<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 3, 1995)
1,300,000 PREFERRED SECURITIES
NWPS CAPITAL FINANCING I
8 1/8% TRUST PREFERRED CAPITAL SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
NORTHWESTERN PUBLIC SERVICE COMPANY
------------
THE 8 1/8% TRUST PREFERRED CAPITAL SECURITIES (THE "PREFERRED SECURITIES")
OFFERED HEREBY REPRESENT PREFERRED UNDIVIDED BENEFICIAL INTERESTS IN THE ASSETS
OF NWPS CAPITAL FINANCING I, A STATUTORY BUSINESS TRUST FORMED UNDER THE LAWS OF
THE STATE OF DELAWARE ("NWPS CAPITAL" OR THE "TRUST"). NORTHWESTERN PUBLIC
SERVICE COMPANY, A DELAWARE CORPORATION (THE "COMPANY"), WILL DIRECTLY OR
INDIRECTLY OWN ALL THE COMMON SECURITIES (THE "COMMON SECURITIES" AND, TOGETHER
WITH THE PREFERRED SECURITIES, THE "TRUST SECURITIES") REPRESENTING UNDIVIDED
BENEFICIAL INTERESTS IN THE ASSETS OF NWPS CAPITAL. NWPS CAPITAL EXISTS FOR THE
SOLE PURPOSE OF ISSUING THE PREFERRED SECURITIES AND COMMON SECURITIES AND
INVESTING THE PROCEEDS THEREOF IN AN EQUIVALENT AMOUNT OF 8 1/8% JUNIOR
SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE SEPTEMBER 30, 2025
("SUBORDINATED DEBT SECURITIES") OF THE COMPANY. 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 FOLLOWING PAGE)
------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE S-7 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN
INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE
PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
-----------------
THE PREFERRED SECURITIES HAVE BEEN APPROVED FOR LISTING ON THE NEW YORK STOCK
EXCHANGE, SUBJECT TO OFFICIAL NOTICE OF ISSUANCE. TRADING OF THE PREFERRED
SECURITIES ON THE NEW YORK STOCK EXCHANGE IS EXPECTED TO COMMENCE WITHIN A
SEVEN-DAY PERIOD AFTER THE DATE OF THIS PROSPECTUS
SUPPLEMENT. 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.
-------------------
PRICE $25 PER SECURITY AND ACCRUED DISTRIBUTIONS, IF ANY
-------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND TO NWPS
PUBLIC (1) COMMISSION (2) CAPITAL (3)(4)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
PER PREFERRED SECURITY................................ $25.00 (3) $25.00
TOTAL (5)............................................. $32,500,000 (3) $32,500,000
<FN>
- ---------
(1) PLUS ACCRUED DISTRIBUTIONS, IF ANY, FROM THE DATE OF INITIAL ISSUE.
(2) NWPS CAPITAL 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) BECAUSE THE PROCEEDS OF THE SALE OF THE PREFERRED SECURITIES WILL
ULTIMATELY BE USED TO PURCHASE SUBORDINATED DEBT SECURITIES, THE
COMPANY HAS AGREED, IN THE UNDERWRITING AGREEMENT, TO PAY TO THE
UNDERWRITERS AS COMPENSATION FOR THEIR SERVICES $.7875 PER PREFERRED
SECURITY (OR $1,023,750 IN THE AGGREGATE); PROVIDED THAT SUCH
COMPENSATION WILL BE $.50 PER PREFERRED SECURITY SOLD TO CERTAIN
INSTITUTIONS. SEE "UNDERWRITING."
(4) EXPENSES OF THE OFFERING, WHICH ARE PAYABLE BY THE COMPANY, ARE
ESTIMATED TO BE $700,000.
(5) NWPS CAPITAL AND THE COMPANY HAVE GRANTED TO THE UNDERWRITERS AN
OPTION, EXERCISABLE WITHIN 30 DAYS OF THE DATE HEREOF, TO PUCHASE UP
TO AN AGGREGATE OF 195,000 ADDITIONAL PREFERRED SECURITIES AT THE
PRICE TO PUBLIC, SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. THE COMPANY
WILL PAY TO THE UNDERWRITERS THE AMOUNTS PER PREFERRED SECURITY SET
FORTH IN NOTE 3 WITH RESPECT TO ANY SUCH ADDITIONAL PREFERRED
SECURITIES. IF THE UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE
TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND
PROCEEDS TO NWPS CAPITAL WILL BE $37,375,000, $1,177,313 AND
$37,375,000, RESPECTIVELY. SEE "UNDERWRITING."
</TABLE>
-------------------
THE PREFERRED SECURITIES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF
ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY
WINTHROP, STIMSON, PUTNAM & ROBERTS, COUNSEL FOR THE UNDERWRITERS. IT IS
EXPECTED THAT DELIVERY OF THE PREFERRED SECURITIES WILL BE MADE ON OR ABOUT
AUGUST 8, 1995 THROUGH THE BOOK-ENTRY FACILITIES OF THE DEPOSITORY TRUST COMPANY
AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGAN STANLEY & CO.
INCORPORATED
DEAN WITTER REYNOLDS INC.
NATWEST CAPITAL MARKETS LIMITED
PAINEWEBBER INCORPORATED
PIPER JAFFRAY INC.
AUGUST 3, 1995
<PAGE>
(CONTINUED FROM PRIOR PAGE)
HOLDERS OF THE PREFERRED SECURITIES ARE ENTITLED TO RECEIVE CUMULATIVE CASH
DISTRIBUTIONS AT AN ANNUAL RATE OF 8 1/8% 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 SEPTEMBER 30, 1995 ("DISTRIBUTIONS"). THE PAYMENT OF
DISTRIBUTIONS OUT OF MONEYS HELD BY NWPS CAPITAL AND PAYMENTS ON LIQUIDATION OF
NWPS CAPITAL OR THE REDEMPTION OF PREFERRED SECURITIES, AS SET FORTH BELOW, ARE
GUARANTEED BY THE COMPANY (THE "GUARANTEE") TO THE EXTENT DESCRIBED UNDER
"DESCRIPTION OF THE GUARANTEES" IN THE ACCOMPANYING PROSPECTUS. 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 BY THE COMPANY. THE OBLIGATIONS
OF THE COMPANY UNDER THE SUBORDINATED DEBT SECURITIES ARE SUBORDINATE AND JUNIOR
IN RIGHT OF PAYMENT TO ALL PRESENT AND FUTURE SENIOR INDEBTEDNESS (AS DEFINED
HEREIN) OF THE COMPANY, WHICH AGGREGATED APPROXIMATELY $124 MILLION AT MARCH 31,
1995, AND RANK PARI PASSU WITH THE COMPANY'S OTHER GENERAL UNSECURED CREDITORS.
THE DISTRIBUTION RATE AND THE DISTRIBUTION AND OTHER PAYMENT DATES FOR THE
PREFERRED SECURITIES WILL CORRESPOND TO THE INTEREST RATE AND INTEREST AND OTHER
PAYMENT DATES ON THE SUBORDINATED DEBT SECURITIES, WHICH WILL BE THE SOLE ASSETS
OF NWPS CAPITAL. AS A RESULT, IF PRINCIPAL OR INTEREST IS NOT PAID ON THE
SUBORDINATED DEBT SECURITIES, NO AMOUNTS WILL BE PAID ON THE PREFERRED
SECURITIES. IF THE COMPANY DOES NOT MAKE PRINCIPAL OR INTEREST PAYMENTS ON THE
SUBORDINATED DEBT SECURITIES, NWPS CAPITAL WILL NOT HAVE SUFFICIENT FUNDS TO
MAKE DISTRIBUTIONS ON THE PREFERRED SECURITIES, IN WHICH EVENT, THE GUARANTEE
WILL NOT APPLY TO SUCH DISTRIBUTIONS UNTIL NWPS CAPITAL HAS SUFFICIENT FUNDS
LEGALLY AVAILABLE THEREFOR.
THE COMPANY HAS THE RIGHT TO DEFER PAYMENTS OF INTEREST ON THE SUBORDINATED
DEBT SECURITIES BY EXTENDING THE INTEREST PAYMENT PERIOD ON THE SUBORDINATED
DEBT SECURITIES AT ANY TIME FOR UP TO 20 CONSECUTIVE QUARTERS (EACH, AN
"EXTENSION PERIOD"). IF INTEREST PAYMENTS ARE SO DEFERRED, DISTRIBUTIONS ON THE
PREFERRED SECURITIES WILL ALSO BE DEFERRED. DURING AN EXTENSION PERIOD,
DISTRIBUTIONS WILL CONTINUE TO ACCRUE WITH INTEREST THEREON (TO THE EXTENT
PERMITTED BY APPLICABLE LAW) AT AN ANNUAL RATE OF 8 1/8% PER ANNUM, COMPOUNDED
QUARTERLY. 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. THERE COULD BE
MULTIPLE EXTENSION PERIODS OF VARYING LENGTHS THROUGHOUT THE TERM OF THE
SUBORDINATED DEBT SECURITIES. SEE "DESCRIPTION OF THE SUBORDINATED DEBT
SECURITIES -- OPTION TO EXTEND INTEREST PAYMENT PERIOD." IF THE COMPANY
EXERCISES THE RIGHT TO EXTEND AN INTEREST PAYMENT PERIOD, THE COMPANY SHALL NOT
DURING SUCH EXTENSION PERIOD (A) 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 AND (B) MAKE ANY
PAYMENT OF INTEREST, PRINCIPAL OR PREMIUM, IF ANY, ON OR REPAY, REPURCHASE OR
REDEEM ANY DEBT SECURITIES ISSUED BY THE COMPANY THAT RANK PARI PASSU WITH OR
JUNIOR TO THE SUBORDINATED DEBT SECURITIES; PROVIDED, HOWEVER, THAT RESTRICTION
(A) ABOVE DOES NOT APPLY TO ANY STOCK DIVIDENDS PAID BY THE COMPANY WHERE THE
DIVIDEND STOCK IS THE SAME AS THAT ON WHICH THE DIVIDEND IS BEING PAID. THE
COMPANY HAS NO PRESENT INTENTION OF EXERCISING ITS RIGHT TO EXTEND AN INTEREST
PAYMENT PERIOD. SEE "RISK FACTORS -- OPTION TO EXTEND INTEREST PAYMENT PERIOD"
AND "UNITED STATES FEDERAL INCOME TAXATION -- ORIGINAL ISSUE DISCOUNT."
THE SUBORDINATED DEBT SECURITIES ARE REDEEMABLE BY THE COMPANY, IN WHOLE OR
IN PART, FROM TIME TO TIME, ON OR AFTER SEPTEMBER 30, 2000, OR AT ANY TIME IN
CERTAIN CIRCUMSTANCES UPON THE OCCURRENCE OF A TAX EVENT (AS DEFINED HEREIN). IF
THE COMPANY REDEEMS SUBORDINATED DEBT SECURITIES, NWPS CAPITAL MUST REDEEM TRUST
SECURITIES HAVING AN AGGREGATE LIQUIDATION AMOUNT EQUAL TO THE AGGREGATE
PRINCIPAL AMOUNT OF THE SUBORDINATED DEBT SECURITIES SO REDEEMED AT $25 PER
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 SUBORDINATED DEBT SECURITIES. THE SUBORDINATED DEBT SECURITIES
MATURE ON SEPTEMBER 30, 2025 BUT THE MATURITY DATE MAY BE EXTENDED ONLY ONCE,
FOR UP TO AN ADDITIONAL 19 YEARS AT THE OPTION OF THE COMPANY, PROVIDED CERTAIN
CONDITIONS ARE MET. SEE "DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES --
OPTION TO EXTEND MATURITY DATE." IN ADDITION, UPON THE OCCURRENCE OF CERTAIN
SPECIAL EVENTS (AS DEFINED HEREIN) ARISING FROM A CHANGE IN LAW OR A CHANGE IN
LEGAL INTERPRETATION, UNLESS THE SUBORDINATED DEBT SECURITIES ARE REDEEMED IN
THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, NWPS CAPITAL SHALL BE DISSOLVED,
WITH THE RESULT THAT THE SUBORDINATED DEBT SECURITIES 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 CERTAIN CIRCUMSTANCES, THE COMPANY WILL HAVE THE
RIGHT TO REDEEM THE SUBORDINATED DEBT SECURITIES, WHICH WOULD RESULT IN THE
REDEMPTION BY NWPS CAPITAL OF TRUST SECURITIES IN THE SAME AMOUNT ON A PRO RATA
BASIS. IF THE SUBORDINATED DEBT SECURITIES ARE DISTRIBUTED TO THE HOLDERS OF THE
PREFERRED SECURITIES, THE COMPANY WILL USE ITS BEST EFFORTS TO HAVE THE
SUBORDINATED DEBT SECURITIES LISTED ON THE NEW YORK STOCK EXCHANGE OR ON SUCH
OTHER EXCHANGE AS THE PREFERRED SECURITIES ARE THEN LISTED. SEE "DESCRIPTION OF
THE PREFERRED SECURITIES -- TAX EVENT REDEMPTION OR DISTRIBUTION" AND
"DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES."
IN THE EVENT OF THE INVOLUNTARY OR VOLUNTARY DISSOLUTION, WINDING UP OR
TERMINATION OF NWPS CAPITAL, 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, THE SUBORDINATED
DEBT SECURITIES ARE DISTRIBUTED TO THE HOLDERS OF THE PREFERRED SECURITIES. SEE
"DESCRIPTION OF THE PREFERRED SECURITIES -- LIQUIDATION DISTRIBUTION UPON
DISSOLUTION."
S-2
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, NWPS CAPITAL OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH
AN OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary................................................................................... S-4
The Company..................................................................................................... S-4
Summary Financial Information................................................................................... S-6
Risk Factors.................................................................................................... S-7
NWPS Capital Financing I........................................................................................ S-10
Use of Proceeds................................................................................................. S-11
Accounting Treatment............................................................................................ S-11
Description of the Preferred Securities......................................................................... S-11
Description of the Subordinated Debt Securites.................................................................. S-23
Effect of Obligations Under the Subordinated Debt Securities and the Guarantee.................................. S-28
United States Federal Income Taxation........................................................................... S-29
Underwriting.................................................................................................... S-33
Legal Matters................................................................................................... S-35
PROSPECTUS
Available Information........................................................................................... 1
Documents Incorporated by Reference............................................................................. 1
The Company..................................................................................................... 2
Pending Acquisition of Synergy Group Incorporated............................................................... 5
Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information.............. 10
The NWPS Trusts................................................................................................. 19
Use of Proceeds................................................................................................. 20
Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Dividends............... 20
Description of the Mortgage Bonds............................................................................... 20
Description of the Subordinated Debt Securities................................................................. 32
Description of the Preferred Securities......................................................................... 40
Description of the Guarantees................................................................................... 41
Description of the Common Stock................................................................................. 43
Legal Opinions.................................................................................................. 45
Experts......................................................................................................... 46
Plan of Distribution............................................................................................ 46
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
CONSIDERED IN CONJUNCTION WITH, THE INFORMATION AND FINANCIAL STATEMENTS
APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS AND THE DOCUMENTS INCORPORATED THEREIN BY REFERENCE. UNLESS OTHERWISE
INDICATED, THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT ASSUMES THAT THE
UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED. SEE "UNDERWRITING."
THE COMPANY
The principal business of Northwestern Public Service Company (the
"Company") is energy distribution. The Company is engaged in providing regulated
electric and natural gas service in South Dakota and natural gas service in
Nebraska. The Company serves approximately 54,900 electric customers and 75,000
gas customers representing a diverse mix of residential, commercial and
industrial customers. In addition, the Company has investments in nonutility
businesses and has recently contracted to acquire Synergy Group Incorporated
("Synergy"), a major propane distribution company. See "The Company" and
"Pending Acquisition of Synergy Group Incorporated" in the accompanying
Prospectus.
The Company's electric business generates, transmits and distributes
electricity to over 100 communities in eastern South Dakota. In 1994, 46% of the
Company's total operating revenues were from the sale of electric energy. At
December 31, 1994, the aggregate capacity of all Company-owned electric
generating units was 309,000 kilowatts ("kw"), consisting of 202,000 kw from
jointly-owned baseload plants and 107,000 kw from internal combustion turbine
and diesel units used primarily for peaking purposes. All of the Company's
baseload plants are fueled by coal. The Company has maintained competitive
electric rates when compared to neighboring utilities and has a competitive
electric baseload generating production cost, which includes fuel and plant
operating expenses, of less than 1.5 CENTS per kilowatt hour.
The Company's natural gas business purchases, transports and distributes
natural gas to over 50 communities in eastern South Dakota and 4 communities in
central Nebraska. In 1994, 40% of the Company's total operating revenues were
from the sale of natural gas. The Company purchases gas supply from more than 20
domestic and Canadian suppliers and transports natural gas supply through five
pipelines. Gas agreements provide for firm deliverable pipeline capacity of
approximately 98,900 million british thermal units ("MMBTU") per day. To
supplement firm gas supplies, the Company owns six propane-air plants and has
contracts for underground natural gas storage services. Over the last five years
the Company has expanded its gas distribution operations to serve 29 new
communities in South Dakota.
The Company's business strategy is summarized by three primary objectives:
- To enhance the Company's competitive position in its energy distribution
businesses;
- To expand energy sales and markets with value-added services for
customers; and
- To provide earnings and dividend growth and increased shareholder value
through its energy distribution businesses and investment and acquisition
activities.
By enhancing the competitive position of its core electric and gas distribution
businesses and expanding its energy sales and markets, the Company believes it
will position itself to be successful in the increasingly competitive electric
and gas distribution businesses anticipated over the next several years. To
supplement growth strategies in its electric and natural gas businesses, the
Company also plans to seek new investment and acquisition opportunities that
have demonstrable growth potential. The primary focus of these investment and
acquisition activities is targeted in energy distribution businesses. The
Company also plans to pursue opportunities in non-energy businesses that
complement its existing operations and provide the capability to enhance
shareholder value.
S-4
<PAGE>
In May 1995, the Company contracted to acquire Synergy, a retail propane
distributor serving over 200,000 customers from 152 locations in 23 states in
the eastern and south central regions of the U.S. See "Pending Acquisition of
Synergy Group Incorporated" in the accompanying Prospectus. In accordance with
its strategic plan, the Company believes that the Synergy propane distribution
operations are complementary to the Company's electric and natural gas
businesses. Propane is the nation's fourth largest energy source after
electricity, natural gas and fuel oil. The acquisition price to be paid for
Synergy is $137.5 million cash (subject to certain adjustments) and certain
securities of the Company's acquisition subsidiary. The Company has entered into
an agreement with a third party for the sale of certain Synergy properties which
will reduce the cash portion of the acquisition price to approximately $100
million. The Company has executed a management agreement with Empire Gas
Corporation ("Empire Gas") for the joint management of the properties after the
acquisition. Empire Gas is the nation's eleventh largest retail propane
distributor. Subsequent to the acquisition and expected third party sale, the
Company's total assets will consist of approximately 65% electric and gas
distribution, 25% propane distribution and 10% marketable securities and other
diversified investments.
