will be issued in a denomination or
aggregate denomination equal to the portion of the aggregate principal amount of
outstanding Subordinated Debt Securities of the series to be represented by such
Global Security or Global Securities. Unless and until it is exchanged in whole
or in part for Subordinated Debt Securities in registered form, a Global
Security may not be registered for transfer or exchange except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any nominee to a successor Depositary or a
nominee of such successor Depositary and except in the circumstances described
in the applicable Prospectus Supplement. The term "Global Security", when used
with respect to any series of Subordinated Debt Securities, means a Subordinated
Debt Security that is executed by the Company and authenticated and delivered by
the Trustee to the Depositary or pursuant to the Depositary's instruction, which
shall be registered in the name of the Depositary or its nominee and which shall
represent, and shall be denominated in an amount equal to the aggregate
principal amount of, all of the Outstanding Subordinated Debt Securities of such
series or any portion thereof, in either case having the same terms, including,
without limitation, the same original issue date, date or dates on which
principal is due, and interest rate or method of determining interest.
11
<PAGE>
The specific terms of the depositary arrangement with respect to any portion
of a series of Subordinated Debt Securities to be represented by a Global
Security will be described in the applicable Prospectus Supplement. The Company
expects that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement,
Subordinated Debt Securities which are to be represented by a Global Security to
be deposited with or on behalf of a Depositary will be represented by a Global
Security registered in the name of such Depositary or its nominee. Upon the
issuance of such Global Security, and the deposit of such Global Security with
or on behalf of the Depositary for such Global Security, the Depositary will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Subordinated Debt Securities represented by such Global
Security to the accounts of institutions that have accounts with such Depositary
or its nominee ("participants"). The accounts to be credited will be designated
by the underwriters or agents of such Subordinated Debt Securities or, if such
Subordinated Debt Securities are offered and sold directly by the Company, by
the Company. Ownership of beneficial interests in such Global Security will be
limited to participants or Persons that may hold interests through participants.
Ownership of beneficial interests by participants in such Global Security will
be shown on, and the transfer of that ownership interest will be effected only
through, records maintained by the Depositary or its nominee for such Global
Security. Ownership of beneficial interests in such Global Security by Persons
that hold through participants will be shown on, and the transfer of that
ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Securities
represented by such Global Security for all purposes under the Indenture. Unless
otherwise specified in the applicable Prospectus Supplement, owners of
beneficial interests in such Global Security will not be entitled to have Debt
Securities of the series represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of
Subordinated Debt Securities of such series in certificated form and will not be
considered the Holders thereof for any purposes under the Indenture.
Accordingly, each Person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such Person is not a
participant, on the procedures of the participant through which such Person owns
its interest, to exercise any rights of a Holder under the Indenture. The
Company understands that under existing industry practices, if the Company
requests any action of Holders or an owner of a beneficial interest in such
Global Security desires to give any notice or take any action a Holder is
entitled to give or take under the Indenture, the Depositary would authorize the
participants to give such notice or take such action, and participants would
authorize beneficial owners owning through such participants to give such notice
or take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
THE TRUSTEE
Norwest Bank Minnesota, National Association is the Trustee under Indenture.
The Company and various of its subsidiaries maintain bank accounts and have
other customary banking relationships with Norwest Bank Minnesota, National
Association in the ordinary course of business.
DESCRIPTION OF THE PREFERRED SECURITIES
Each NSP Trust may issue, from time to time, only one series of Preferred
Securities having terms described in the Prospectus Supplement relating thereto.
The Declaration of each NSP Trust authorizes
12
<PAGE>
the Regular Trustees of such NSP Trust to issue on behalf of such NSP Trust one
series of Preferred Securities. The Declaration will be qualified as an
indenture under the Trust Indenture Act. The Institutional Trustee, Wilmington
Trust Company, an independent trustee, will act as indenture trustee for the
Preferred Securities, to be issued by each NSP Trust, for the purposes of
compliance with the provisions of the Trust Indenture Act. The Preferred
Securities will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferred or other special rights or
such restrictions as shall be set forth in the Declaration or made part of the
Declaration by the Trust Indenture Act, and which will mirror the terms of the
Subordinated Debt Securities held by the NSP Trust and as described in the
Prospectus Supplement related thereto. Reference is made to the Prospectus
Supplement relating to the Preferred Securities of the NSP Trust for specific
terms, including (i) the distinctive designation of such Preferred Securities;
(ii) the number of Preferred Securities issued by such NSP Trust; (iii) the
annual distribution rate (or method of determining such rate) for Preferred
Securities issued by such NSP Trust and the date or dates upon which such
distributions shall be payable; provided, however, that distributions on such
Preferred Securities shall be payable on a quarterly basis to holders of such
Preferred Securities as of a record date in each quarter during which such
Preferred Securities are outstanding; (iv) whether distributions on Preferred
Securities issued by such NSP Trust shall be cumulative, and, in the case of
Preferred Securities having such cumulative distribution rights, the date or
dates or method of determining the date or dates from which distributions on
Preferred Securities issued by such NSP Trust shall be cumulative; (v) the
amount or amounts which shall be paid out of the assets of such NSP Trust to the
holders of Preferred Securities of such NSP Trust upon voluntary or involuntary
dissolution, winding-up or termination of such NSP Trust; (vi) the obligation,
if any, of such NSP Trust to purchase or redeem Preferred Securities issued by
such NSP Trust and the price or prices at which, the period or periods within
which, and the terms and conditions upon which, Preferred Securities issued by
such NSP Trust shall be purchased or redeemed, in whole or in part, pursuant to
such obligation (with such redemption price to be determined through
negotiations among the Company and the Underwriters based on, among other
factors, redemption prices of securities similar to the Preferred Securities and
market conditions generally); (vii) the voting rights, if any, of Preferred
Securities issued by such NSP Trust in addition to those required by law,
including the number of votes per Preferred Security and any requirement for the
approval by the holders of Preferred Securities, or of Preferred Securities
issued by one or more NSP Trusts, or of both, as a condition to specified action
or amendments to the Declaration of such NSP Trust; (viii) the terms and
conditions, if any, upon which the Subordinated Debt Securities may be
distributed to holders of Preferred Securities; (ix) if applicable, any
securities exchange upon which the Preferred Securities shall be listed, and (x)
any other relevant rights, preferences, privileges, limitations or restrictions
of Preferred Securities issued by such NSP Trust not inconsistent with the
Declaration of such NSP Trust or with applicable law. All Preferred Securities
offered hereby will be guaranteed by the Company to the extent set forth below
under "Description of the Preferred Securities Guarantees." The Preferred
Securities Guarantee of the Company, when taken together with the Company's
obligations under the Subordinated Debt Securities and the relevant Supplemental
Indenture, and its obligations under each Declaration, including obligations to
pay costs, expenses, debts and liabilities of the NSP Trust (other than with
respect to the Trust Securities), would provide a full and unconditional
guarantee of amounts due on Preferred Securities issued by each of NSP Financing
I and NSP Financing II. Any United States federal income tax considerations
applicable to any offering of Preferred Securities will be described in the
Prospectus Supplement relating thereto.
In connection with the issuance of Preferred Securities, each NSP Trust will
issue one series of Common Securities. The Declaration of each NSP Trust
authorizes the Regular Trustees of such trust to issue on behalf of such NSP
Trust one series of Common Securities having such terms including distributions,
redemption, voting, liquidation rights or such restrictions as shall be set
forth therein. The terms of the Common Securities issued by an NSP Trust will be
substantially identical to the terms of the Preferred Securities issued by such
trust and the Common Securities will rank PARI PASSU, and payments will be made
thereon PRO RATA, with the Preferred Securities except that, upon an event of
default under the
13
<PAGE>
Declaration, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Preferred Securities.