The Company's principal executive offices are located at 33 Third Street
S.E., Huron, South Dakota 57350. The Company's telephone number is (605)
352-8411.
S-5
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS)
The financial information presented below should be read in conjunction with
the Company's historical financial statements and the notes thereto which are
incorporated by reference herein and the pro forma financial statements and the
notes thereto included in the accompanying Prospectus. The pro forma financial
information contained in the right column, reflecting the pending acquisition of
Synergy and related matters, was prepared solely to comply with Regulation S-X
of the Securities and Exchange Commission. The pro forma financial information
is based on the assumptions and adjustments set forth under "Northwestern Public
Service Company and Synergy Group Incorporated Pro Forma Financial Information"
in the accompanying Prospectus.
<TABLE>
<CAPTION>
PRO FORMA (1)
-------------------------
THREE THREE
YEAR ENDED DECEMBER 31, MONTHS YEAR ENDED MONTHS
------------------------------------- ENDED MARCH DECEMBER 31, ENDED MARCH
1992 1993 1994 31, 1995 1994 31, 1995(2)
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.......................... $ 119,197 $ 153,257 $ 157,266 $ 50,754 $ 256,634 $ 82,612
Operating income.................. 24,809 27,246 30,368 12,882 37,985 20,088
Net income........................ 13,721 15,191 15,440 7,103 17,463 13,840
Net income available for common
stock............................ 13,578 15,070 15,320 7,073 15,300 13,299
Earnings per share................ 1.77 1.96 2.00 0.92 1.74 1.51
Dividends paid per common share... 1.59 1.63 1.67 0.425 1.67 0.425
Weighted average shares
outstanding...................... 7,677 7,677 7,677 7,677 8,805 8,805
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1995
--------------------------------------------------
ACTUAL PRO FORMA
----------- -----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets.......................................................... $ 363,432 $ 487,435
----------- -----------
----------- -----------
Capitalization Summary
Long-term debt (including current maturities)................. $ 129,888 51.6% $ 181,592 50.7%
Company-Obligated Mandatory Redeemable Preferred Securities of
Subsidiary Trust (3)......................................... -- -- 24,212 6.8
Cumulative preferred stock (including portion to be redeemed
within one year)............................................. 2,640 1.1 2,640 0.7
Common Stock Equity
Common stock.................................................. 26,870 -- 31,179 --
Additional paid-in capital.................................. 29,923 -- 56,398 --
Retained earnings........................................... 59,183 -- 59,183 --
Unrealized gain on investments, net......................... 3,181 -- 3,181 --
----------- -----------
$ 119,157 47.3 $ 149,941 41.8
----------- ----- ----------- -----
Total....................................................... $ 251,685 100.0% $ 358,385 100.0%
----------- ----- ----------- -----
----------- ----- ----------- -----
<FN>
- ------------------------
(1) The pro forma financial information does not purport to present the
financial position or results of operations of the Company had the
acquisition of Synergy actually been completed as of the dates indicated.
In addition, the pro forma financial information is not necessarily
indicative of future results of operations.
(2) The results of operations of Synergy for the three months ended March 31,
1995 are not indicative of a full year's results of operations.
(3) As described herein, all of the assets of NWPS Capital, the subsidiary
trust, will be approximately $33.5 million of Subordinated Debt Securities
of the Company which will bear interest at the rate of 8 1/8% per annum,
assuming the issuance of 1.3 million Preferred Securities. Pro Forma
amounts shown in the table reflect the portion of the estimated net
proceeds of the offering of the Preferred Securities assumed for purposes
of preparing the Pro Forma Financial Information to be used to fund the
acquisition of Synergy.
</TABLE>
S-6
<PAGE>
The following information concerning the Company, NWPS Capital, the
Preferred Securities, the Guarantee and the Subordinated Debt Securities
supplements, and should be read in conjunction with, the information contained
in the accompanying Prospectus. Capitalized terms used in this Prospectus
Supplement have the same meanings as in the accompanying Prospectus.
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.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND SUBORDINATED DEBT
SECURITIES
The Company's obligations 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 by the Company. The
obligations of the Company under the Subordinated Debt Securities are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of the Company and pari passu with obligations to or rights of the
Company's other general unsecured creditors. As of March 31, 1995, Senior
Indebtedness aggregated approximately $124 million. There are no terms in the
Preferred Securities, the Subordinated Debt Securities or the Guarantee that
limit the Company's ability to incur additional indebtedness, including
indebtedness that ranks senior to the Subordinated Debt Securities and the
Guarantee. See "Description of the Guarantees -- Status of the Guarantees" and
"Description of the Subordinated Debt Securities -- Subordination" in the
accompanying Prospectus, and "Description of the Subordinated Debt Securities --
Subordination" herein.
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). Wilmington Trust Company
will act as indenture trustee under the Guarantee for the purposes of compliance
with the Trust Indenture Act (the "Guarantee Trustee"). The Guarantee Trustee
will hold the Guarantee for the benefit of the holders of the Preferred
Securities.
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accrued and unpaid distributions that are required to be paid
on the Preferred Securities, to the extent the Company has made a payment of
interest or principal on the Subordinated Debt Securities, (ii) the Redemption
Price, including all accrued and unpaid distributions with respect to Preferred
Securities called for redemption by NWPS Capital, to the extent the Company has
made a payment of interest or principal on the Subordinated Debt Securities, and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
NWPS Capital (other than in connection with the distribution of Subordinated
Debt Securities to the holders of Preferred Securities or redemption of all the
Preferred Securities upon the maturity or redemption of the Subordinated Debt
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 NWPS Capital has funds legally available therefor and (b)
the amount of assets of NWPS Capital remaining available for distribution to
holders of the Preferred Securities in liquidation of NWPS Capital. 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. If the Guarantee
Trustee fails to enforce the Guarantee, any holder of Preferred Securities may,
after such holder's written request to the Guarantee Trustee to enforce the
Guarantee, institute a legal proceeding directly against the Company to enforce
the Guarantee Trustee's rights under the Guarantee without first instituting a
legal proceeding against NWPS Capital, the Guarantee Trustee or any other person
or entity. If the Company were to default on its obligation to pay amounts
payable on the Subordinated Debt Securities, NWPS Capital would lack available
funds for the payment of distributions or amounts payable on
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redemption of the Preferred Securities or otherwise, and, in such event, holders
of the Preferred Securities would not be able to rely upon the Guarantee for
payment of such amounts. Instead, holders of the Preferred Securities would be
required to rely on the enforcement by the Property Trustee of its rights as
registered holder of the Subordinated Debt Securities against the Company
pursuant to the terms of the Subordinated Debt Securities and may also vote to
appoint a Special Regular Trustee who shall have the same rights, powers and
privileges as the Regular Trustees. See "Description of the Guarantees" and
"Description of the 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 Subordinated Debt Securities
Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If (i) NWPS Capital fails to pay distributions in full on the Preferred
Securities for six consecutive quarterly distribution periods or (ii) a
Declaration Event of Default (as defined herein) occurs and is continuing, then
the holders of Preferred Securities would be entitled, by majority vote, to
appoint a Special Regular Trustee, who shall have the same rights, powers and
privileges as the other Regular Trustees. In addition, the holders of a majority
in aggregate liquidation amount of the Preferred Securities will have the right
to: (i) direct the time, method, and place of conducting any proceeding for any
remedy available to the Property Trustee or to direct the exercise of any trust
or power conferred upon the Property Trustee under the Declaration; (ii) waive
any past default; or (iii) exercise any right to rescind or annul a declaration
that the principal of all the Subordinated Debt Securities shall be due and
payable; provided, however, that where a consent under the Indenture requires
the consent of all holders of the Subordinated Debt Securities affected thereby,
the Property Trustee may only give such consent at the direction of all holders
of the Preferred Securities. If the Property Trustee fails to enforce its rights
under the Subordinated Debt Securities, to the fullest extent permitted by law,
a holder of Preferred Securities may, after such holder's written request to the
Property Trustee to enforce such rights, institute a legal proceeding directly
against the Company to enforce the Property Trustee's rights under the
Subordinated Debt Securities without first instituting any legal proceeding
against the Property Trustee or any other person or entity.
The Company has the right under the Indenture (as such term is defined in
"Description of Subordinated Debt Securities" herein) to defer payments of
interest on the Subordinated Debt Securities for a period not exceeding 20
consecutive quarters (each, an "Extension Period"). Appointment of a Special
Regular Trustee is the only right of the holders of the Preferred Securities if
NWPS Capital fails to pay distributions in full on the Preferred Securities for
six consecutive quarters until expiration of the Extension Period. The Company's
right to defer payments of interest on the Subordinated Debt Securities is not
affected by the right of the holders of the Preferred Securities to appoint a
Special Regular Trustee. Upon termination of any Extension Period and the
payment of all amounts then due, the Company may commence a new Extension
Period, subject to the requirements described under "Option to Extend Interest
Payment Period" below.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture, to defer payments of interest
on the Subordinated Debt Securities by extending the interest payment period at
any time, and from time to time, on the Subordinated Debt Securities. As a
consequence of such an extension, quarterly distributions on the Preferred
Securities would be deferred (but despite such deferral would continue to accrue
with interest thereon compounded quarterly) by NWPS Capital during any such
extended interest payment period. Such right to extend the interest payment
period for the Subordinated Debt Securities is limited to a period not exceeding
an Extension Period. In the event that the Company exercises this right to defer
interest payments, then during such Extension Period (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 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 issued by the Company that rank pari passu with or junior to the
Subordinated Debt
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Securities; provided, however, that restriction (a) above does not apply to any
stock dividends paid by the Company where the dividend stock is the same stock
as that on which the dividend is being paid. 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. 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 Subordinated Debt Securities -- Option to Extend Interest Payment
Period."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities will
continue to accrue interest income (as original issue discount) in respect of
the deferred interest allocable to its Preferred Securities for United States
federal income tax purposes, which will be allocated but not distributed to
holders of record of Preferred Securities. As a result, each such holder of
Preferred Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash from
NWPS Capital related to such income if such holder disposes of its Preferred
Securities prior to the record date for the date on which distributions of such
amounts are made. The Company has no current intention of exercising its right
to defer payments of interest by extending the interest payment period on the
Subordinated Debt Securities. However, should the Company determine to exercise
such right in the future, the market price of the Preferred Securities is likely
to be affected. A holder that disposes of its Preferred Securities during an
Extension Period, therefore, may not receive the same return on its investment
as a holder that continues to hold its Preferred Securities. In addition, as a
result of the Company's right to defer interest payments, the market price of
the Preferred Securities (which represent an undivided beneficial interest in
the Subordinated Debt Securities) may be more volatile than other securities on
which original issue discount accrues but with respect to which there is no
right to defer interest payments. See "United States Federal Income Taxation --
Original Issue Discount."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event (as defined herein), NWPS Capital
shall be dissolved, except in the limited circumstance described below, with the
result that the Subordinated Debt Securities will be distributed to the holders
of the Trust Securities in connection with the liquidation of NWPS Capital. In
certain circumstances, the Company shall have the right to redeem the
Subordinated Debt Securities, in whole or in part, in lieu of a distribution of
the Subordinated Debt Securities by NWPS Capital, in which event NWPS Capital
will redeem the Trust Securities on a pro rata basis to the same extent as the
Subordinated Debt Securities 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
Subordinated Debt Securities upon the dissolution of NWPS Capital would not be a
taxable event to holders of the Preferred Securities. Upon occurrence of a Tax
Event (as defined herein), however, a dissolution of NWPS Capital 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
Subordinated Debt Securities or Cash Upon Liquidation of NWPS Capital."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debt Securities that may be distributed in
exchange for Preferred Securities if a dissolution or liquidation of NWPS
Capital 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 Subordinated Debt Securities that a holder of Preferred
Securities may receive on dissolution and liquidation of NWPS Capital, may trade
at a discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Subordinated Debt Securities upon the occurrence of a Special Event, prospective
purchasers of Preferred Securities are
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also making an investment decision with regard to the Subordinated Debt
Securities and should carefully review all the information regarding the
Subordinated Debt Securities contained herein and in the accompanying
Prospectus. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution" and "Description of the Subordinated Debt Securities
- -- General."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and, except
for the rights of holders of Preferred Securities to appoint a Special Regular
Trustee upon the occurrence of certain events described herein, will not be
entitled to vote to appoint, remove or replace, or to increase or decrease the
number of, NWPS Trustees, which voting rights are vested exclusively in the
holder of the Common Securities.
TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debt Securities. A holder 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 Subordinated Debt Securities through
the date of disposition in income as ordinary income (i.e., OID), and to add
such amount to his adjusted tax basis in his pro rata share of the underlying
Subordinated Debt Securities deemed disposed of. To the extent the selling price
is less than the holder's adjusted tax basis (which will include, in the form of
OID, all accrued but unpaid interest), a holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes. See
"United States Federal Income Taxation -- Original Issue Discount" and "Sales of
Preferred Securities."
NWPS CAPITAL FINANCING I
NWPS Capital is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, dated as of June 19, 1995, executed by
the Company, as sponsor (the "Sponsor"), and the trustees of NWPS Capital (the
"NWPS Trustees") and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware on June 19, 1995. The 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. 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 NWPS Capital. NWPS
Capital 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 Subordinated Debt
Securities and (iii) engaging in only those other activities necessary or
incidental thereto.
Pursuant to the Declaration, the number of NWPS Trustees will initially be
three. Two of the NWPS 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 maintains its principal place of
business in the State of Delaware and is unaffiliated with the Company, which
trustee will serve as property trustee under the Declaration and as indenture
trustee for the purposes of the Trust Indenture Act (the "Property Trustee").
The Property Trustee will be the only trustee of NWPS Capital who will be a
trustee for purposes of the Trust Indenture Act and is the only entity that will
perform the functions of a trustee under such Act. Initially, Wilmington Trust
Company, a Delaware banking corporation, will be the Property Trustee unless
removed or replaced by the holder of the Common Securities. Wilmington Trust
Company will also act as indenture trustee under the Guarantee (the "Guarantee
Trustee"). See "Description of the Guarantees" in the accompanying
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Prospectus. In certain circumstances, the holders of a majority in aggregate
liquidation amount of the Preferred Securities will be entitled to appoint one
Regular Trustee (a "Special Regular Trustee"), who need not be an officer or
employee of or otherwise affiliated with the Company. See "Description of the
Preferred Securities -- Voting Rights."
The Property Trustee will hold title to the Subordinated Debt Securities for
the benefit of the holders of the Trust Securities, and the Property Trustee
will have the power to exercise all rights, powers, and privileges under the
Indenture (as defined herein) as the holder of the Subordinated Debt Securities.
In addition, the Property Trustee will maintain exclusive control of a
segregated non-interest bearing bank account (the "Property Account") to hold
all payments made in respect of the Subordinated Debt Securities for the benefit
of the holders of the Trust Securities. The Property Trustee will make payments
of distributions and payments on liquidation, redemption and otherwise to the
holders of the Trust Securities out of funds from the Property Account. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Securities. Subject to the right of the holders of the Preferred
Securities to appoint a Special Regular Trustee, the Company, as the direct or
indirect holder of all the Common Securities, will have the right to appoint,
remove or replace any NWPS Trustee and to increase or decrease the number of
NWPS Trustees; provided that, (i) the number of NWPS Trustees shall be at least
three and (ii) a majority shall be Regular Trustees. The Company will pay all
fees and expenses related to NWPS Capital and the offering of the Trust
Securities. See "Description of the Subordinated Debt Securities --
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 "Business Trust Act") and the
Trust Indenture Act. See "Description of the Preferred Securities."
USE OF PROCEEDS
The net proceeds from the sale of up to 1,495,000 Preferred Securities will
be applied to fund the acquisition of Synergy, including certain transaction
expenses. Any additional net proceeds from the sale of the Preferred Securities
will be applied to repay short-term debt of the Company. See "Use of Proceeds"
in the accompanying Prospectus.
ACCOUNTING TREATMENT
The financial statements of NWPS Capital will be reflected in the Company's
consolidated financial statements with the Preferred Securities shown as
Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Trust. All of the assets of NWPS Capital will be approximately $33.5 million of
Subordinated Debt Securities of the Company which will bear interest at a rate
of 8 1/8% per annum, assuming the issuance of 1.3 million Preferred Securities.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, the Wilmington Trust Company, will act as
the indenture trustee for purposes of compliance with the provisions of the
Trust Indenture Act. The terms of the Preferred Securities will include those
stated in the Declaration, the Business Trust Act and those made part of the
Declaration by the Trust Indenture Act. The following summary of the principal
terms and provisions of the Preferred Securities does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the
Declaration, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part, the Business Trust Act
and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of NWPS
Capital the Trust Securities, which represent undivided beneficial interests in
the assets of NWPS Capital. All of the
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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 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 NWPS
Capital of any securities other than the Trust Securities or the incurrence of
any indebtedness by NWPS Capital. Pursuant to the Declaration, the Property
Trustee will own the Subordinated Debt Securities purchased by NWPS Capital for
the benefit of the holders of the Trust Securities. The payment of distributions
out of money held by NWPS Capital, and payments upon redemption of the Preferred
Securities or liquidation of NWPS Capital, are guaranteed by the Company to the
extent described under "Description of the 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 NWPS Capital 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 appoint a Special
Regular Trustee and to direct the Property Trustee to enforce the Property
Trustee's rights under the Subordinated Debt Securities. See "Description of the
Preferred Securities -- Voting Rights."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 8 1/8% 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 8 1/8% 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 August 8, 1995, the date of initial issuance thereof, and will be payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing September 30, 1995, when, as and if available and determined to
be so payable by the Property Trustee, except as otherwise described below.
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debt Securities by extending the interest payment period
from time to time on the Subordinated Debt Securities, which right, if
exercised, would defer quarterly distributions on the Preferred Securities (but
such distributions would continue to accrue with interest since interest would
continue to accrue on the Subordinated Debt Securities) during any such
Extension Period. Such right to extend the interest payment period for the
Subordinated Debt Securities is limited to a period not exceeding 20 consecutive
quarters. In the event that the Company exercises this right, then during such
Extension Period (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 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 issued by the Company that
rank pari passu with or junior to such Subordinated Debt Securities; provided,
however, that, the foregoing restriction (a) does not apply to any stock
dividends paid by the Company where the dividend stock is the same stock as that
on which the dividend is being paid. 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 of the Subordinated Debt Securities. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company may
select a new Extension Period, subject to the above requirements. See
"Description of the Subordinated Debt Securities -- Interest" and "-- Option to
Extend Interest Payment Period." If distributions are
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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 NWPS Capital on the record date next following the termination of
such deferral period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that NWPS Capital has funds legally available for the payment of
such distributions in the Property Account. NWPS Capital's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from the Company on the Subordinated Debt Securities. See
"Description of the Subordinated Debt Securities." The payment of distributions
out of moneys held by NWPS Capital is guaranteed by the Company to the extent
set forth under "Description of the 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 NWPS Capital on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day prior to the relevant payment dates. Such
distributions will be paid through the Property Trustee who will hold amounts
received in respect of the Subordinated Debt Securities 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 "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 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 payment date. A "Business Day" shall mean any day other than Saturday,
Sunday or any other day on which banking institutions in the City of New York
(in the state of New York) are permitted or required by any applicable law to
close.