Except in certain limited circumstances, the Common Securities will also carry
the right to vote to appoint, remove or replace any of the NSP Trustees of an
NSP Trust. All of the Common Securities of each NSP Trust will be directly or
indirectly owned by the Company.
PROPOSED TAX LEGISLATION
On March 19, 1996 President Clinton proposed certain tax law changes (the
"Proposed Legislation"), that, among other things, would prevent companies from
deducting interest on debt instruments with a maturity of more than 40 years and
would treat as equity for United States federal income tax purposes instruments
with a maximum term of more than 20 years that are not shown as indebtedness on
the consolidated balance sheet of the issuer. The Proposed Legislation, by its
own terms provides for an effective date, with certain exceptions not relevant
to the Subordinated Debt Securities and the Preferred Securities, that is
retroactive to December 7, 1995. On March 29, 1996, however, Senate Finance
Committee Chairman Roth and House Ways and Means Committee Chairman Archer
released a joint statement (the "Joint Statement") indicating that "the
effective date of any of [the provisions of the Proposed Legislation] that may
be adopted by either of the tax-writing committees will be no earlier than the
date of appropriate Congressional action." Accordingly, if, contrary to the
Joint Statement, the Proposed Legislation were enacted in its current form, it
would apply to the Subordinated Debt Securities and the Preferred Securities if
their maximum term were more than 20 years. If the Proposed Legislation were to
apply to the Subordinated Debt Securities, the United States federal income tax
consequences of the purchase, ownership and disposition of the Preferred
Securities would differ from those described herein. In addition, if the
Proposed Legislation were to apply to the Subordinated Debt Securities, the
Company would not be able to deduct interest paid on the Subordinated Debt
Securities, which would constitute a Tax Event. A Tax Event could result in the
distribution of the Subordinated Debt Securities to holders of the Preferred
Securities or, at the Company's option, redemption of the Subordinated Debt
Securities by the Company. Although it is not the Company's intention to issue
securities to which the Proposed Legislation would apply in such a way as to
create a Tax Event, and the Company believes that the Joint Statement indicates
that it is unlikely that the Proposed Legislation would be enacted in a form
which would apply retroactively to any securities offered hereby, there can be
no assurances as to whether or in what form the Proposed Legislation may be
enacted into law or whether other legislation will be enacted that otherwise
adversely affects the tax treatment of the Subordinated Debt Securities and the
Preferred Securities. The discussion herein assumes that the Proposed
Legislation, if enacted, will not apply to the Subordinated Debt Securities or
the Preferred Securities.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees which will be executed and delivered by the Company for
the benefit of the holders from time to time of Preferred Securities. Each
Preferred Securities Guarantee will be qualified as an indenture under the Trust
Indenture Act. Wilmington Trust Company, an independent trustee, will act as
indenture trustee under each Preferred Securities Guarantee (the "Preferred
Guarantee Trustee") for the purposes of compliance with the provisions of the
Trust Indenture Act. The terms of each Preferred Securities Guarantee will be
those set forth in such Preferred Securities Guarantee and those made part of
such Preferred Securities Guarantee by the Trust Indenture Act. The following
summary does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the form of
Preferred Securities Guarantee, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the Trust Indenture Act.
Each Preferred Securities Guarantee will be held by the Preferred Guarantee
Trustee for the benefit of the holders of the Preferred Securities of the
applicable NSP Trust.
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<PAGE>
GENERAL
Pursuant to each Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the Preferred Securities issued by an NSP Trust, the
Guarantee Payments (as defined herein) (except to the extent paid by such NSP
Trust), as and when due, regardless of any defense, right of set-off or
counterclaim which such NSP Trust may have or assert. The following payments or
distributions with respect to Preferred Securities issued by an NSP Trust to the
extent not paid by such NSP Trust (the "Guarantee Payments"), will be subject to
the Preferred Securities Guarantee thereon (without duplication): (i) any
accrued and unpaid distributions which are required to be paid on such Preferred
Securities, to the extent such NSP Trust shall have funds available therefor;
(ii) the redemption price (the "Redemption Price") and all accrued and unpaid
distributions to the date of redemption to the extent such NSP Trust has funds
available therefor with respect to any Preferred Securities called for
redemption by such NSP Trust and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of such NSP Trust (other than in
connection with the distribution of Subordinated Debt Securities to the holders
of Preferred Securities or the redemption of all of the Preferred Securities),
the lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on such Preferred Securities to the date of payment, to the
extent such NSP Trust has funds available therefor and (b) the amount of assets
of such NSP Trust remaining available for distribution to holders of such
Preferred Securities in liquidation of such NSP 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
applicable NSP Trust to pay such amounts to such holders.
Each Preferred Securities Guarantee will be a guarantee with respect to the
Preferred Securities issued by the applicable NSP Trust, but will not apply to
any payment of distributions except to the extent such NSP Trust shall have
funds available therefor. If the Company does not make interest payments on the
Subordinated Debt Securities purchased by an NSP Trust, such NSP Trust will not
pay distributions on the Preferred Securities issued by such NSP Trust and will
not have funds available therefor. See "Description of the Subordinated Debt
Securities." The Preferred Securities Guarantee, when taken together with the
Company's obligations under the Subordinated Debt Securities, the Indenture, and
the Declaration will provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due on the Preferred Securities.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the NSP Trusts with respect to the Common
Securities (the "Common Securities Guarantees") to the same extent as the
Preferred Securities Guarantee, except that upon an event of default under the
Indenture, holders of Preferred Securities shall have priority over holders of
Common Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities issued by the applicable NSP Trust remain
outstanding, if there shall have occurred any event that would constitute an
event of default under such Preferred Securities Guarantee or the Declaration of
such NSP Trust, then (a) the Company shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire or make
liquidation payments with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Company Common Stock in connection with
the satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security requiring the Company to purchase shares of Company Common
Stock, (ii) as a result of a reclassification of the Company's capital stock or
the exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock or, (iii) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such Company capital stock
or the
15
<PAGE>
security being converted or exchanged), (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company which
rank PARI PASSU with or junior to such Subordinated Debt Securities and (c) the
Company shall not make any guarantee payments with respect to the foregoing
(other than pursuant to a Preferred Securities Guarantee).
MODIFICATION OF THE PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required),
each Preferred Securities Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation amount of the
outstanding Preferred Securities issued by the applicable NSP Trust. The manner
of obtaining any such approval of holders of such Preferred Securities will be
as set forth in an accompanying Prospectus Supplement. All guarantees and
agreements contained in a Preferred Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Company and
shall inure to the benefit of the holders of the Preferred Securities of the
applicable NSP Trust then outstanding.
TERMINATION
Each Preferred Securities Guarantee will terminate as to the Preferred
Securities issued by the applicable NSP Trust (a) upon full payment of the
Redemption Price of all Preferred Securities of such NSP Trust, (b) upon
distribution of the Subordinated Debt Securities held by such NSP Trust to the
holders of the Preferred Securities of such NSP Trust or (c) upon full payment
of the amounts payable in accordance with the Declaration of such NSP Trust upon
liquidation of such NSP Trust. Each Preferred Securities Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
holder of Preferred Securities issued by the applicable NSP Trust must restore
payment of any sums paid under such Preferred Securities or such Preferred
Securities Guarantee.