MANDATORY REDEMPTION
The Subordinated Debt Securities will mature on September 30, 2025, unless
the maturity date is extended at the option of the Company (provided certain
conditions are met), and may be redeemed, in whole or in part, at any time on or
after September 30, 2000, or at any time in certain circumstances upon the
occurrence of a Tax Event. Upon the repayment of the Subordinated Debt
Securities, 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 Subordinated Debt Securities 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. See "Description of the
Subordinated Debt Securities -- 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 "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 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, (b) any amendment to or change in an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after the date of the issuance of the Preferred
Securities), (c) any
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interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position, or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated or effective, or
which interpretation or pronouncement is issued or announced, or which action is
taken, in each case on or after the date of the issuance of the Preferred
Securities, there is more than an insubstantial risk that (i) NWPS Capital is,
or will be within 90 days after the date thereof, subject to United States
federal income tax with respect to income accrued or received on the
Subordinated Debt Securities, (ii) interest payable to NWPS Capital on the
Subordinated Debt Securities is not, or will not be within 90 days after the
date thereof, in whole or in part, deductible by the Company for United States
federal income tax purposes or (iii) NWPS Capital is or will be subject to more
than a de minimis amount of other taxes, duties or other governmental charges.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940, as amended (the "1940 Act"),
that as a result of the occurrence of a change in law or regulation by any
legislative body, court, governmental agency or regulatory authority (a "Change
in 1940 Act Law"), the Trust is or will be considered an "investment company"
which is required to be registered under the 1940 Act, which Change in 1940 Act
Law becomes effective on or after the date of the issuance of the Preferred
Securities. In case of any uncertainty regarding an Investment Company Event,
the good faith determination of the Regular Trustees, based on the advice of
counsel, shall be conclusive.
If, at any time, a Tax Event or an Investment Company Event (each, a
"Special Event") shall occur and be continuing, NWPS Capital shall, except in
the limited circumstances described below, be dissolved with the result that,
after satisfaction of liabilities to creditors of the Trust, Subordinated Debt
Securities with an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the distribution rate
of, and accrued and unpaid interest equal to accrued and unpaid distributions
on, the Trust Securities, would be distributed to the holders of the Trust
Securities in liquidation of such holders' interests in NWPS Capital 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, such
dissolution and distribution shall be conditioned on 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 Subordinated Debt Securities; and provided, further, that, if at
the time there is available to NWPS Capital the opportunity to eliminate, within
such 90-day period, the Special Event by taking some ministerial action, such as
filing a form or making an election or pursuing some other reasonable measure
that will have no adverse effect on NWPS Capital, the Company or the holders of
the Trust Securities, NWPS Capital will pursue such measure in lieu of
dissolution. Furthermore, if in the case of the occurrence of a Tax Event, 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 Subordinated Debt Securities for
United States federal income tax purposes even if the Subordinated Debt
Securities were distributed to the holders of Trust Securities in liquidation of
such holders' interests in NWPS Capital 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 NWPS Capital, the Company shall have the right, upon
not less than 30 nor more than 60 days notice, to redeem the Subordinated Debt
Securities, in whole or in part, for cash within 90 days following the
occurrence of such Tax Event, and, following such redemption, Trust Securities
with an aggregate liquidation amount equal to the aggregate principal amount of
the Subordinated Debt Securities so redeemed shall be redeemed by NWPS Capital
at the Redemption Price on a pro rata basis; provided, however, that, if at the
time there is available to the Company or NWPS Capital the opportunity to
eliminate, within such 90-day
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period, the Tax Event by taking some ministerial action, such as filing a form
or making an election or pursuing some other similar reasonable measure which
has no adverse effect on NWPS Capital, the Company or the holders of the Trust
Securities, the Company or NWPS Capital will pursue such measure in lieu of
redemption.
If the Subordinated Debt Securities are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to cause the
Subordinated Debt Securities to be listed on the New York Stock Exchange or on
such other exchange as the Preferred Securities are then listed.
After the date for any distribution of Subordinated Debt Securities upon
dissolution of NWPS Capital, (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 Subordinated Debt Securities to be delivered
upon such distribution, and (iii) any certificates representing Preferred
Securities not held by the Depositary or its nominee will be deemed to represent
Subordinated Debt Securities having an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on such Preferred Securities until such certificates are
presented to the Company or its agent for transfer or reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Subordinated Debt Securities that may be distributed in
exchange for the Preferred Securities if a dissolution and liquidation of NWPS
Capital 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 Subordinated Debt Securities that an investor may receive if a
dissolution and liquidation of NWPS Capital were to occur, may trade at a
discount to the price that the investor paid to purchase the Preferred
Securities offered hereby.
REDEMPTION PROCEDURES
NWPS Capital 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 NWPS Capital 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, and if the Company has paid to the Property
Trustee a sufficient amount of cash in connection with the related redemption or
maturity of the Subordinated Debt Securities, then NWPS Capital will irrevocably
deposit with the Depositary funds sufficient to pay the applicable Redemption
Price and will give the Depositary irrevocable instructions and authority to pay
the Redemption Price to the holders of the Preferred Securities. See "Book-Entry
Only Issuance -- The Depository Trust Company." If notice of redemption shall
have been given and funds deposited as required, then, immediately prior to the
close of business on the date of such deposit, distributions will cease to
accrue and all rights of holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price but without interest on such
Redemption Price. In the event that any date fixed for redemption of Preferred
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day 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 NWPS Capital, 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.
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In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed pro rata as described
below under "Book-Entry Only Issuance -- The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of NWPS Capital (each a "Liquidation"), the then
holders of the Preferred Securities will be entitled to receive out of the
assets of NWPS Capital, after satisfaction of liabilities to creditors of the
Trust, distributions in an amount equal to the aggregate of the stated
liquidation amount of $25 per Preferred Security plus accrued and unpaid
distributions thereon to the date of payment (the "Liquidation Distribution"),
unless, in connection with such Liquidation, Subordinated Debt Securities 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 Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because NWPS Capital has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by
NWPS Capital 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, NWPS Capital shall terminate (i) on August 3,
2050, the expiration of the term of NWPS Capital, (ii) upon the bankruptcy of
the Company or the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the holder of the
Common Securities or the Company, the filing of a certificate of cancellation
with respect to NWPS Capital, or the revocation of the charter of the holder of
the Common Securities or the Company and the expiration of 90 days after the
date of revocation without a reinstatement thereof, (iv) upon the distribution
of Subordinated Debt Securities upon the occurrence of a Special Event, (v) upon
the entry of a decree of a judicial dissolution of the holder of the Common
Securities, the Company or NWPS Capital, or (vi) upon the redemption of all the
Trust Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"), provided that, pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Preferred Securities have been so cured, waived, or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the holders of the Preferred Securities and only the holders of the
Preferred Securities will have the right to direct the Property Trustee with
respect to certain matters under the Declaration, and therefore the Indenture.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Subordinated Debt Securities will have the right under
the Indenture to declare the principal of and interest on the Subordinated Debt
Securities to be immediately due and payable. The Company and NWPS Capital are
each required to file annually with the Property Trustee an officer's
certificate as to its compliance with all conditions and covenants under the
Declaration.
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VOTING RIGHTS
Except as described herein, under the Business Trust Act, the Trust
Indenture Act and under "Description of the Guarantees -- Amendments and
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.
If (i) NWPS Capital fails to pay distributions in full on the Preferred
Securities for six (6) consecutive quarterly distribution periods or (ii) a
Declaration Event of Default occurs and is continuing (each an "Appointment
Event"), then the holders of the Preferred Securities, acting as a single class,
will be entitled by a vote of a majority in liquidation amount of the Preferred
Securities to appoint a Special Regular Trustee. For purposes of determining
whether NWPS Capital has failed to pay distributions in full for six (6)
consecutive quarterly distribution periods, distributions shall be deemed to
remain in arrears, notwithstanding any payments in respect thereof, until full
cumulative distributions have been or contemporaneously are paid with respect to
all quarterly distribution periods terminating on or prior to the date of
payment of such cumulative distributions. Any holder of Preferred Securities
(other than the Company or any of its affiliates) shall be entitled to nominate
any person to be appointed as Special Regular Trustee. Not later than 30 days
after such right to appoint a Special Regular Trustee arises, the Regular
Trustees shall convene a meeting of the holders of Preferred Securities for the
purpose of appointing a Special Regular Trustee. If the Regular Trustees fail to
convene such meeting within such 30-day period, the holders of not less than 10%
of the aggregate stated liquidation amount of the Preferred Securities will be
entitled to convene such meeting. The provisions of the Declaration relating to
the convening and conduct of the meetings of the holders will apply with respect
to any such meeting. Any Special Regular Trustee so appointed shall cease to be
a Special Regular Trustee if the Appointment Event pursuant to which the Special
Regular Trustee was appointed and all other Appointment Events cease to be
continuing. Notwithstanding the appointment of any such Special Regular Trustee,
the Company shall retain all rights under the Indenture, including the right to
defer payments of interest by extending the interest payment period as provided
under "Description of the Subordinated Debt Securities -- Option to Extend
Interest Payment Period." If such an extension occurs, there will be no
Indenture Event of Default and, consequently, no Declaration Event of Default
for failure to make any scheduled interest payment during the Extension Period
on the date originally scheduled.
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debt Securities for an Extension Period (a period not
exceeding 20 consecutive quarters). Appointment of a Special Regular Trustee is
the only right of the holders of the Preferred Securities if NWPS Capital fails
to pay distributions in full on the Preferred Securities for six consecutive
quarters until expiration of the Extension Period. The Company's right to defer
payments of interest on the Subordinated Debt Securities is not affected by the
right of the holders of the Preferred Securities to appoint a Special Regular
Trustee. Upon termination of any Extension Period and the payment of all amounts
then due, the Company may commence a new Extension Period, subject to the
requirements described under "Description of The Subordinated Debt Securities --
Option to Extend Interest Payment Period."
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to (i) direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee, or direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration including the right to direct the Property Trustee, as holder of the
Subordinated Debt Securities, to exercise the remedies available under the
Indenture with respect to the Subordinated Debt Securities, (ii) waive any past
Indenture Event of Default that is waivable under Section 513 of the Base
Indenture (as defined herein), or (iii) exercise any right to rescind or annul a
declaration that the principal of all the Subordinated Debt Securities shall be
due and payable; provided, however, that, where a consent under the Indenture
would require the consent of all holders of the Subordinated Debt Securities, no
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such consent shall be given by the Property Trustee without the prior direction
of all holders of the Preferred Securities. If the Property Trustee fails to
enforce its rights under the Subordinated Debt Securities, to the fullest extent
permitted by law, a record holder of Preferred Securities may, after such
holder's written request to the Property Trustee to enforce such rights,
institute a legal proceeding directly against the Company to enforce the
Property Trustee's rights under the Subordinated Debt Securities without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. The Property Trustee shall notify all holders of the Preferred
Securities of any notice of default received from the Indenture Trustee with
respect to the Subordinated Debt Securities. Such notice shall state that such
Indenture Event of Default also constitutes a Declaration Event of Default.
Except with respect to directing the time, method and place of conducting a
proceeding for a remedy, the Property Trustee shall not take any of the actions
described in clauses (i), (ii) or (iii) above unless the Property Trustee has
obtained an opinion of tax counsel to the effect that, as a result of such
action, NWPS Capital will not fail to be classified as a grantor trust for
United States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debt Securities, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture or the Subordinated
Debt Securities, the Property 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 all holders of the
Subordinated Debt Securities, the Property Trustee may only give such consent at
the direction of all holders of the Trust Securities. The Property 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 Property Trustee has obtained
an opinion of tax counsel to the effect that for the purposes of United States
federal income tax NWPS Capital 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 NWPS Capital to
redeem and cancel Preferred Securities or distribute Subordinated Debt
Securities in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if 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.
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Except in the limited circumstances described above, in connection with the
appointment of a Special Regular Trustee, holders of the Preferred Securities
will have no rights to appoint or remove the NWPS 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 a majority of the
Regular Trustees (and in certain circumstances the Property Trustee), provided
that, if any proposed amendment provides for, or the Regular Trustees otherwise
propose to effect, (i) any action that would materially 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 NWPS Capital other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least 66 2/3% in liquidation amount of the Trust Securities affected thereby;
provided that, the rights of holders of Preferred Securities to appoint a
Special Regular Trustee shall not be amended without the consent of each holder
of Preferred Securities; provided further that, if any amendment or proposal
referred to in clause (i) above would materially 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 66 2/3% 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 NWPS Capital
to be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) affect the powers, rights, duties, obligations or
immunities of the Property Trustee or the Delaware Trustee (unless such
amendment is consented to by the Property Trustee or the Delaware Trustee, as
the case may be), or (iii) cause NWPS Capital to be deemed an "investment
company" which is required to be registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
NWPS Capital may not consolidate, amalgamate, merge 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. NWPS
Capital may, with the consent of a majority of the Regular Trustees and without
the consent of the holders of the Trust Securities, the Delaware Trustee or the
Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by
a trust organized as such under the laws of any State, provided that (i) such
successor entity either (x) expressly assumes all of the obligations of NWPS
Capital under the Trust Securities or (y) substitutes for the Preferred
Securities other securities (the "Successor Securities"), so long as the
Successor Securities rank the same as the Trust 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 Property Trustee as the holder of the Subordinated
Debt Securities, (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 or 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 or any Successor
Securities in any material respect under the documents governing the Trust
Securities or the Successor Securities (other than with respect to any dilution
of the holders' interest in the new entity), (vi) such successor entity has a
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purpose substantially identical to that of NWPS Capital, (vii) prior to such
merger, consolidation, amalgamation or replacement, the Company has received an
opinion of a nationally recognized independent counsel to NWPS Capital
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 or any Successor
Securities in any material respect under the documents governing the Trust
Securities or the Successor Securities (other than with respect to any dilution
of the holders' interest in the new entity), and (B) following such merger,
consolidation, amalgamation or replacement, neither NWPS Capital nor such
successor entity will be required to register as an investment company under the
1940 Act and (viii) the Company guarantees the obligations of such successor
entity under the Successor Securities at least to the extent provided by the
Guarantee and the Common Securities Guarantee. Notwithstanding the foregoing,
NWPS Capital 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 NWPS Capital or
the Successor Entity to be classified as other than a grantor trust for United
States federal income tax purposes.
There are no provisions which afford the holders of the Preferred Securities
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company. There are
also no provisions which require the repurchase of the Preferred Securities upon
a change in control of the Company.
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 or a custodian thereof.
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, Inc. (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
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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 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 NWPS Capital 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 NWPS Capital 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 NWPS Capital.
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, NWPS
Capital 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 NWPS Capital, 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
NWPS Capital. 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
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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 NWPS Capital believe to be
reliable, but neither the Company nor NWPS Capital takes responsibility for the
accuracy thereof.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities, undertakes to perform only such duties as are specifically
set forth in the Declaration and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her own
affairs.
Subject to such provisions, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The holders of Preferred Securities will not be required to offer such
indemnity in the event such holders, by exercising their voting rights, direct
the Property Trustee to take any action following a Declaration Event of
Default.
PAYING AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the following provisions would apply:
The Property Trustee will act as paying agent, and may designate an
additional or substitute paying agent at any time.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of NWPS Capital, but upon payment (with the giving of
such indemnity as NWPS Capital or the Company may require) in respect of any tax
or other government charges that may be imposed in relation to it.
NWPS Capital 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 NWPS Capital in
such a way so that NWPS Capital will not be (i) required to register as an
"investment company" under the 1940 Act or (ii) characterized as other than a
grantor trust for United States federal income tax purposes. The Company is
authorized and directed to conduct its affairs so that the Subordinated Debt
Securities 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 NWPS Capital or the certificate of
incorporation of the Company, that each of the Company and the Regular Trustees
determines in its discretion to be necessary or desirable to achieve such end,
as long as such action does not adversely affect the interests of the holders of
the Preferred Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
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DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Subordinated
Debt Securities in which NWPS Capital 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 Subordinated Debt Securities set
forth in the accompanying Prospectus under the caption "Description of the
Subordinated Debt Securities." The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the description in the accompanying Prospectus and the Subordinated Debt
Securities Indenture, dated as of August 1, 1995 (the "Base Indenture") between
the Company and The Chase Manhattan Bank (N.A.), as Trustee (the "Indenture
Trustee"), as supplemented by a First Supplemental Indenture, dated as of August
1, 1995 (the Base Indenture, as so supplemented, is hereinafter referred to as
the "Indenture"), the forms of which are filed as Exhibits 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 NWPS Capital
following the occurrence of a Special Event, Subordinated Debt Securities may be
distributed to the holders of the Trust Securities in liquidation of NWPS
Capital. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution."
If the Subordinated Debt Securities are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the
Subordinated Debt Securities listed on the New York Stock Exchange or on such
other national securities exchange or similar organization on which the
Preferred Securities are then listed or quoted.
GENERAL
The Subordinated Debt Securities will be issued as unsecured debt under the
Indenture. The Subordinated Debt Securities will be limited in aggregate
principal amount to approximately $31 million, such amount being the sum of the
aggregate stated liquidation amount of the Preferred Securities and the capital
contributed by the Company in exchange for the Common Securities (the "Company
Payment").
The Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Subordinated Debt Securities will
mature and become due and payable, together with any accrued and unpaid interest
thereon including Compound Interest (as hereinafter defined) and Additional
Interest (as hereinafter defined), if any, on September 30, 2025 subject to the
election of the Company to extend the scheduled maturity date of the
Subordinated Debt Securities to a date not later than September 30, 2044 which
election is subject to the Company's satisfying certain conditions. See " --
Option to Extend Maturity."
If Subordinated Debt Securities are distributed to holders of Preferred
Securities in liquidation of such holders' interests in NWPS Capital, such
Subordinated Debt Securities will initially be issued as a Global Security. As
described herein, under certain limited circumstances, Subordinated Debt
Securities may be issued in certificated form in exchange for a Global Security
(as defined below). See "Book-Entry and Settlement" below. In the event that
Subordinated Debt Securities are issued in certificated form, such Subordinated
Debt Securities will be in denominations of $25 and integral multiples thereof
and may be transferred or exchanged at the offices described below. Payments on
Subordinated Debt Securities issued as a Global Security will be made to DTC, a
successor depositary or, in the event that no depositary is used, to a Paying
Agent for the Subordinated Debt Securities. In the event Subordinated Debt
Securities are issued in certificated form, principal and interest will be
payable, the transfer of the Subordinated Debt Securities will be registrable
and Subordinated Debt Securities will be exchangeable for Subordinated Debt
Securities of other denominations of a like aggregate principal amount at the
corporate trust office of the Indenture Trustee in Brooklyn, New York; provided
that, payment of interest may be made at the option of the Company by check
mailed to the address of the persons entitled thereto.
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SUBORDINATION
The Indenture provides that the Subordinated Debt Securities are
subordinated and junior in right of payment to all Senior Indebtedness of the
Company. No payment of principal (including redemption and sinking fund
payments), premium, if any, or interest on the Subordinated Debt Securities may
be made (i) if any Senior Indebtedness of the Company is not paid when due, (ii)
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 (iii) if the
maturity of any Senior Indebtedness of the Company has been accelerated because
of a default. Upon any distribution of assets of the Company to creditors upon
any dissolution, winding-up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all principal, premium, if any, and interest due or to become due on all Senior
Indebtedness of the Company must be paid in full before the holders of
Subordinated Debt Securities are entitled to receive or retain any payment. Upon
satisfaction of all claims of all Senior Indebtedness then outstanding, the
rights of the holders of the Subordinated Debt Securities will be subrogated to
the rights of the holders of Senior Indebtedness of the Company to receive
payments or distributions applicable to Senior Indebtedness until all amounts
owing on the Subordinated Debt Securities are paid in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor including,
without limitation, in the case of the Company, all obligations under its New
Mortgage and 1940 Indenture (each as defined in the accompanying Prospectus),
(ii) all capital lease obligations of such obligor, (iii) all obligations of
such obligor issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such obligor and all obligations of such obligor
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business), (iv) all obligations of such
obligor for the reimbursement on any letter of credit, banker's acceptance,
security purchase facility or similar credit transaction, (v) all obligations of
the type referred to in clauses (i) through (iv) above of other persons for the
payment of which such obligor is responsible or liable as obligor, guarantor or
otherwise, and (vi) all obligations of the type referred to in clauses (i)
through (v) above of other persons secured by any lien on any property or asset
of such obligor (whether or not such obligation is assumed by such obligor),
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
between or among such obligor or its affiliates, including all other debt
securities and guarantees in respect of those debt securities issued, to (a) any
other NWPS Trust (as defined in the accompanying Prospectus), or a trustee of
such trust, and (b) any other trust, or a trustee of such trust, partnership or
other entity affiliated with the Company that is a financing vehicle of the
Company (a "financing entity") in connection with the issuance by such financing
entity of Preferred Securities or other securities that rank pari passu with, or
junior to, the Preferred Securities. Such Senior Indebtedness shall continue to
be Senior Indebtedness and be entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term of
such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company. As of March 31, 1995, Senior Indebtedness of
the Company aggregated approximately $124 million.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Subordinated Debt Securities,
in whole or in part, from time to time, on or after September 30, 2000, or at
any time in certain circumstances upon the occurrence of a Tax Event as
described under "Description of the Preferred Securities -- Special Event
Redemption or Distribution," upon not less than 30 nor more than 60 days notice,
at a redemption price equal to 100% of the principal amount to be redeemed plus
any accrued and unpaid interest, including Additional Interest, if any, to the
redemption date. If a partial redemption of the
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Preferred Securities resulting from a partial redemption of the Subordinated
Debt Securities would result in the delisting of the Preferred Securities, the
Company may only redeem the Subordinated Debt Securities in whole.
INTEREST
Each Subordinated Debt Security shall bear interest at the rate of 8 1/8%
per annum (the "Coupon Rate") from the original date of issuance until the
principal becomes due and payable, and on any overdue principal and on any
overdue installment of interest at the Coupon Rate, compounded quarterly,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year (each, an "Interest Payment Date"), commencing September 30, 1995,
to the person in whose name such Subordinated Debt Security is registered, at
the close of business on the Business Day next preceding such Interest Payment
Date. In the event the Subordinated Debt Securities shall not continue to remain
in book-entry only form, the Company shall have the right to select record
dates, which shall be any date at least one Business Day prior to the Interest
Payment Date. It is anticipated that NWPS Capital will be the sole holder of the
Subordinated Debt Securities.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the
Subordinated Debt Securities is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
OPTION TO EXTEND MATURITY DATE
The maturity date of the Subordinated Debt Securities is September 30, 2025
(the "Scheduled Maturity Date"). The Company, however, may, before the Scheduled
Maturity Date, extend such maturity date no more than one time for up to an
additional 19 years from the Scheduled Maturity Date; provided that (a) the
Company is not in bankruptcy or otherwise insolvent, (b) the Company is not in
default on any Subordinated Debt Securities issued to a NWPS Trust or to any
trustee of such trust in connection with an issuance of Trust Securities by such
NWPS Trust, (c) the Company has made timely payments on the Subordinated Debt
Securities for the immediately preceding six quarters without deferrals, (d)
NWPS Capital is not in arrears on payments of distributions on the Preferred
Securities, (e) the Subordinated Debt Securities are rated Investment Grade by
any one of Standard & Poor's Rating Group, Moody's Investors Service, Inc.,
Fitch Investor Services, Duff & Phelps Credit Rating Company or any other
nationally recognized statistical rating organization, and (g) the final
maturity of such Subordinated Debt Securities is not later than the 49th
anniversary of the issuance of the Preferred Securities. Pursuant to the
Declaration, the Regular Trustees are required to give notice of the Company's
election to extend the Scheduled Maturity Date to the holders of the Preferred
Securities.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If (i) NWPS Capital fails to pay distributions in full on the Preferred
Securities for six consecutive quarterly distribution periods or (ii) a
Declaration Event of Default (as defined herein) occurs and is continuing, then
the holders of Preferred Securities would be entitled, by majority vote, to
appoint a Special Regular Trustee, who shall have the same rights, powers and
privileges as the other Regular Trustees. In addition, the holders of a majority
in aggregate liquidation amount of the Preferred Securities will have the right
to: (i) direct the time, method, and place of conducting any proceeding for any
remedy available to the Property Trustee or to direct the exercise of any trust
or power conferred upon the Property Trustee under the Declaration; (ii) waive
any past default; or (iii) exercise any right to rescind or annul a declaration
that the principal of all the Subordinated Debt Securities shall be due and
payable; provided, however, that where a consent under the Indenture requires
the consent of all
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holders of the Subordinated Debt Securities affected thereby, the Property
Trustee may only give such consent at the direction of all holders of the
Preferred Securities. If the Property Trustee fails to enforce its rights under
the Subordinated Debt Securities, to the fullest extent permitted by law, a
holder of Preferred Securities may, after such holder's written request to the
Property Trustee to enforce such rights, institute a legal proceeding directly
against the Company to enforce the Property Trustee's rights under the
Subordinated Debt Securities without first instituting any legal proceeding
against the Property Trustee or any other person or entity.
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debt Securities for an Extension Period (a period not
exceeding 20 consecutive quarters). Appointment of a Special Regular Trustee is
the only right of the holders of the Preferred Securities if NWPS Capital fails
to pay distributions in full on the Preferred Securities for six consecutive
quarters until expiration of the Extension Period. The Company's right to defer
payments of interest on the Subordinated Debt Securities is not affected by the
right of the holders of the Preferred Securities to appoint a Special Regular
Trustee. Upon termination of any Extension Period and the payment of all amounts
then due, the Company may commence a new Extension Period, subject to the
requirements described under "Option to Extend Interest Payment Period."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, during
the term of the Subordinated Debt Securities to defer payments of interest by
extending the interest payment period for a period not exceeding 20 consecutive
quarters, at the end of which Extension Period, the Company shall pay all
interest then accrued and unpaid (including any Additional Interest, as herein
defined) together with interest thereon compounded quarterly at the rate
specified for the Subordinated Debt Securities to the extent permitted by
applicable law ("Compound Interest"); provided that, during any such Extension
Period, (a) the Company shall not declare or pay any 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 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 issued by the Company that rank pari
passu with or junior to the Subordinated Debt Securities; provided, however,
that, the foregoing restriction (a) does not apply to any stock dividends paid
by the Company where the dividend stock is the same as that on which the
dividend is paid.
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. 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
Subordinated Debt Securities. If the Property Trustee shall be the sole holder
of the Subordinated Debt Securities, the Company shall give the Regular Trustees
and the Property Trustee notice of its selection of 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 Property Trustee shall not be the sole holder of the
Subordinated Debt Securities, the Company shall give the holders of the
Subordinated Debt Securities notice of its selection of such Extension Period
ten Business Days prior to the earlier of (i) the 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
Subordinated Debt Securities of the record or payment date of such related
interest payment.
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ADDITIONAL INTEREST
If at any time while the Property Trustee is the holder of the Subordinated
Debt Securities, NWPS Capital 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")
on the Subordinated Debt Securities such additional amounts as shall be required
so that the net amounts received and retained by NWPS Capital after paying any
such taxes, duties, assessments or other governmental charges will be not less
than the amounts NWPS Capital would have received had no such taxes, duties,
assessments or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Property Trustee, as the holder of the Subordinated Debt Securities, will have
the right to declare the principal of and the interest on the Subordinated Debt
Securities (including 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 Subordinated
Debt Securities. See "Description of the Subordinated Debt Securities -- Events
of Default" 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 Property Trustee to exercise its rights as the holder of the
Subordinated Debt Securities. See "Description of the Preferred Securities --
Declaration Events of Default" and "Voting Rights."
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of NWPS Capital
as a result of the occurrence of a Special Event, the Subordinated Debt
Securities will be issued in the form of one or more global certificates (each,
a "Global Security") registered in the name of the Depositary or its nominee.
Except under the limited circumstances described below, Subordinated Debt
Securities represented by the Global Security will not be exchangeable for, and
will not otherwise be issuable as, Subordinated Debt Securities in definitive
form. The Global Securities described above may not be transferred except by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary or to a successor depositary
or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated Debt
Securities in definitive form and will not be considered the holders (as defined
in the Indenture) thereof for any purpose under the Indenture, and no Global
Security representing Subordinated Debt Securities shall be exchangeable, except
for another Global Security of like denomination and tenor to be registered in
the name of the Depositary or its nominee or to a successor Depositary or its
nominee. Accordingly, each Beneficial Owner must rely on the procedures of the
Depositary or if such person is not a Participant, on the procedures of the
Participant through which such person owns its interest to exercise any rights
of a holder under the Indenture.
THE DEPOSITARY
If Subordinated Debt Securities are distributed to holders of Preferred
Securities in liquidation of such holders' interests in NWPS Capital, DTC will
act as securities depositary for the Subordinated Debt Securities. 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
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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
depository for the Global Securities.
None of the Company, NWPS Capital, the Indenture Trustee, any paying agent
and any other agent of the Company or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Subordinated Debt Securities 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 Subordinated Debt Securities
registered in the names of persons other than the depositary or its nominee only
if (i) the depositary notifies the Company that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed, (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 Subordinated Debt
Securities. Any Global Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for Subordinated Debt Securities registered in
such names as the depositary shall direct. It is expected that such instructions
will be based upon directions received by the depositary from its Participants
with respect to ownership of beneficial interests in such Global Security.
MISCELLANEOUS
The Indenture will provide that the Company will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Subordinated Debt
Securities, (ii) the organization, maintenance and dissolution of NWPS Capital,
(iii) the retention of the NWPS Trustees and (iv) the enforcement by the
Property Trustee of the rights of the holders of the Preferred Securities. The
payment of such fees and expenses will be fully and unconditionally guaranteed
by the Company.
EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of NWPS Capital is to
issue the Trust Securities evidencing undivided beneficial interests in the
assets of NWPS Capital, and to invest the proceeds from such issuance and sale
in the Subordinated Debt Securities.
As long as payments of interest and other payments are made when due on the
Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the following
factors: (i) the aggregate principal amount of Subordinated Debt Securities will
be equal to the sum of the aggregate stated liquidation amount of the Trust
Securities; (ii) the interest rate and the interest and other payment dates on
the Subordinated Debt Securities will match the distribution rate and
distribution and other payment dates for the Preferred Securities; (iii) the
Company shall pay all costs and expenses of the Trust to the extent not
satisfied out of the Trust's assets; and (iv) the Declaration further provides
that the NWPS Trustees shall not cause or permit NWPS Capital to, among other
things, engage in any activity that is not consistent with the purposes of NWPS
Capital.
Payments of distributions (to the extent funds therefor are legally
available) and other payments due on the Preferred Securities (to the extent
funds therefor are legally available) are guaranteed by the Company as and to
the extent set forth under "Description of the Guarantees" in the accompanying
Prospectus. If the Company does not make interest payments on the Subordinated
Debt Securities purchased by NWPS Capital, it is expected that NWPS Capital will
not have sufficient funds to pay
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distributions on the Preferred Securities. The Guarantee is a full and
unconditional guarantee from the time of its issuance but does not apply to any
payment of distributions unless and until NWPS Capital has sufficient funds
legally available for the payment of such distributions.
If the Company fails to make interest or other payments on the Subordinated
Debt Securities when due (taking account of any Extension Period), the
Declaration provides a mechanism whereby the holders of the Preferred
Securities, using the procedures described in "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company" and "--
Voting Rights," may (i) appoint a Special Regular Trustee and (ii) direct the
Property Trustee to enforce its rights under the Subordinated Debt Securities.
If the Property Trustee fails to enforce its rights under the Subordinated Debt
Securities, to the fullest extent permitted by law, a holder of Preferred
Securities may, after such holder's written request to the Property Trustee to
enforce such rights, institute a legal proceeding against the Company to enforce
the Property Trustee's rights under the Subordinated Debt Securities without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. 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. If
the Guarantee Trustee fails to enforce the Guarantee, any holder of Preferred
Securities may, after such holder's written request to the Guarantee Trustee to
enforce the Guarantee, institute a legal proceeding directly against the Company
to enforce the Guarantee Trustee's rights under the Guarantee without first
instituting a legal proceeding against NWPS Capital, the Guarantee Trustee, or
any other person.
The Company and NWPS Capital believe that the rights of the holders of the
Preferred Securities and the obligations of the Company under the Declaration,
the Guarantees, the Preferred Securities, the Common Securities, the Indenture,
the Supplemental Indenture and the Subordinated Debt Securities collectively
provide the substantial equivalent of a full and unconditional guarantee by the
Company of payments due on the Preferred Securities. See "Description of the
Guarantees -- General" in the accompanying Prospectus.
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. 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 whose functional currency is 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 THE SUBORDINATED DEBT SECURITIES
In connection with the issuance of the Subordinated Debt Securities, Schiff
Hardin & Waite, special tax counsel to the Company and NWPS Capital, will render
its opinion generally to the effect that, although not entirely free from doubt,
under then current law and assuming full compliance
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with the terms of the Indenture (and certain other documents), and based on
certain facts and assumptions contained in such opinion, the Subordinated Debt
Securities held by NWPS Capital will be classified for United States federal
income tax purposes as indebtedness of the Company.
CLASSIFICATION OF NWPS CAPITAL
In connection with the issuance of the Preferred Securities, Schiff Hardin &
Waite, special tax counsel to the Company and NWPS Capital, 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, NWPS Capital 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 will be considered the owner of an undivided interest in
the Subordinated Debt Securities, and each holder will be required to include in
its gross income any original issue discount ("OID") accrued with respect to its
allocable share of those Subordinated Debt Securities.
ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the Subordinated Debt
Securities, to defer payments of interest by extending interest payment periods
for up to 20 quarters, all payments in respect of the Subordinated Debt
Securities will be treated as "original issue discount." Holders of debt
instruments issued with OID must include that discount in income on an economic
accrual basis before the receipt of cash attributable to the interest,
regardless of their method of tax accounting. Generally, all of a holder's
taxable interest income with respect to the Subordinated Debt Securities will be
accounted for as OID, and actual distributions of stated interest will not be
separately reported as taxable income. The amount of OID that accrues in any
month will approximately equal the amount of the interest that accrues on the
Subordinated Debt Securities in that month at the stated interest rate. In the
event that the interest payment period is extended, holders will continue to
accrue OID approximately equal to the amount of the interest payment due at the
end of the Extension Period on an economic accrual basis over the length of the
extended interest period.
Corporate holders of Preferred Securities will not be entitled to a
dividends received deduction with respect to any income recognized with respect
to the Preferred Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Preferred Securities other than Initial Holders may be considered
to have acquired their undivided interests in the Subordinated Debt Securities
with market discount or acquisition premium as such phrases are defined for
United States federal income tax purposes. Such holders are advised to consult
their tax advisors as to the income tax consequences of the acquisition,
ownership and disposition of the Preferred Securities.
RECEIPT OF SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF NWPS CAPITAL
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Special Event Redemption or Distribution,"
Subordinated Debt Securities may be distributed to holders in exchange for the
Preferred Securities and in liquidation of NWPS Capital. Under current law, such
a distribution, 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 Subordinated Debt Securities equal to such holder's
aggregate tax basis in its Preferred Securities. A holder's holding period in
the Subordinated Debt Securities so received in liquidation of NWPS Capital
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
Subordinated Debt Securities may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Preferred
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Securities. Under current law, such a redemption 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 "United States Federal Income
Taxation -- 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. A holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price increased by OID previously includible in such holder's gross
income to the date of disposition and decreased by payments received on the
Preferred Securities. 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
Subordinated Debt Securities. A holder 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 Subordinated Debt Securities through
the date of disposition in income as ordinary income, and to add such amount to
his adjusted tax basis in his pro rata share of the underlying Subordinated Debt
Securities deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, in the form of OID, all accrued
but unpaid interest) a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership, or a non-resident fiduciary of a foreign estate or trust.
Under present United States federal income tax law: (i) payments by NWPS
Capital or any of its paying agents to any holder of a Preferred Security that
is a United States Alien Holder will not be subject to United States federal
withholding tax; provided that (a) the beneficial owner of the Preferred
Security does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote,
(b) the beneficial owner of the Preferred Security is not a controlled foreign
corporation that is related to the Company through stock ownership, and (c)
either (A) the beneficial owner of the Preferred Security certifies to NWPS
Capital or its agent, under penalties of perjury, that it is not a United States
holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Preferred Security in such capacity, certifies to
NWPS Capital or its agent, under penalties of perjury, that such statement has
been received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes NWPS Capital or its agent with
a copy thereof; and (ii) a United States Alien Holder of a Preferred Security
will generally not be subject to United States federal income or withholding tax
on any gain realized upon the sale or other disposition of a Preferred Security,
except that a United States Alien Holder will be subject to United States income
tax on any gain if such United States Alien Holder (a) is engaged in a trade or
business in the United States and such gain is effectively connected to the
conduct of such trade or business or (b) is an individual present in the United
States for 183 days or more during the taxable year, and certain other
conditions are met.
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.
S-31
<PAGE>
NWPS Capital will be obligated to report annually to Cede & Co., as holder
of record of the Preferred Securities, the OID related to the Subordinated Debt
Securities that accrued during the year. NWPS Capital currently intends to
report such information on Form 1099 prior to January 31 following each calendar
year. The Underwriters have indicated to NWPS Capital 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 NWPS
Capital. NWPS Capital, 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 Preferred Securities through the
Underwriters will receive Forms 1099 reflecting the income on their Preferred
Securities from such nominee holders rather than NWPS Capital.