EVENTS OF DEFAULT
An event of default under a Preferred Securities Guarantee will occur upon
the failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
to which such Preferred Securities Guarantee relates have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Preferred Guarantee Trustee in respect of the Preferred Securities
Guarantee or to direct the exercise of any trust or power conferred upon the
Preferred Guarantee Trustee under such Preferred Securities Guarantee. If the
Preferred Guarantee Trustee fails to enforce such Preferred Securities
Guarantee, any holder of Preferred Securities to which such Preferred Securities
Guarantee relates may institute a legal proceeding directly against the Company
to enforce such holder's rights under such Preferred Securities Guarantee,
without first instituting a legal proceeding against the relevant NSP Trust, the
Preferred Guarantee Trustee or any other person or entity. The Company waives
any right or remedy to require that any action be brought first against such NSP
Trust or any other person or entity before proceeding directly against the
Company.
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Preferred Securities Guarantees will constitute unsecured obligations of
the Company and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Company, (ii) PARI PASSU with the most senior preferred
or preference stock now or hereafter issued by the Company and with any
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company; and (iii) senior
to the Company's Common Stock. The terms of the Preferred Securities provide
that each holder of Preferred Securities issued by the applicable NSP Trust by
acceptance thereof agrees to the subordination provisions and other terms of the
Preferred Securities Guarantee relating thereto.
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The Preferred Securities Guarantees will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity).
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to a Preferred Securities Guarantee, undertakes to perform only such
duties as are specifically set forth in such Preferred Securities Guarantee and,
after default, shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to such
provisions, the Preferred Guarantee Trustee is under no obligation to exercise
any of the powers vested in it by a Preferred Securities Guarantee at the
request of any holder of Preferred Securities, unless offered reasonable
indemnity against the costs, expenses and liabilities which might be incurred
thereby; but the foregoing shall not relieve the Preferred Guarantee Trustee,
upon the occurrence of an event of default under such Preferred Securities
Guarantee, from exercising the rights and powers vested in it by such Preferred
Securities Guarantee.
GOVERNING LAW
The Preferred Securities Guarantees will be governed by and construed in
accordance with the internal laws of the State of Minnesota.
PLAN OF DISTRIBUTION
The Company and/or any NSP Trust may sell the Offered Securities (i) to or
through underwriters or dealers; (ii) directly to purchasers; or (iii) through
agents. The Prospectus Supplement with respect to the Offered Securities will
set forth the terms of the offering of the Offered Securities, including the
name or names of any underwriters, dealers or agents; the purchase price of the
Offered Securities and the proceeds to the Company and/or an NSP Trust from such
sale; any underwriting discounts and commissions or agency fees and other items
constituting underwriters' or agents' compensation; any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
and any securities exchange on which such Offered Securities may be listed. Any
initial public offering price, discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Offered Securities will be
named in the Prospectus Supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will be
set forth on the cover of such Prospectus Supplement. Unless otherwise set forth
in the Prospectus Supplement relating thereto, the obligations of the
underwriters to purchase the Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all the
Offered Securities if any are purchased.
If dealers are utilized in the sale of Offered Securities, the Company
and/or the applicable NSP Trust will sell such Offered Securities to the dealers
as principals. The dealers may then resell such Offered Securities to the public
at varying prices to be determined by such dealers at the time of resale. The
names of the dealers and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
The Offered Securities may be sold directly by the Company and/or an NSP
Trust or through agents designated by the Company and/or such NSP Trust from
time to time. Any agent involved in the offer or sale of the Offered Securities
in respect to which this Prospectus is delivered will be named, and any
17
<PAGE>
commissions payable by the Company and/or the applicable NSP Trust to such agent
will be set forth, in the Prospectus Supplement relating thereto. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment.
The Offered Securities may be sold directly by the Company and/or an NSP
Trust to institutional investors or others, who may be deemed to be underwriters
within the meaning of the Securities Act with respect to any resale thereof. The
terms of any such sales will be described in the Prospectus Supplement relating
thereto.
Agents, dealers and underwriters may be entitled under agreements with the
Company and/or an NSP Trust to indemnification by the Company and/or the
applicable NSP Trust against certain civil liabilities, including liabilities
under the Securities Act, or to contribution with respect to payments which such
agents, dealers or underwriters may be required to make in respect thereof.