BACKUP WITHHOLDING
Payments made in respect of, and proceeds from the sale of, the Preferred
Securities, or Subordinated Debentures distributed to Holders of 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.
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-32
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, each of the Underwriters named below, for whom
Morgan Stanley & Co. Incorporated, Dean Witter Reynolds Inc., NatWest Capital
Markets Limited, PaineWebber Incorporated and Piper Jaffray Inc. are acting as
representatives (the "Representatives") has severally agreed to purchase, and
NWPS Capital has agreed to sell to each of the Underwriters, severally, the
respective number of Preferred Securities set opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SECURITIES
- -------------------------------------------------------------------------- ------------------
<S> <C>
Morgan Stanley & Co. Incorporated......................................... 175,000
Dean Witter Reynolds Inc. ................................................ 170,000
NatWest Capital Markets Limited........................................... 170,000
PaineWebber Incorporated.................................................. 170,000
Piper Jaffray Inc. ....................................................... 170,000
Advest, Inc............................................................... 20,000
Alex. Brown & Sons Incorporated........................................... 35,000
Crowell, Weedon & Co...................................................... 20,000
Dain Bosworth Incorporated................................................ 20,000
A.G. Edwards & Sons, Inc.................................................. 35,000
J.J.B. Hilliard, W.L. Lyons, Inc.......................................... 20,000
Interstate/Johnson Lane Corporation....................................... 20,000
Janney Montgomery Scott Inc. ............................................. 20,000
Kemper Securities, Inc.................................................... 20,000
Legg Mason Wood Walker, Incorporated...................................... 20,000
McDonald & Company Securities, Inc. ...................................... 20,000
Morgan Keegan & Company, Inc. ............................................ 20,000
The Ohio Company.......................................................... 20,000
Olde Discount Corporation................................................. 20,000
Oppenheimer & Co., Inc.................................................... 35,000
Raymond James & Associates, Inc. ......................................... 20,000
The Robinson-Humphrey Company, Inc. ...................................... 20,000
Trilon Securities International........................................... 20,000
Tucker Anthony Incorporated............................................... 20,000
Wheat, First Securities, Inc.............................................. 20,000
----------
Total................................................................. 1,300,000
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Preferred Securities are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
the Preferred Securities offered hereby if any of the Preferred Securities are
purchased. In the event of default by an Underwriter, the Underwriting Agreement
provides that, in certain circumstances, the purchase commitments of the
nondefaulting Underwriters may be increased or the Underwriting Agreement may be
terminated.
The Underwriters propose to offer all or part of the Preferred Securities
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and all or part to certain securities
dealers at a price that represents a concession not in excess of $.50 per
Preferred Security. The Underwriters may allow, and such dealers may reallow, a
concession not in
S-33
<PAGE>
excess of $.25 per Preferred Security to certain other dealers. After the
Preferred Securities are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Representative.
Because the proceeds of the sale of the Preferred Securities will ultimately
be used to purchase the Subordinated Debt Securities of the Company, the
Underwriting Agreement provides that the Company will pay to the Underwriters as
compensation for their services $.7875 per Preferred Security (or $1,023,750 in
the aggregate); provided that such compensation will be $.50 per Preferred
Security sold to certain institutions.
NWPS Capital and the Company have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus Supplement, to purchase
up to an additional 195,000 Preferred Securities at the initial public offering
price set forth on the cover page hereof. The Company will pay to the
Underwriters the amounts per Preferred Security set forth in the immediately
preceding paragraph with respect to any such additional Preferred Securities.
The Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, incurred in the sale of the Preferred Securities.
During a period of 90 days from the date of the Prospectus Supplement,
neither NWPS Capital nor the Company will, without the prior written consent of
Morgan Stanley & Co. Incorporated, directly or indirectly, sell, offer to sell,
grant any option for the sale of, pledge, or otherwise dispose of, any Preferred
Securities, any security convertible into or exchangeable into or exercisable
for Preferred Securities or any equity securities substantially similar to the
Preferred Securities (except for any series of Subordinated Debt Securities and
the Preferred Securities offered hereby) or enter into any swap or similar
agreement that transfers, in whole or in part, the economic risk of ownership of
Preferred Securities, whether any such transaction is to be settled by delivery
of Preferred Securities or other securities, in cash or otherwise.
Application has been made to list the Preferred Securities on the New York
Stock Exchange. Listing will be contingent upon meeting the requirements of the
New York Stock Exchange, including those relating to distribution. If listing is
approved, trading of the Preferred Securities on the New York Stock Exchange is
expected to commence within a 7-day period after the date of this Prospectus
Supplement. The Representatives have advised NWPS Capital that they intend to
make a market in the Preferred Securities prior to the commencement of trading
on the New York Stock Exchange. The Representatives will have no obligation to
make a market in the Preferred Securities, however, and may cease market making
activities, if commenced, at any time.
NWPS Capital and the Company 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 (or in the future may engage in)
transactions with, and perform services for, the Company and certain of its
affiliates in the ordinary course of business. Morgan Stanley & Co. Incorporated
represents Synergy Group Incorporated in connection with the pending acquisition
of Synergy by the Company described under "Pending Acquisition of Synergy Group
Incorporated" included in the accompanying Prospectus. Piper Jaffray Inc.
rendered financial advisory services to the Company in connection with the
Company's evaluation of the Synergy acquisition. National Westminster Bank, P l
c. is the parent of NatWest Capital Markets Limited and is serving as the
managing agent for the short-term loan for the Synergy acquisition.
NatWest Capital Markets Limited ("NatWest"), a United Kingdom broker-dealer
and a member of the Securities Futures Authority Limited, has agreed that, as
part of the distribution of the Preferred Securities offered hereby and subject
to certain exceptions, it will not offer or sell any Preferred Securities within
the United States, its territories or possessions or to persons who are citizens
thereof or residents therein. The Underwriting Agreement does not limit sale of
the Preferred Securitites offered hereby outside the United States.
S-34
<PAGE>
NatWest has further represented and agreed that (i) it has not offered or
sold and will not offer or sell any Preferred Securities to persons in the
United Kingdom, except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (ii) it
has complied with and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the Preferred Securities in, from or otherwise involving the United Kingdom, and
(iii) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of the
Preferred Securities to a person who is of the kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995 or is a person to whom such document may otherwise lawfully be issued
or passed on.
LEGAL MATTERS
The validity of the Preferred Securities, the Subordinated Debt Securities,
the Guarantee and certain matters relating thereto will be passed upon for the
Company and NWPS Capital by Schiff Hardin & Waite, Chicago, Illinois. Certain
legal matters will be passed upon for the Underwriters by Winthrop, Stimson,
Putnam & Roberts, New York, New York. Certain matters of Delaware law relating
to the validity of the Preferred Securities will be passed upon by Richards,
Layton & Finger, Wilmington, Delaware, special Delaware counsel to the Company
and NWPS Capital.
S-35
<PAGE>
PROSPECTUS
$200,000,000
NORTHWESTERN PUBLIC SERVICE COMPANY
MORTGAGE BONDS
SUBORDINATED DEBT SECURITIES
COMMON STOCK
NWPS CAPITAL FINANCING I
NWPS CAPITAL FINANCING II
NWPS CAPITAL FINANCING III
PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
NORTHWESTERN PUBLIC SERVICE COMPANY
-----------------
NORTHWESTERN PUBLIC SERVICE COMPANY, A DELAWARE CORPORATION (THE "COMPANY"),
MAY OFFER FROM TIME TO TIME, TOGETHER OR SEPARATELY, (I) MORTGAGE BONDS
("MORTGAGE BONDS"); (II) SUBORDINATED DEBT SECURITIES ("SUBORDINATED DEBT
SECURITIES"); AND (III) COMMON STOCK, PAR VALUE $3.50 PER SHARE ("COMMON
STOCK").
NWPS CAPITAL FINANCING I, NWPS CAPITAL FINANCING II AND NWPS CAPITAL
FINANCING III (EACH, A "NWPS TRUST"), EACH A STATUTORY BUSINESS TRUST 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 NWPS TRUSTS ("PREFERRED SECURITIES"). THE PAYMENT OF PERIODIC CASH
DISTRIBUTIONS ("DISTRIBUTIONS") WITH RESPECT TO PREFERRED SECURITIES OF A
PARTICULAR NWPS TRUST OUT OF MONEYS HELD BY THAT NWPS TRUST, AND PAYMENTS ON
LIQUIDATION, REDEMPTION OR OTHERWISE WITH RESPECT TO SUCH PREFERRED SECURITIES,
WILL BE GUARANTEED BY THE COMPANY TO THE EXTENT DESCRIBED HEREIN ("GUARANTEE").
SEE "DESCRIPTION OF THE GUARANTEES" BELOW. THE COMPANY'S OBLIGATIONS UNDER EACH
GUARANTEE 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 ISSUED FROM TIME TO TIME BY THE COMPANY. THE SUBORDINATED DEBT SECURITIES
MAY BE ISSUED AND SOLD FROM TIME TO TIME IN ONE OR MORE SERIES BY THE COMPANY TO
A NWPS TRUST, OR A TRUSTEE OF SUCH TRUST, IN CONNECTION WITH THE INVESTMENT OF
THE PROCEEDS FROM THE OFFERING OF PREFERRED SECURITIES AND COMMON SECURITIES (AS
DEFINED HEREIN) OF SUCH NWPS TRUST. THE SUBORDINATED DEBT SECURITIES PURCHASED
BY A NWPS TRUST MAY BE SUBSEQUENTLY DISTRIBUTED PRO RATA TO HOLDERS OF PREFERRED
SECURITIES AND COMMON SECURITIES IN CONNECTION WITH THE DISSOLUTION OF SUCH NWPS
TRUST UPON THE OCCURRENCE OF CERTAIN EVENTS AS MAY BE DESCRIBED IN AN
ACCOMPANYING PROSPECTUS SUPPLEMENT. THE SUBORDINATED DEBT SECURITIES WILL BE
UNSECURED AND SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO CERTAIN OTHER
INDEBTEDNESS OF THE COMPANY AS MAY BE DESCRIBED IN THE ACCOMPANYING PROSPECTUS
SUPPLEMENT.
THE MORTGAGE BONDS, SUBORDINATED DEBT SECURITIES AND COMMON STOCK OF THE
COMPANY, AND THE PREFERRED SECURITIES OF ANY NWPS TRUST, ARE COLLECTIVELY
REFERRED TO HEREIN AS THE "OFFERED SECURITIES."
THE OFFERED SECURITIES MAY BE ISSUED IN ONE OR MORE SERIES OR ISSUANCES IN
AN AMOUNT NOT TO EXCEED IN THE AGGREGATE $200,000,000, BASED ON THE INITIAL
OFFERING PRICE, WITH THE AMOUNTS, PRICES AND TERMS TO BE DETERMINED AT OR PRIOR
TO THE TIME OF SALE AND SET FORTH IN ONE OR MORE SUPPLEMENTS TO THIS PROSPECTUS
(EACH, A "PROSPECTUS SUPPLEMENT").
(CONTINUED ON FOLLOWING PAGE)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY 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 OFFERED SECURITIES WILL BE SOLD DIRECTLY, THROUGH AGENTS, UNDERWRITERS
AND DEALERS, INCLUDING MORGAN STANLEY & CO. INCORPORATED, AS DESIGNATED FROM
TIME TO TIME, OR THROUGH A COMBINATION OF SUCH METHODS. SEE "PLAN OF
DISTRIBUTION." THE NAMES OF SUCH AGENTS, UNDERWRITERS OR DEALERS AND ANY
APPLICABLE COMMISSIONS OR DISCOUNTS WILL BE SET FORTH IN, OR MAY BE CALCULATED
FROM, THE PROSPECTUS SUPPLEMENT. SEE "PLAN OF DISTRIBUTION" FOR A DESCRIPTION OF
ANY INDEMNIFICATION ARRANGEMENTS BETWEEN THE COMPANY, EACH OF THE NWPS TRUSTS
AND ANY UNDERWRITERS, DEALERS OR AGENTS.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
MORGAN STANLEY & CO.
INCORPORATED
AUGUST 3, 1995
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
CERTAIN SPECIFIC TERMS OF THE PARTICULAR OFFERED SECURITIES IN RESPECT OF
WHICH THIS PROSPECTUS IS BEING DELIVERED WILL BE SET FORTH IN AN ACCOMPANYING
PROSPECTUS SUPPLEMENT, INCLUDING, WHERE APPLICABLE, THE INITIAL PUBLIC OFFERING
PRICE OF THE OFFERED SECURITIES, THE NET PROCEEDS THEREOF TO THE COMPANY OR A
NWPS TRUST, AS APPLICABLE, ANY LISTING OF SUCH OFFERED SECURITIES ON A
SECURITIES EXCHANGE AND ANY OTHER SPECIAL TERMS. THE PROSPECTUS SUPPLEMENT WILL
ALSO SET FORTH CERTAIN OTHER INFORMATION WITH REGARD TO OFFERED SECURITIES BEING
OFFERED, INCLUDING WITHOUT LIMITATION, THE FOLLOWING: (I) IN THE CASE OF
MORTGAGE BONDS, THE SERIES DESIGNATION, AGGREGATE PRINCIPAL AMOUNT, AUTHORIZED
DENOMINATIONS, MATURITY, INTEREST RATE (WHICH MAY BE FIXED OR VARIABLE) OR
METHOD OF CALCULATION OF INTEREST AND DATE OF PAYMENT OF ANY INTEREST, AND ANY
EXCHANGE, CONVERSION, REDEMPTION, SINKING FUND, OR CREDIT ENHANCEMENT PROVISIONS
AND OTHER SPECIAL TERMS OF EACH SERIES; (II) IN THE CASE OF SUBORDINATED DEBT
SECURITIES, THE SPECIFIC DESIGNATION, AGGREGATE PRINCIPAL AMOUNT, AUTHORIZED
DENOMINATION, MATURITY, INTEREST RATE (WHICH MAY BE FIXED OR VARIABLE) OR METHOD
OF CALCULATION OF INTEREST, DATE OF PAYMENT OF ANY INTEREST, ANY PREMIUM, THE
PLACE OR PLACES WHERE PRINCIPAL OF, PREMIUM, IF ANY, AND ANY INTEREST ON SUCH
SUBORDINATED DEBT SECURITIES WILL BE PAYABLE, 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, ANY EXCHANGE, CONVERSION, REDEMPTION OR SINKING
FUND PROVISIONS, AND ANY SECURITY, SUBORDINATION OR OTHER TERMS IN CONNECTION
WITH THE OFFERING AND SALE OF THE SUBORDINATED DEBT SECURITIES IN RESPECT OF
WHICH THIS PROSPECTUS IS DELIVERED; (III) IN THE CASE OF COMMON STOCK, THE
NUMBER OF SHARES AND THE TERMS OF OFFERING THEREOF; AND (IV) IN THE CASE OF
PREFERRED SECURITIES, THE DESIGNATION, NUMBER OF SECURITIES, LIQUIDATION
PREFERENCE PER SECURITY, DISTRIBUTION RATE (OR METHOD OF CALCULATION THEREOF),
DATES ON WHICH DISTRIBUTIONS SHALL BE PAYABLE AND DATES FROM WHICH DISTRIBUTIONS
SHALL ACCRUE, ANY VOTING RIGHTS, ANY EXCHANGE, CONVERSION, REDEMPTION OR SINKING
FUND PROVISIONS, ANY OTHER RIGHTS, PREFERENCES, PRIVILEGES, LIMITATIONS OR
RESTRICTIONS RELATING TO THE PREFERRED SECURITIES AND THE TERMS UPON WHICH THE
PROCEEDS OF THE SALE OF THE PREFERRED SECURITIES SHALL BE USED TO PURCHASE A
SPECIFIC SERIES OF SUBORDINATED DEBT SECURITIES OF THE COMPANY. IF SO SPECIFIED
IN THE APPLICABLE PROSPECTUS SUPPLEMENT, OFFERED SECURITIES MAY BE ISSUED IN
WHOLE OR IN PART IN THE FORM OF ONE OR MORE TEMPORARY OR GLOBAL SECURITIES.
THE PROSPECTUS SUPPLEMENT WILL ALSO CONTAIN INFORMATION, WHERE APPLICABLE,
ABOUT CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE
OFFERED SECURITIES COVERED BY THE PROSPECTUS SUPPLEMENT.
<PAGE>
AVAILABLE INFORMATION
The Company and the NWPS Trusts have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3 (including
any amendments thereto, the "Registration Statement") 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
the Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document are not necessarily complete. With respect to each such
contract, agreement or other document filed or incorporated by reference as an
exhibit to the Registration Statement, reference is made to such exhibit for a
more complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
The Company and Synergy Group Incorporated ("Synergy"), a corporation which
the Company proposes to acquire (see "Pending Acquisition of Synergy Group
Incorporated"), are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith file reports and other information with the Commission, including
proxy statements in the case of the Company, but not Synergy. Reports, proxy
statements and other information filed by the Company and Synergy with the
Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and
at Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of
such materials may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Such reports, proxy statements and other information concerning the Company may
also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, on which exchange certain of the Company's
securities are listed. Information in this Prospectus concerning Synergy has
been obtained from reports and other information filed by Synergy with the
Commission.
No separate financial statements of any of the NWPS Trusts have been
included herein. The Company and the NWPS Trusts do not consider that such
financial statements would be material to holders of the Preferred Securities
because (i) all of the common securities of the NWPS Trusts will be owned,
directly or indirectly, by the Company, a reporting company under the Exchange
Act, (ii) each of the NWPS Trusts is a newly organized special purpose entity,
has no operating history and has no independent operations but exists for the
sole purpose of issuing securities representing undivided beneficial interests
in the assets of such NWPS Trust, investing the proceeds thereof in Subordinated
Debt Securities issued by the Company and engaging in activities necessary or
incidental thereto, and (iii) the obligations of each of the NWPS Trusts under
the Trust Securities (as defined herein) are fully and unconditionally
guaranteed by the Company to the extent that such NWPS Trust has funds legally
available to meet such obligations. See "Description of the Subordinated Debt
Securities" and "Description of the Guarantees."
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1994;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995;
(c) The Company's Current Report on Form 8-K filed May 26, 1995;
(d) The Company's Current Report on Form 8-K filed June 21, 1995; and
(e) The Company's Current Report on Form 8-K filed July 27, 1995.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), or 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the Offered
1
<PAGE>
Securities shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, or in the Prospectus Supplement for the offering of the
particular Offered Securities, modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE
WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS
REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS PROSPECTUS BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE INTO THE INFORMATION THAT THE PROSPECTUS INCORPORATES.
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MS. ROGENE THADEN, TREASURER,
NORTHWESTERN PUBLIC SERVICE COMPANY, 33 THIRD STREET S.E., HURON, SOUTH DAKOTA
57350-1318, TELEPHONE NUMBER 605-353-8320.
THE COMPANY
The Company's principal business is energy distribution. The Company is
engaged as an electric and gas utility in generating, transmitting,
distributing, and selling electric energy in eastern South Dakota, where it
furnishes electric service to approximately 54,900 customers in more than 100
communities and adjacent rural areas and in purchasing, distributing, selling,
and transporting natural gas to approximately 75,000 customers in four
communities in Nebraska and 56 communities in eastern South Dakota. The Company,
through its subsidiaries, is also engaged in certain nonutility operations as
more fully discussed under the caption "Nonutility Operations" and has recently
contracted to acquire Synergy Group Incorporated, a major propane distribution
company. See "Pending Acquisition of Synergy Group Incorporated." The Company
was incorporated under the laws of the State of Delaware in 1923 and has its
principal office at 33 Third Street S.E., Huron, South Dakota 57350-1318. Its
telephone number is 605-352-8411.
ELECTRIC BUSINESS
On a fully consolidated basis, 46% of the Company's 1994 operating revenues
were from the sale of electric energy. All of the Company's electric revenues
are derived from customers in South Dakota.
By customer category, 33% of 1994 total electric sales were from residential
sales, 50% were from commercial and industrial sales, 2% was from street
lighting and sales to public authorities, and 15% were from sales for resale.
The Company has relatively few large customers in its service territory.
Sales for resale primarily include power pool sales to other utilities.
Power pool sales fluctuate from year to year depending on a number of factors
including the Company's availability of excess short-term generation and the
ability to sell the excess power to other utilities in the power pool. The
Company also sells power and energy at wholesale to certain municipalities for
resale and to various governmental agencies.
The Company shares in the ownership of the Big Stone Generating Plant ("Big
Stone"), located near Big Stone City in northeastern South Dakota, the Coyote I
Electric Generating Plant ("Coyote"), located near Beulah, North Dakota, and the
Neal Electric Generating Unit #4 ("Neal"), located near Sioux City.
At December 31, 1994, the aggregate net summer peaking capacity of all
Company owned electric generating units was 309,480 kw, consisting of 105,711 kw
from Big Stone (the Company's 23.4% share), 42,600 kw from Coyote (the Company's
10.0% share), 54,169 kw from Neal (the Company's 8.7% share), and 107,000 kw
from internal combustion turbine units and small diesel units, used primarily
for peaking purposes.
2
<PAGE>
The Company is a summer peaking utility. The 1994 peak demand of 229,922 kw
occurred on July 18, 1994. Total system capability at the time of peak was
309,480 kw. The reserve margin for 1994 was 35%. The minimum reserve margin
requirement as determined by the members of the Mid-Continent Area Power Pool,
of which the Company is a member, is 15%.
The Company has an integrated resource plan to identify how to meet the
energy needs of its customers. The plan includes estimates of customer usage and
programs to provide for economic, reliable, and timely supplies of energy. The
plan does not anticipate the need for additional baseload generating capacity
for the Company for at least the next 10 years.
All of the Company's baseload plants are fueled by coal. The Company has
maintained competitive electric rates when compared to neighboring utilities and
has a competitive electric baseload generating production cost, which includes
fuel and plant operating expenses, of less than 1.5 CENTS per kilowatt hour.
Lignite and sub-bituminous coal were utilized by the Company as fuel for
virtually all of the electric energy generated during 1994. The continued
delivery of lignite and sub-bituminous coal to the three large steam generating
units in which the Company is part owner is reasonably assured by contracts
covering various periods of the operating lives of these units.
GAS BUSINESS
On a fully consolidated basis, 40% of the Company's 1994 operating revenues
were from the sale of gas energy. During 1994, the Company derived 56% of its
gas revenues from South Dakota and 44% from Nebraska. The Company's peak daily
sendout was 128,700 MMBTU.
For the year ended December 1994, 44% of the Company's gas sales were from
residential customers and 56% of sales were from commercial and industrial
sales. During the last five years the Company has expanded its gas distribution
operations to serve 29 new communities in South Dakota.
The Company owns and operates natural gas distribution systems serving
approximately 36,000 customers in eastern South Dakota, for which it purchases
gas from various gas marketing firms under gas transportation service agreements
with various gas marketing firms. These agreements provide for firm deliverable
pipeline capacity of approximately 49,300 MMBTU per day in South Dakota. The
Company has service agreements with Northern Natural Gas Company ("NNG")
providing for firm transportation of natural gas. While NNG has eliminated
nearly all of its gas supply activities, the Company has supply contracts in
place and peak shaving capacity to meet its peak day system needs.
In Nebraska, the Company owns and operates natural gas distribution systems
serving approximately 39,000 retail customers in the village of Alda and the
cities of Grand Island, Kearney, and North Platte, Nebraska. The Company
purchases much of its natural gas for these systems from KN Gas Supply Co. under
a seven-year service agreement entered into in 1993. The Company also purchases
certain quantities of gas for its Nebraska customers from various gas marketing
firms. These agreements provide for firm deliverable pipeline capacity of
approximately 49,600 MMBTU per day in Nebraska.
To supplement firm gas supplies, the Company has contracts for underground
natural gas storage services to meet the heating season and peak day
requirements of its gas customers. In addition, the Company owns and operates
six propane-air plants with a total rated capacity of 18,000 MMBTU per day, or
approximately 14% of peak day requirements. The propane-air plants provide an
economic alternative to pipeline transportation charges to meet the extreme
peaks caused by customer demand on extremely cold days.
A few of the Company's industrial customers purchase their natural gas
requirements directly from gas marketing firms for transportation and delivery
through the Company's distribution system. The transportation rates have been
designed to make the Company economically indifferent as to whether the Company
sells and transports gas or only transports gas.
COMPETITION
Although the Company's electric service territory is assigned according to
the South Dakota Public Utilities Act, and the Company has the right to provide
electric service to present and future electric
3
<PAGE>
customers in its assigned service area for so long as the service provided is
deemed adequate, the energy industry in general has become increasingly
competitive. Electric service also competes with other forms of energy and the
degree of competition may vary from time to time depending on relative costs and
supplies of other forms of energy.
The National Energy Policy Act of 1992 was designed to promote energy
efficiency and increased competition in the electric wholesale markets. Such Act
also allows the Federal Energy Regulatory Commission ("FERC") to order wholesale
wheeling by public utilities to provide utility and nonutility generators access
to public utility transmission facilitates. The FERC is currently investigating
a restructuring of the electric utility industry. Many states are currently
considering retail wheeling, which aims to provide all customers with the right
to choose their electricity supplier. No regulatory proposals have yet been
formally introduced in South Dakota.
FERC Order 636 requires, among other provisions, that all companies with
natural gas pipelines separate natural gas supply or production services from
transportation service and storage businesses. This allows gas distribution
companies, such as the Company, and individual customers to purchase gas
directly from producers, third parties, and various gas marketing entities and
transport it through the suppliers' pipelines. While Order 636 had positive
aspects by providing for more diversified supply and storage options, it also
required the Company to assume responsibility for the procurement,
transportation, and storage of natural gas. The alternatives now available under
Order 636 create additional pressure on all distribution companies to keep gas
supply and transportation pricing competitive, particularly for large customers.
WEATHER
Weather fluctuations in the Company's service area have the greatest
influence on the Company's revenues from year to year. Typically gas sales peak
when colder winter weather patterns create increased winter heating needs while
sales decline during warmer winter periods. Electric sales peak during warmer
summer periods due to increased air conditioning sales while cooler summer
weather patterns produce less sales of electric energy.
REGULATION
The Company is a "public utility" within the meaning of the Federal Power
Act and the South Dakota Public Utilities Act and, as such, is subject to the
jurisdiction of, and regulation by, FERC with respect to issuance of securities,
the South Dakota Public Utilities Commission ("PUC") with respect to electric
service territories, and both FERC and the PUC with respect to rates, service,
accounting records, and in other respects. The State of Nebraska has no
centralized regulatory agency which has jurisdiction over the Company's
operations in that state; however, the Company's natural gas rates are subject
to regulation by the municipalities in which it operates.
Under the South Dakota Public Utilities Act, enacted in 1975, a requested
rate increase may be implemented by the Company 30 days after the date of its
filing unless its effectiveness is suspended by the PUC and, in such event, can
be implemented subject to refund with interest six months after the date of
filing, unless sooner authorized by the PUC. The Company's electric rate
schedules provide that it may pass along to all classes of customers qualified
increases or decreases in the cost of fuel used in its generating stations and
in the cost of fuel included in purchased power. A purchased gas adjustment
provision in its gas rate schedules permits the company to pass along to gas
customers increases or decreases in the cost of purchased gas.
The Company's last electric rate increase amounted to less than 1% in May,
1985. On May 26, 1994, the Company filed for a $2.4 million increase in South
Dakota natural gas revenues. As a result of a negotiated settlement with the PUC
on November 15, 1994, the Company implemented rates which will produce
additional annual natural gas revenues of $2.1 million, assuming normal weather,
representing an overall increase of 6.2%. On December 30, 1994, the Company
filed for a $2.7 million increase in rates applicable to its Nebraska natural
gas service area. Following a negotiated settlement, an annual increase of
$2.275 million has been implemented, effective July 1, 1995, an overall increase
of 8.7%.
4
<PAGE>
CAPITAL SPENDING AND FINANCING
The Company's primary capital requirements include the funding of its
utility construction and expansion programs, the funding of debt and preferred
stock retirements and sinking fund requirements, and the funding of its
corporate development and investment activities.
Expenditures for regulated utility construction activities for 1994, 1993,
and 1992 were $22.7 million, $20.0 million, and $18.5 million. Construction
expenditures during the last three years included expenditures related to the
installation of an additional 43 mw of internal electric peaking capacity, the
expansion of the Company's natural gas system into 29 additional communities in
eastern South Dakota, and to construction of an operations center which will
provide future cost savings and operating efficiencies through consolidation of
activities. Construction expenditures for the Company's regulated utility
businesses are estimated to be $19.3 million in 1995. The majority of these
projected expenditures will be spent on enhancements of the electric and gas
distribution systems and completion of the operations center. Estimated
construction expenditures for the Company's regulated utility businesses for the
years 1995 through 1999 are expected to be approximately $69 million.
Capital requirements for the mandatory retirement of long-term debt and the
mandatory preferred stock sinking fund redemption totaled $600,000, $180,000,
and $513,000, for the years ended 1994, 1993, and 1992. It is expected that such
mandatory retirements will be $600,000 in 1995, $1,080,000 in 1996, $570,000 in
1997, $20.6 million in 1998, and $13.5 million in 1999.
NONUTILITY OPERATIONS
NORTHWESTERN GROWTH CORPORATION ("NGC"). NGC was incorporated under the laws
of South Dakota in 1994 to pursue and manage nonutility investments and
development activities. Although the primary focus of NGC's investment program
will be to seek growth opportunities in the energy, energy equipment, and energy
services industries, NGC is also pursuing opportunities in existing and emerging
growth entities in nonenergy industries that meet return and capital gain
requirements. Along with a portfolio of marketable securities, NGC's assets
include the investments of three subsidiaries: Northwestern Networks, Inc.,
Northwestern Systems, Inc., and SYN Inc.
NORTHWESTERN NETWORKS, INC. ("NNI"). NNI was incorporated in South Dakota in
1986. NNI holds a common stock investment in LodgeNet Entertainment Corporation,
a provider of television entertainment and information systems to hotels and
motels.
NORTHWESTERN SYSTEMS, INC. ("NSI"). NSI was incorporated in South Dakota in
1986. NSI owns all of the common stock ownership in Lucht, Inc., a firm that
develops, manufactures, and markets multi-image photographic printers and other
related equipment.
SYN INC. ("SYN"). SYN, a Delaware corporation, was formed for the purpose of
acquiring Synergy Group Incorporated, a major propane distributor. See "Pending
Acquisition of Synergy Group Incorporated."
GRANT, INC. Grant, Inc., which holds title to property not used in the
Company's utility business, was incorporated in South Dakota in 1972.
PENDING ACQUISITION OF SYNERGY GROUP INCORPORATED
GENERAL
On May 17, 1995, SYN entered into a Purchase and Sale Agreement (the
"Acquisition Agreement") with Synergy Group Incorporated, a Delaware corporation
("Synergy"), S & J Investments and the stockholders of Synergy (the "Synergy
Stockholders"), providing for the acquisition by SYN of Synergy and its
subsidiaries and of certain operating equipment which Synergy has been leasing
from S & J Investments (the "Acquisition"). NGC, the immediate parent
corporation of SYN, joined in the Acquisition Agreement to guarantee SYN's
performance thereof.
Under the terms of the Acquisition Agreement, the Acquisition is subject to
various conditions and approvals, including the accuracy of various
representations and warranties made by the sellers as to the
5
<PAGE>
business, assets, financial condition and results of operations of Synergy and
its subsidiaries, the obtaining of financing needed by SYN for the Acquisition,
the issuance of orders by the FERC authorizing the Company's issuance of the
securities offered under this Prospectus, the net proceeds from which are to be
used to provide such financing for SYN (see "Use of Proceeds"), and the
expiration or termination of the waiting period for the Acquisition under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. On June 19, 1995 the FERC
issued the required orders and on July 6, 1995 early termination of the
Hart-Scott-Rodino waiting period was granted.
The Acquisition will be an expansion of the Company's energy distribution
business, which currently is primarily regulated electric and gas utility
distribution. See "The Company". Two of the Company's corporate objectives are
intended to be accomplished through the Acquisition. The immediate objective is
to expand the Company's energy distribution business. The second objective is to
use the business acquired from Synergy as a base for additional acquisitions in
the propane distribution industry which, unlike the Company's electric and gas
public utility business, is not regulated as to rates or territory served. The
Company is currently considering the acquisition of a small propane distributor.
The propane distribution industry currently consists of approximately 8,000
retail propane marketing companies in the continental United States, with
propane being the fourth largest source of energy marketed at retail in the
United States, following electricity, natural gas and fuel oil.
As a result of the factors affecting Synergy's business, see "Business of
Synergy", the Company expects that its consolidated revenues and earnings may be
subject to increased variability following consummation of the Acquisition.
BUSINESS OF SYNERGY
Synergy, headquartered in Farmingdale, New York, is a multi-state marketer
principally engaged in the retail distribution of propane and other fuels for
residential, commercial, industrial, agricultural and other uses. Synergy's
propane sales during the past three fiscal years represented approximately 83%
of its annual revenues, of which the major portion (approximately 50% of propane
sales in the fiscal year ending March 31, 1995) resulted from sales to customers
who utilize propane for residential purposes, primarily for home heating, water
heating and cooking. The balance of propane sales are primarily for commercial,
industrial and agricultural use. Synergy also sells propane for use as engine
fuel for forklifts and over-the-road vehicles. Synergy currently maintains 152
retail branches which service approximately 200,000 customers in 23 states,
primarily in rural and suburban areas of the Northeast, Mid-Atlantic, Southeast
and Southcentral regions of the United States. According to available industry
data, Synergy is, based upon volume sold, one of the nation's 10 largest
retailers of propane.
Synergy also sells gasoline, diesel and aviation fuel, and appliances and
equipment which use propane, and is engaged in the sale, repair and leasing of
forklift trucks.
Synergy purchases propane from major domestic oil companies as well as
independent oil and liquid gas producers. These producers ship the propane via
pipeline to immediate supply terminals at which Synergy's large transport trucks
take delivery and transport the propane to bulk storage tanks. Synergy's fleet
of approximately 500 tank trucks delivers the propane from these bulk storage
facilities to approximately 193,000 propane storage tanks or cylinders which it
leases to its customers and which are located at customer premises. These tanks
are used exclusively to hold propane purchased from Synergy, thereby promoting
the stability of Synergy's customer base. While the cost and inconvenience of
switching tanks tends to minimize switching by customers among suppliers on the
basis of minimal price variations, it also makes it more difficult to obtain new
customers, other than through acquisitions, in areas where there are existing
relationships between potential customers and other distributors.
The retail propane industry is mature, with only limited growth in total
demand for the product foreseen. The Company expects the overall demand for
propane to remain relatively constant over the next several years, with
year-to-year industry volumes being impacted primarily by weather patterns.
Therefore,
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<PAGE>
Synergy's ability to grow within the industry will be dependent on its ability
to acquire other retail distributors, on the success of opening new district
locations and on the success of its marketing efforts to acquire new customers.
Synergy competes with other distributors of propane, including several major
companies and several thousand small independent operators. Synergy's ability to
compete effectively depends on the reliability of its service, its
responsiveness to customers and its ability to maintain competitive retail
prices.
Synergy competes for customers against suppliers of electricity, fuel oil
and natural gas. In the last two decades, many new homes were built, and older
homes converted to use electrical heating systems and appliances. Electricity is
a major competitor of propane, but propane generally enjoys a substantial
competitive price advantage over electricity. The Company believes that fuel oil
does not present a significant competitive threat in Synergy's primary service
areas because: (i) propane is a residue-free, cleaner energy source, (ii)
environmental concerns make fuel oil relatively unattractive, and (iii) fuel oil
appliances generally are not as efficient as propane appliances. Furnaces and
appliances that burn propane will not operate on fuel oil, and therefore a
conversion from one fuel to the other requires the installation of new
equipment. Synergy's customers will have an incentive to switch to fuel oil only
if fuel oil becomes significantly less expensive than propane. Synergy generally
does not attempt to sell propane in areas served by natural gas distribution
systems, except sales for specialized industrial applications because the price
per equivalent energy unit of propane is, and has historically been, higher than
that of natural gas. To use natural gas, however, a retail customer must be
connected to a distribution system provided by a local utility. Natural gas is
not expected by management of the Company to create significant competition for
Synergy in areas that are not currently served by natural gas distribution
systems because of the costs involved in building or connecting to a natural gas
distribution system.
The propane gas distribution business is affected by economic and other
factors, some of which are beyond the control of the Synergy, such as weather
conditions. Synergy's business is highly seasonal, with a substantial portion of
its revenues customarily being generated during the six month winter period
ending in March. Synergy's business was adversely affected by unusually warm
winter conditions in fiscal 1995. Warm winter conditions in the future periods
may adversely affect Synergy's revenues, operating income and cash flow in such
years.
The retail propane business is a "margin-based" business in which gross
profits are dependent upon the excess of the sales price over the propane supply
costs. Propane is a commodity, and, as such, its unit price is subject to
changes in response to changes in supply or other market conditions.
Consequently, the unit price of propane purchased by Synergy, as well as other
marketers, can change rapidly over a short period. In general, product supply
contracts permit suppliers to charge posted prices at the time of delivery or
the current prices established at major storage points. If rapid increases in
the wholesale cost of propane cannot be immediately passed on to retail
customers, such increases may reduce margins on retail sales. Consequently,
Synergy's profitability will be sensitive to changes in wholesale propane
prices.
According to public reports filed by Synergy with the Commission, Synergy
incurred substantial net losses in each of its last five fiscal years. As a
result of such net losses, Synergy has been in default under certain of its debt
covenants and the audit report prepared by Synergy's independent accountants
relating to Synergy's financial statements for the last two fiscal years noted
that Synergy's recurring losses from operations, net capital deficiency and
default on certain of its debt "raise substantial doubt about the entity's
ability to continue as a going concern." Although Synergy has recorded net
losses during each of the last five years, its operating income for the years
ended March 31, 1995 and 1994 was approximately $6,492,000 and $4,090,000,
respectively. See "Management of Synergy" for a description of the Company's
financing plans and anticipated operating efficiencies which the Company
believes will substantially improve Synergy's results of operations following
the Acquisition.