Agents, dealers and underwriters may be customers of, engage in transactions
with, or perform services for the Company and/ or an NSP Trust in the ordinary
course of business.
Each series of Offered Securities will be a new issue of securities and will
have no established trading market. Any underwriters to whom Offered Securities
are sold for public offering and sale may make a market in such Offered
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. The Offered Securities
may or may not be listed on a national securities exchange. No assurance can be
given that there will be a market for the Offered Securities.
VALIDITY OF SECURITIES
The validity of the Offered Securities of the Company will be passed upon
for the Company by Gary R. Johnson, Vice President, General Counsel and
Corporate Secretary for the Company, and for the underwriters by Gardner, Carton
and Douglas, Chicago, Illinois. Mr. Johnson is a full-time employee and officer
of the Company and owns 2,790.389 shares of the Company Common Stock as of
November 30, 1996. Certain matters of Delaware law relating to the validity of
the Preferred Securities will be passed upon on behalf of the NSP Trusts by
Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to the
NSP Trusts. Certain United States federal income taxation matters will be passed
upon for the Company and the NSP Trusts by Gardner, Carton & Douglas, special
tax counsel to the Company and the NSP Trusts. Gardner, Carton & Douglas from
time to time renders legal services to the Company.
EXPERTS
The consolidated historical financial statements of the Company for the year
ended December 31, 1995 and the consolidated historical financial statements of
WEC incorporated in this Prospectus by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995, and the consolidated
financial statements of NRG for the year ended December 31, 1995 incorporated in
this Prospectus by reference to the Company's Current Report on Form 8-K dated
July 9, 1996, have been so incorporated in reliance upon the reports of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The financial statements and related financial statement schedules of the
Company for the years ended December 31, 1994 and 1993, incorporated in this
Prospectus by reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 have been audited by Deloitte & Touche LLP and have
been so incorporated in reliance upon the reports of Deloitte & Touche LLP
(which report expresses an unqualified opinion and includes an explanatory
paragraph related to the Company's change in method of accounting for
postretirement healthcare costs in 1993) given upon the authority of that firm
as experts in accounting and auditing.
18
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NORTHERN STATES POWER COMPANY, NSP FINANCING I
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF NORTHERN STATES POWER COMPANY OR NSP FINANCING I SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATIONS.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary Financial Information............................................. S-3
Risk Factors.............................................................. S-4
NSP....................................................................... S-9
Proposed Merger........................................................... S-9
NSP Financing I........................................................... S-10
NSP's Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed
Charges and Preferred Stock Dividends.................................... S-11
Accounting Treatment...................................................... S-12
Use of Proceeds........................................................... S-12
Description of the Preferred Securities................................... S-13
Description of Guarantee.................................................. S-23
Description of the Junior Subordinated Debentures......................... S-24
Effect of Obligations Under the Junior Subordinated Debentures and the
Guarantee................................................................ S-31
United States Federal Income Taxation..................................... S-32
Underwriting.............................................................. S-36
Legal Matters............................................................. S-37
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 3
NSP....................................................................... 4
Proposed Merger........................................................... 4
The NSP Trusts............................................................ 5
Use of Proceeds........................................................... 6
NSP's Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends.................................... 6
Description of the Subordinated Debt Securities........................... 7
Description of the Preferred Securities................................... 12
Description of the Preferred Securities Guarantees........................ 14
Plan of Distribution...................................................... 17
Validity of Securities.................................................... 18
Experts................................................................... 18
</TABLE>
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8,000,000 PREFERRED SECURITIES
[LOGO]
NSP FINANCING I
7 7/8% TRUST ORIGINATED
PREFERRED SECURITIES-SM-
("TOPrS-SM-")
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
NORTHERN STATES POWER
COMPANY
(A MINNESOTA CORPORATION)
------------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
DAIN BOSWORTH
INCORPORATED
PIPER JAFFRAY INC.
JANUARY 28, 1997
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