ACQUISITION CONSIDERATION
The consideration to be paid by SYN for the Acquisition, in addition to
assuming various liabilities of Synergy and its subsidiaries, consists of (i)
cash in the amount of $137,500,000, which amount will be subject
7
<PAGE>
to adjustment upward or downward according to whether the working capital of
Synergy (as specifically defined in the Acquisition Agreement) exceeds or is
less than $21,042,000 at the time of closing of the Acquisition, (ii) a
promissory note payable by SYN in the principal amount of $1,250,000, and (iii)
the issuance to the Synergy Stockholders of 17,500 shares of the Common Stock of
SYN (17.5% of the total that will be outstanding) and 2,500 shares of the 15%
Series A Cumulative Preferred Stock of SYN (valued at $2,500,000), such shares
of preferred stock being part of a series of preferred stock of SYN for which
the remaining 50,000 shares are expected to be issued to the Company in exchange
for a $50,000,000 portion of the long-term financing which the Company expects
to provide to SYN. Substantially all of Synergy's loan indebtedness ($88.2
million) will be paid from the cash portion of the consideration for the
Acquisition.
MANAGEMENT OF SYNERGY
The Acquisition will be made in association with Empire Gas Corporation
("Empire Gas"), a large propane distribution company headquartered in Lebanon,
Missouri, which has a management experienced in the retail propane distribution
business. NGC and SYN have entered into a management agreement (the "Management
Agreement") with Empire Gas, pursuant to which Empire Gas has been engaged to
perform the planning and management of the assets and business operations of SYN
and its subsidiaries, subject to the direction of the Board of Directors of SYN,
following the Acquisition (the "Management Services").
It is planned that, immediately upon the consummation of the Acquisition,
substantial changes will be made in the management and operation of the acquired
business in order to achieve improvement in the results of operations of the
business. NGC and Empire Gas will implement significant cost efficiency measures
to reduce Synergy's operating, selling and general and administrative expenses.
These measures include the elimination of employee positions, corporate overhead
and field location operating expenses. The Synergy headquarters office
operations will be consolidated with the Empire Gas corporate offices in
Lebanon, Missouri, resulting in substantial expense savings. Another significant
portion of the expense reductions is represented by the elimination of
compensation and vehicle lease expenses previously paid to the Synergy
Stockholders. In addition to operating cost reductions, the Company's post
acquisition financing and capitalization plan for Synergy will reduce overall
financing expenses and provide capital for growth that was not available prior
to the acquisition. See "Northwestern Public Service Company and Synergy Group
Incorporated Pro Forma Financial Information."
As compensation for the Management Services, SYN will pay Empire Gas a Fixed
Fee and a Management Fee. The Fixed Fee is intended to cover Empire Gas'
operating overhead in performing the Management Services and initially will be
$3,250,000 per annum, subject to adjustment annually based upon increases in the
Consumer Price Index. The Management Fee will be at the rate of $500,000 per
annum plus 10% of the amount by which the earnings before interest, taxes,
depreciation and amortization of SYN and its subsidiaries, on a consolidated
basis, exceed certain threshold amounts.
At the time of the Acquisition, Empire Gas will purchase 10% of the common
stock of SYN for $10,000 and will have an ongoing option to purchase from NGC an
additional 20% of the common stock of SYN for $20,000. However, according to the
formula stated in another agreement among SYN, Empire Gas and NGC, NGC will be
allowed to reacquire from Empire Gas up to 7,500 shares of such common stock of
SYN, without payment, if Empire Gas fails to achieve certain cumulative results
from the management of SYN and its subsidiaries while the Management Agreement
remains in effect.
The term of the Management Agreement extends to June 30, 2000 and continues
year to year thereafter unless terminated earlier by SYN or Empire Gas. The
Management Agreement may be terminated by either party prior to the expiration
of the term on any one of several grounds specified in the Agreement. The
Management Agreement includes a right of termination by SYN if its operating
results do not exceed prescribed thresholds which increase annually as specified
therein. In the event the Company receives notice that the Management Agreement
will be terminated by Empire Gas, SYN has the right to the use of the personnel
and facilities of Empire Gas for a period of up to 18 months following such
notice by Empire Gas, while developing an alternative for Empire Gas' services.
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<PAGE>
THIRD PARTY SALE
NGC and SYN have entered into a purchase agreement with an unrelated party,
granting that party the right to purchase certain of the retail branches to be
acquired by SYN from Synergy (the "Third Party Sale"). The purchase price for
the Third Party Sale is payable in cash and will be based on the price paid by
SYN to Synergy for such outlets. Such cash price is estimated to be
approximately $40 million, which would decrease SYN's cash payment for the
Acquisition to approximately $100 million, which reduction would be applied to
reduce the long-term investment in securities to be issued by SYN to the Company
and the loan to be made by NGC to SYN.
CAPITALIZATION OF SYN
The capitalization of SYN, taking into account the financing intended to be
provided to SYN by the Company and NGC from the net proceeds of certain of the
securities being offered pursuant to this Prospectus (see "Use of Proceeds"), is
planned to be as follows at the time of the Acquisition closing, assuming
consummation of the third party sale:
<TABLE>
<S> <C>
Common Stock (100,000 shares outstanding):
NGC (72,500 shares) (1)............................................. $ 72,500
Empire Gas (10,000 shares) (1)...................................... 10,000
Former Synergy Stockholders (17,500 shares) (2)..................... 17,500
$ 100,000
15% Series A Cumulative Preferred Stock (52,500 shares outstanding):
Company (50,000 shares)............................................. $ 50,000,000
Former Synergy Stockholders (2,500 shares) (2)...................... 2,500,000
$ 52,500,000
Long Term Debt:
Secured Term Loan from NGC (3)...................................... $ 52,500,000
Total Capitalization.............................................. $105,100,000
<FN>
- ------------------------
(1) Empire Gas has an option to purchase 20,000 of the shares owned by NGC for
a price of $1 per share.
(2) Issued to Former Synergy Stockholders as part of Acquisition consideration.
(3) The Company anticipates that SYN will obtain a bank borrowing facility to
fund SYN's working capital needs.
</TABLE>
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<PAGE>
NORTHWESTERN PUBLIC SERVICE COMPANY AND
SYNERGY GROUP INCORPORATED
PRO FORMA FINANCIAL INFORMATION
Set forth below are summary financial data extracted from the audited
consolidated statement of operations of the Company for the year ended December
31, 1994, the unaudited consolidated financial statements of the Company as of
March 31, 1995, and for the three months then ended; the summary financial data
extracted from the unaudited statement of operations of Synergy for the 12
months ended December 31, 1994 and for the three months ended March 31, 1995,
and balance sheet information as of March 31, 1995; and the pro forma financial
information for the Company ("the Pro Forma Financial Information") for the year
ended December 31, 1994, for the three months ended March 31, 1995, and as of
March 31, 1995, based on such historical financial statements, to illustrate the
effects of the Acquisition. The Pro Forma Financial Information illustrates the
effects of the Acquisition as adjusted to give effect to the Third Party Sale.
(See "Pending Acquisition of Synergy Group Incorporated.")
The Acquisition will be accounted for using the purchase method of
accounting. After the Acquisition, the total purchase price of the Acquisition
will be allocated to Synergy's tangible and intangible assets and liabilities
based upon their respective fair values. The allocation of the aggregate
purchase price included in the Pro Forma Financial Information is preliminary,
but the final allocation of the purchase price is not expected to differ
materially from the preliminary allocation. The financing plan to be executed
for the funding of the Acquisition is expected to be as presented in the Pro
Forma Financial Information. Although market conditions may impact certain
financing options and assumptions as to interest and dividend rates, the overall
financing plan is not expected to vary materially from that presented.
The pro forma statements of operations for the year ended December 31, 1994
and for the three months ended March 31, 1995, give effect to the Acquisition,
and the related transactions as if they had occurred on January 1, 1994. The pro
forma balance sheet as of March 31, 1995 has been prepared as if the transaction
had occurred on that date. The pro forma financial information does not purport
to present the financial position or results of operations of the Company had
the Acquisition actually been completed as of the dates indicated. In addition,
the pro forma financial information is not necessarily indicative of future
results of operations and should be read in conjunction with the historical
consolidated financial statements of the Company incorporated by reference
herein.
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<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ESTIMATED
EFFECTS OF
PARTIAL SALE
OF ASSETS TO
NPS SYNERGY UNRELATED PRO FORMA
HISTORICAL HISTORICAL THIRD PARTY(A) SUBTOTAL ADJUSTMENT PRO FORMA
---------- ---------- -------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue............................ $ 157,266 $ 128,182 $(28,814) $256,634 -- $256,634
Cost of Product Sold......................... 80,457 62,242 (14,748) 127,951 -- 127,951
---------- ---------- -------------- -------- ----------- ---------
Gross Profit................................. 76,809 65,940 (14,066) 128,683 -- 128,683
---------- ---------- -------------- -------- ----------- ---------
Operating Costs and Expenses
Operating and maintenance expenses......... 18,191 44,663 (10,046) 52,808 $(4,181)(B) 48,627
General and administrative................. 9,707 14,239 -- 23,946 (4,944)(B) 19,002
Depreciation and amortization.............. 12,439 4,983 (905) 16,517 448(C) 16,965
Property and other taxes................... 6,104 -- -- 6,104 -- 6,104
---------- ---------- -------------- -------- ----------- ---------
46,441 63,885 (10,951) 99,375 (8,677) 90,698
---------- ---------- -------------- -------- ----------- ---------
Operating Income............................. 30,368 2,055 (3,115) 29,308 8,677 37,985
---------- ---------- -------------- -------- ----------- ---------
Other Income (Expense)
Investment income and other................ 2,611 1,185 -- 3,796 -- 3,796
Interest expense........................... (9,670) (11,994) -- (21,664) 7,504(D) (14,160)
Debt restructuring costs................... -- (2,976)(G) -- (2,976) -- (2,976)
---------- ---------- -------------- -------- ----------- ---------
(7,059) (13,785) -- (20,844) 7,504 (13,340)
---------- ---------- -------------- -------- ----------- ---------
Income (Loss) Before Income Taxes............ 23,309 (11,730) (3,115) 8,464 16,181 24,645
Provision (Credit) for Income Taxes.......... 7,869 (324) (94) 7,451 (269)(E) 7,182
---------- ---------- -------------- -------- ----------- ---------
Net Income................................. 15,440 (11,406) (3,021) 1,013 16,450 17,463
Dividends on Preferred Stock................. (120) -- -- (120) (2,043)(F) (2,163)
---------- ---------- -------------- -------- ----------- ---------
Net Income Available for Common............ $ 15,320 $ (11,406) $ (3,021) $ 893 $14,407 $ 15,300(G)
---------- ---------- -------------- -------- ----------- ---------
---------- ---------- -------------- -------- ----------- ---------
Net Income per Share......................... $ 2.00 $ 1.74(G)
---------- ---------
---------- ---------
Weighted Average Shares Outstanding.......... 7,677 8,805
---------- ---------
---------- ---------
Selected Financial Ratios
Interest coverage.......................... 5.14(H) 4.65
---------- ---------
---------- ---------
Ratio of earnings to fixed charges......... 3.39(H) 2.73(G)
---------- ---------
---------- ---------
Ratio of earnings to fixed charges,
including preferred dividends............. 3.33(H) 2.25(G)
---------- ---------
---------- ---------
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ESTIMATED
EFFECTS OF
PARTIAL SALE
OF ASSETS TO
NPS SYNERGY UNRELATED PRO FORMA
HISTORICAL HISTORICAL THIRD PARTY(A) SUBTOTAL ADJUSTMENT PRO FORMA
---------- ---------- -------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue............................ $ 50,754 $ 42,816 ($10,958) $ 82,612 $-- $ 82,612
Cost of Product Sold......................... 26,185 20,907 (6,001) 41,091 -- 41,091
---------- ---------- -------------- -------- ----------- ---------
24,569 21,909 (4,957) 41,521 -- 41,521
---------- ---------- -------------- -------- ----------- ---------
Operating Costs and Expenses
Operating and maintenance expenses......... 4,210 11,889 (2,819) 13,280 197(B) 13,477
General and administrative................. 2,594 (159)(G) -- 2,435 (690)(B) 1,745
Depreciation and amortization.............. 3,210 1,476 (220) 4,466 72(C) 4,538
Property and other taxes................... 1,673 -- -- 1,673 -- 1,673
---------- ---------- -------------- -------- ----------- ---------
11,687 13,206 (3,039) 21,854 (421) 21,433
---------- ---------- -------------- -------- ----------- ---------
Operating Income............................. 12,882 8,703 (1,918) 19,667 421 20,088
---------- ---------- -------------- -------- ----------- ---------
Other Income (Expense)
Investment income and other................ 565 172 -- 737 -- 737
Interest expense........................... (2,590) (2,390) -- (4,980) 1,267(D) (3,713)
Debt restructuring costs................... -- (24) -- (24) -- (24)
---------- ---------- -------------- -------- ----------- ---------
(2,025) (2,242) -- (4,267) 1,267 (3,000)
---------- ---------- -------------- -------- ----------- ---------
Income (Loss) Before Income Taxes............ 10,857 6,461 (1,918) 15,400 1,688 17,088
Provision (Credit) for Income Taxes.......... 3,754 (224) -- 3,530 (282)(E) 3,248
---------- ---------- -------------- -------- ----------- ---------
Net Income................................... 7,103 6,685 (1,918) 11,870 1,970 13,840
Dividends on Preferred Stock................. (30) -- -- (30) (511)(F) (541)
---------- ---------- -------------- -------- ----------- ---------
Net Income Available for Common.............. $ 7,073 $ 6,685 ($ 1,918) $ 11,840 $ 1,459 $ 13,299(G)
---------- ---------- -------------- -------- ----------- ---------
---------- ---------- -------------- -------- ----------- ---------
Net Income per Share......................... $ 0.92 $ 1.51(G)
---------- ---------
---------- ---------
Weighted Average Shares Outstanding.......... 7,677 8,805
---------- ---------
---------- ---------
Selected Financial Ratios
Interest coverage.......................... 7.53(H) 6.68
---------- ---------
---------- ---------
Ratio of earnings to fixed charges........... 5.09(H) 5.52(G)
---------- ---------
---------- ---------
Ratio of earnings to fixed charges, including
preferred dividends......................... 5.00(H) 4.69(G)
---------- ---------
---------- ---------
<FN>
- ------------------------
Note: The results of operations for Synergy for the three months ended March
31, 1995 are not indicative of a full year's results of operations.
</TABLE>
12
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ESTIMATED SALE
OF CERTAIN
ASSETS TO
NPS SYNERGY UNRELATED PRO FORMA
HISTORICAL HISTORICAL THIRD PARTY(I) SUBTOTAL ADJUSTMENT PRO FORMA
---------- ---------- -------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Current Assets
Cash....................................... $ 3,338 $ 4,117 $ 40,000 $ 47,455 ($40,000)(J) $ 7,455
Trade receivables.......................... 13,890 16,677 (4,598) 25,969 (990)(K) 24,979
Inventories................................ 13,332 10,607 (2,393) 21,546 (1,500)(K) 20,046
Prepaid expenses........................... -- 1,137 -- 1,137 -- 1,137
Other...................................... 5,765 -- -- 5,765 -- 5,765
---------- ---------- -------------- -------- ----------- ---------
36,325 32,538 33,009 101,872 (42,490) 59,382
---------- ---------- -------------- -------- ----------- ---------
Property and Equipment
At cost, net of accumulated depreciation... 252,806 70,045 (13,685) 309,166 7,140(K) 316,306
---------- ---------- -------------- -------- ----------- ---------
Other Assets (net)
Goodwill and other intangibles............. -- 2,348 (19,324) (16,976) 54,422(K) 37,446
Other...................................... 74,301 1,014 -- 75,315 (1,014)(K) 74,301
---------- ---------- -------------- -------- ----------- ---------
74,301 3,362 (19,324) 58,339 53,408 111,747
---------- ---------- -------------- -------- ----------- ---------
Total Assets............................... $ 363,432 $ 105,945 $-- $469,377 $ 18,058 $487,435
---------- ---------- -------------- -------- ----------- ---------
---------- ---------- -------------- -------- ----------- ---------
Current Liabilities
Commercial paper........................... $ 6,000 $ -- $-- $ 6,000 $ -- $ 6,000
Current maturities of long-term debt....... 570 88,387 -- 88,957 (88,387)(L) 570
Accounts payable and accrued expenses...... 29,699 10,540 -- 40,239 5,455(K) 45,694
---------- ---------- -------------- -------- ----------- ---------
36,269 98,927 -- 135,196 (82,932) 52,264
---------- ---------- -------------- -------- ----------- ---------
Other Liabilities
Deferred income taxes...................... 37,742 2,093 -- 39,835 (1,720)(L) 38,115
Unamortized investment tax credits......... 10,444 -- -- 10,444 -- 10,444
Deferred interest payable.................. -- 1,030 -- 1,030 (1,030)(L) --
Other...................................... 27,862 935 -- 28,797 -- 28,797
---------- ---------- -------------- -------- ----------- ---------
76,048 4,058 -- 80,106 (2,750) 77,356
---------- ---------- -------------- -------- ----------- ---------
Long Term Debt............................... 129,318 4,330 -- 133,648 47,374(M) 181,022
---------- ---------- -------------- -------- ----------- ---------
Company-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trust.... -- -- -- -- 24,212(N) 24,212
---------- ---------- -------------- -------- ----------- ---------
Cumulative Preferred Stock................... 2,640 41,700 -- 44,340 (41,700)(Q) 2,640
---------- ---------- -------------- -------- ----------- ---------
Common Stock Equity (Deficit)
Common stock............................... 26,870 41 -- 26,911 4,268(O) 31,179
Additional paid-in capital................. 29,923 5,284 -- 35,207 21,191(P) 56,398
Retained earnings.......................... 59,183 (48,395) -- 10,788 48,395(Q) 59,183
Unrealized gain on investments, net........ 3,181 -- -- 3,181 -- 3,181
---------- ---------- -------------- -------- ----------- ---------
119,157 (43,070) -- 76,087 73,854 149,941
---------- ---------- -------------- -------- ----------- ---------
Total Liabilities & Stockholders Equity.... $ 363,432 $ 105,945 -- $469,377 $ 18,058 $487,435
---------- ---------- -------------- -------- ----------- ---------
---------- ---------- -------------- -------- ----------- ---------
</TABLE>
13
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
A) Represents all relevant statement of operations effects, net of income taxes,
generated by the expected sale of certain Synergy properties to an unrelated
third party. Although a purchase agreement to sell certain properties has
been executed and it is anticipated that such transaction will be
consummated, in the event the Third Party Sale is not closed, pro forma net
income available for common would have been $15,343,000 and $14,040,000; and
pro forma net income per common share would have been $1.73 and $1.58 for
the year ended December 31, 1994 and for the three months ended March 31,
1995, respectively. The following represents the estimated impact on pro
forma net income available for common as presented if the sale does not
occur (in thousands):
<TABLE>
<CAPTION>
YEAR THREE
ENDED MONTHS
12/31/94 ENDED
--------- 3/31/95
INCREASE -----------
(DECREASE)
<S> <C> <C>
Pro forma net income available for common as presented........................... $ 15,300 $ 13,299
--------- -----------
1) Operating income retained............................................ 3,115 1,918
2) Additional reductions in operating costs and expenses................ 610 153
3) Increased general and administrative charge.......................... (750) (188)
4) Increased interest expense........................................... (1,934) (483)
5) Increased income tax expense......................................... (180) (455)
6) Increased dividends on preferred stock............................... (818) (204)
--------- -----------
Subtotal........................................................... 43 741
--------- -----------
Pro forma net income available for common without sale to third party............ $ 15,343 $ 14,040
--------- -----------
--------- -----------
</TABLE>
The following represents the estimated impact on the pro forma balance sheet
at March 31, 1995 as presented if the sale does not occur (in thousands):
<TABLE>
<CAPTION>
3/31/95
-----------
INCREASE
(DECREASE)
<S> <C>
1) Trade receivables................................................... $ 4,598
2) Inventories......................................................... 2,393
3) Property and equipment, net......................................... 13,685
4) Goodwill............................................................ 19,324
-----------
Total Assets...................................................... $ 40,000
-----------
-----------
1) Long-term debt...................................................... 28,000
2) Common stock........................................................ 2,000
3) Preferred stock..................................................... 10,000
-----------
Total Liabilities & Equity........................................ $ 40,000
-----------
-----------
</TABLE>
14
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
B) Represents the following breakdown of reductions in operating costs and
expenses principally related to employee positions, corporate administrative
expenses and certain other specifically identified cost savings (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED THREE
12/31/94 MONTHS
----------- ENDED
3/31/95
INCREASE -----------
(DECREASE)
<S> <C> <C>
Operating expenses --
1) Employee related expenses................................................... $ (1,834) $ (458)
2) Vehicle lease expenses...................................................... (2,047) 730
3) Store consolidations........................................................ (300) (75)
----------- -----------
Total..................................................................... $ (4,181) $ 197
----------- -----------
----------- -----------
General and administrative expenses --
1) Employee related expenses................................................... $ (7,863) $ (1,431)
2) Occupancy costs............................................................. (643) (151)
3) Bank account charges........................................................ (188) (45)
4) Empire Gas general and administrative charge................................ 3,250 812
5) Empire Gas management fee................................................... 500 125
----------- -----------
Total..................................................................... $ (4,944) $ (690)
----------- -----------
----------- -----------
</TABLE>
All general and administrative functions previously performed at Synergy
headquarters would be undertaken by Empire Gas, Inc. under a management
agreement governing the operation of the Synergy properties. (See "Pending
Acquisition of Synergy Group Incorporated.") Under the terms of the
management agreement, Empire Gas will be compensated through a general and
administrative charge and a management fee arrangement.
The vehicle lease expenses are primarily attributable to property owned by
affiliates of existing Synergy shareholders. Such property will be purchased
as a part of the acquisition transaction. The increase in lease expense for
the three months ended March 31, 1995 reflects the net effect of the
elimination of such lease expense and a reversal of the credit to expense
created by a $1,328,000 forgiveness by these same affiliates of accrued
rental obligations. In addition, general and administrative expense savings
include shareholder compensation.
C) Represents additional depreciation and amortization of fixed assets and
intangibles related to the adjustment of assets to fair market value in
accordance with the purchase method of accounting.
D) Represents interest expense savings associated with the retirement of
Synergy's debt as a result of the Acquisition net of additional interest
expense related to NPS issuing new debt securities.
15
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
The following table presents a reconciliation of the pro forma interest
expense to the historical interest expense for the year ended December 31,
1994, and the three months ended March 31, 1995 (in thousands):
<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED ENDED
12/31/94 3/31/95
---------- ---------
<S> <C> <C>
Historical interest expense --
NPS....................................................................................... $ 9,670 $ 2,590
Synergy................................................................................... 11,994 2,390
---------- ---------
21,664 4,980
---------- ---------
Add: Interest on short-term bridge financing at an assumed rate of 7.5%.................... 649 162
Interest on new debt securities issued for permanent financing at an assumed rate of
7.5%.................................................................................. 3,639 910
Less: Interest on retired long-term debt of Synergy.................................. (11,792) (2,339)
---------- ---------
Pro forma adjustment........................................................................ (7,504) (1,267)
---------- ---------
Pro forma interest expense.................................................................. $ 14,160 $ 3,713
---------- ---------
---------- ---------
</TABLE>
E) Represents income tax effect of all pro forma adjustments. Such adjustments
assume Synergy will be a separate income tax filing and reporting entity.
F) Represents preferred stock dividend requirements related to the issuance of
new securities as part of the permanent financing. This dividend requirement
is based on an 8.5% pretax rate.
G) The net income of Synergy for the year ended December 31, 1994 includes a
nonrecurring charge of $2,976,000 for debt restructing costs. Had the debt
restructuring not occurred, pro forma net income available for common would
have been $18,276,000; pro forma net income per common share would have been
$2.08; ratio of earnings to fixed charges would have been 2.94x; and ratio
of fixed charges, including preferred dividends would have been 2.42x for
the year ended December 31, 1994.
The net income of Synergy for the three months ended March 31, 1995 includes
a nonrecurring credit to general and administrative expense of $4,326,000
for the reversal of previously accrued shareholders' compensation. Had this
compensation adjustment not been made, pro forma net income available for
common would have been $8,973,000; pro forma net income per common share
would been $1.02; ratio of earnings to fixed charges would have been 4.38x
and ratio of earnings to fixed charges, including preferred dividends would
have been 3.68x for the three months ended March 31, 1995.
In accordance with the current guidelines of the Commission, no minority
interest has been recognized even though NPS will initially own 72.5% of the
common stock of SYN.
H) The Company has calculated the interest coverage ratio pursuant to the
Company's general mortgage indenture and has calculated the ratio of
earnings to fixed charges pursuant to Item 503 of the Commission's
Regulation S-K.
I) Represents the sale of certain assets to an unrelated third party in a
separate transaction.
J) Represents cash purchase price from the unrelated third party sale proceeds.
K) Represents various purchase accounting adjustments to be accounted for in
accordance with the purchase method of accounting.
16
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
The following is a detailed allocation of the purchase price and source of
funds, net of underwriting fees, related to the acquisition transaction (in
thousands):
<TABLE>
<S> <C>
Purchase price.......................................................... $ 140,000
Add: Debt, acquisition, and transition costs........................... 5,000
---------
Total............................................................... 145,000
Less: Sale to an unrelated third party................................. 40,000
---------
Adjusted purchase price................................................. $ 105,000
---------
---------
Allocation of purchase price --
Cash.................................................................. $ 4,117
Trade receivables..................................................... 11,089
Inventories........................................................... 6,714
Prepaid expenses and other............................................ 1,137
Property, plant, and equipment........................................ 63,500
Goodwill and other intangibles........................................ 37,446
Accounts payable and accrued expenses................................. (15,995)
Customer deposits..................................................... (935)
Deferred income tax................................................... (373)
Long-term debt........................................................ (1,700)
---------
Net assets acquired................................................. $ 105,000
---------
---------
Source of funds, net --
Long-term debt........................................................ $ 50,004
Company-Obligated Mandatorily Redeemable Preferred Securities of Trust
Subsidiary........................................................... 24,212
Common stock.......................................................... 30,784
---------
Total............................................................... $ 105,000
---------
---------
</TABLE>
L) Represents liabilities and other deferred credits that would be paid with
proceeds of the transaction.
M) Represents the following debt restructuring of the combined companies (in
thousands):
<TABLE>
<S> <C>
Historical long-term debt --
NPS................................................................... $ 129,318
Synergy............................................................... 4,330
---------
Total............................................................... 133,648
---------
Add: New debt offering................................................. 50,004
Less: Retirement of Synergy long-term debt............................. (2,630)
---------
Pro forma adjustment.................................................. 47,374
---------
Pro forma long-term debt.............................................. $ 181,022
---------
---------
</TABLE>
N) Represents the net proceeds expected to be generated by a Company-Obligated
Mandatorily Redeemable Preferred Securities of Trust Subsidiary offering
that is part of the permanent financing. All of the assets of NWPS Capital,
the subsidiary trust, will be approximately $33.5 million of Subordinated
Debt Securities of the Company which will bear interest at a rate of 8 1/8%
per annum, assuming the issuance of 1.3 million Preferred Securities. Pro
Forma amounts shown in the table reflect the portion of the estimated net
proceeds of the offering of Preferred Securities assumed for purposes of
preparing the Pro Forma Financial Information to be used to fund the
Acquisition.
O) Represents the combination of purchase accounting adjustments eliminating
Synergy's common stock investment of $41,000 against the par value of shares
expected to be sold in a common stock offering that is part of the permanent
financing.
17
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
The following provides a summary of the net adjustment (in thousands):
<TABLE>
<S> <C>
Par value of shares generated from Company common stock offering.......... $ 4,309
Less: elimination of Synergy common stock................................ (41)
---------
Net..................................................................... $ 4,268
---------
---------
</TABLE>
P) Represents the combination of purchase accounting adjustments eliminating
Synergy's additional paid-in capital of $5,284,000 against the net proceeds
expected to be allocated to Company additional paid-in capital as a result
of the common stock offering that is part of the permanent financing.
The following provides a summary of the net adjustment (in thousands):
<TABLE>
<S> <C>
Net allocation to additional paid-in capital from Company common stock
offering................................................................ $ 26,475
Less: elimination of Synergy additional paid-in capital................. (5,284)
---------
Net.................................................................... $ 21,191
---------
---------
</TABLE>
Q) Represents the elimination of Synergy's remaining equity accounts.
18
<PAGE>
THE NWPS TRUSTS
Each of NWPS Capital Financing I, NWPS Capital Financing II and NWPS Capital
Financing III 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 NWPS Trustees (as
defined below) of such trust and (ii) the filing of a separate certificate of
trust with the Secretary of State of the State of Delaware on June 19, 1995.
Each NWPS Trust exists for the exclusive purposes of (i) issuing the Preferred
Securities and common securities representing undivided beneficial interests in
the assets of such NWPS Trust (the "Common Securities" and, together with the
Preferred Securities, the "Trust Securities"), (ii) investing the gross proceeds
from the sale of the Trust Securities in the Subordinated Debt Securities of the
Company 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 NWPS Trust. Each NWPS Trust has a term of approximately 55
years but may terminate earlier, as provided in each Declaration. The business
and affairs of each NWPS Trust will be conducted by the trustees (the "NWPS
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 NWPS
Trustees of a NWPS Trust. The duties and obligations of the NWPS Trustees for
each NWPS Trust shall be governed by the Declaration for such trust. A majority
of the NWPS Trustees will be persons who are employees or officers of or who are
affiliated with the Company (the "Regular Trustees"). In certain limited
circumstances set forth in the Prospectus Supplement for the Preferred
Securities, the holders of a majority in liquidation amount 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
NWPS Trustee of each NWPS Trust will be a financial institution that is not
affiliated with the Company and has a specified minimum amount of aggregate
capital, surplus, and undivided profits of not less than $50,000,000, which
shall act as property trustee and as indenture trustee for the purposes of the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), pursuant to
the terms set forth in the Prospectus Supplement for the Preferred Securities
(the "Property Trustee"). In addition, unless the Property Trustee maintains a
principal place of business in the State of Delaware and otherwise meets the
requirements of applicable law, one NWPS Trustee of each NWPS Trust will have a
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 NWPS Trusts
and the offering of the Trust Securities, the payment of which will be
guaranteed by the Company as described under "Description of the Guarantees"
herein. The Delaware Trustee for each NWPS Trust is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890. The
principal place of business of each NWPS Trust is c/o the Company, 33 Third
Street S.E., Huron, South Dakota, 57350-1318, telephone (605) 352-8411.
19
<PAGE>
USE OF PROCEEDS
If the Third Party Sale is consummated, the net proceeds from the sale of
$102.5 million of the Offered Securities will be applied to fund the
Acquisition, including certain transaction expenses. The Company will use $50
million of the net proceeds to purchase 50,000 shares of the 15% Series A
Cumulative Preferred Stock of SYN, the subsidiary of the Company formed to
effect the Acquisition, and $52.5 million of the net proceeds will be loaned by
the Company to SYN. If the Third Party Sale is not consummated, the net proceeds
from the sale of $142,500,000 of the Offered Securities will be applied to fund
the Acquisition, including certain transaction expenses. In that case the
Company will use $68 million of the net proceeds to purchase 68,000 shares of
the 15% Series A Cumulative Preferred Stock of SYN and $74.5 million of the net
proceeds will be loaned by NGC to SYN.
Each NWPS Trust will use all of the proceeds received from the sale of its
Preferred Securities to purchase Subordinated Debt Securities from the Company.
The Company intends to add the net proceeds from the sale of the Subordinated
Debt Securities to its general funds, to be used to fund the Acquisition, as
described above, and for other general corporate purposes, as described below.
The net proceeds from the sale of any other Offered Securities will be used
for general corporate purposes, which may include the repayment of indebtedness,
working capital expenditures and other investments in, or acquisitions of,
businesses and assets. Pending application of such net proceeds for specific
purposes, such proceeds may be invested in short-term or marketable securities.
Specific allocations of proceeds to a particular purpose that have been made at
the date of any Prospectus Supplement will be described therein.
In the event the Acquisition is not consummated, the net proceeds from the
sale of the Offered Securities will be used to redeem or acquire and retire
outstanding First Mortgage Bonds (as defined under "Description of the Mortgage
Bonds"), repay short term debt, and for other general corporate purposes, as
described above.
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred dividends for the Company on an
historical basis for the fiscal years ended December 31, 1994, 1993, 1992, 1991
and 1990, and for the three-month period ended March 31, 1995. Such ratios are
also presented on a pro forma basis for the year ended December 31, 1994 and the
three-month period ended March 31, 1995. For the purpose of calculating such
ratios, "earnings" consist of income from continuing operations before income
taxes, "fixed charges" consist of interest on all indebtedness, amortization of
debt expense and the percentage of rental expense on operating leases deemed
representative of the interest factor and "preferred dividends" represent
dividends paid on all preferred shares outstanding during the periods. See
"Northwestern Public Service Company and Synergy Group Incorporated Pro Forma
Financial Information" for the assumptions upon which the pro forma ratios are
based.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED
--------------------------------------------------------------- MARCH 31,
1990 1991 1992 1993 1994 1995
----- ----- ----- ----- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges....... 4.61 4.09 3.42 3.52 3.39 5.09
Ratio of Earnings to Combined Fixed
Charges and Preferred Dividends......... 4.28 3.79 3.33 3.45 3.33 5.00
<CAPTION>
PRO FORMA
--------------------------------
YEAR ENDED QUARTER ENDED
DECEMBER 31, MARCH 31,
1994 1995
----------------- -------------
<S> <C> <C>
Ratio of Earnings to Fixed Charges....... 2.73 5.52
Ratio of Earnings to Combined Fixed
Charges and Preferred Dividends......... 2.25 4.69
</TABLE>
DESCRIPTION OF THE MORTGAGE BONDS
GENERAL
The Mortgage Bonds will be bonds, notes or other evidences of indebtedness
authenticated and delivered under a General Mortgage Indenture and Deed of
Trust, between the Company and The Chase
20
<PAGE>
Manhattan Bank (N.A.) (the "New Mortgage Trustee"), dated as of August 1, 1993.
The New Mortgage Trustee shall act as indenture trustee for the purposes of the
Trust Indenture Act of 1939, as amended. Such General Mortgage and Deed of
Trust, as supplemented by various supplemental indentures, including one or more
supplemental indentures relating to the Mortgage Bonds, is hereinafter referred
to as the "New Mortgage." The summaries under this heading do not purport to be
complete and are subject to the detailed provisions of the New Mortgage.
Capitalized terms used under this heading which are not otherwise defined in
this Prospectus shall have the meanings ascribed thereto in the New Mortgage.
Wherever particular provisions of the New Mortgage or terms defined therein are
referred to, such provisions or definitions are incorporated by reference as a
part of the statements made herein and such statements are qualified in their
entirety by such reference. References to article and section numbers in this
description of the Mortgage Bonds, unless otherwise indicated, are references to
article and section numbers of the New Mortgage.
The New Mortgage provides that additional bonds may be issued thereunder on
the basis of Pledged Bonds (as hereinafter defined), property additions, retired
bonds and cash. (See "Issuance of Additional Mortgage Bonds" below.) The
Mortgage Bonds and all other bonds heretofore or hereafter issued under the New
Mortgage are collectively referred to herein as the "Mortgage Bonds."
Reference is made to the Prospectus Supplement for the Mortgage Bonds for a
description of the following terms of the series of Mortgage Bonds in respect of
which this Prospectus is being delivered: (i) the title (series designation) of
such Mortgage Bonds; (ii) the limit, if any, upon the aggregate principal amount
of such Mortgage Bonds, (iii) the date or dates on which the principal of such
Mortgage Bonds is payable; (iv) the rate or rates at which such Mortgage Bonds
will bear interest, if any; the date or dates from which such interest will
accrue; the dates on which such interest will be payable ("Interest Payment
Dates") and the regular record dates for the interest payable on such Interest
Payment Dates; (v) the bases on which the Mortgage Bonds will be issued; (vi)
the option, if any, of the Company to redeem such Mortgage Bonds and the periods
within which or the dates on which, the prices at which and the terms and
conditions upon which, such Mortgage Bonds may be redeemed, in whole or in part,
upon the exercise of such option; (vii) the obligation, if any, of the Company
to redeem or purchase such Mortgage Bonds pursuant to any sinking fund or
analogous provisions or at the option of the Holder and the periods within which
or the dates on which, the prices at which and the terms and conditions upon
which such Mortgage Bonds will be redeemed, in whole or in part, pursuant to
such obligation; (viii) the denominations in which such Mortgage Bonds will be
issuable; and (ix) any other terms of such Mortgage Bonds not inconsistent with
the provisions of the New Mortgage.
While the New Mortgage contains provisions for the maintenance of the
Mortgaged Property, it does not contain any provisions for a maintenance or
sinking fund and, except as may be provided in a Supplemental Indenture (and
described in the applicable Prospectus Supplement), there will be no provisions
for any such funds for the Mortgage Bonds.
REDEMPTION OF THE MORTGAGE BONDS
Any terms for the optional or mandatory redemption of Mortgage Bonds will be
set forth in the Prospectus Supplement. Except as shall otherwise be provided in
the applicable Prospectus Supplement with respect to Mortgage Bonds redeemable
at the option of the Holder, Mortgage Bonds will be redeemable only upon notice
by mail not less than 30 days prior to the date fixed for redemption, and, if
less than all the Mortgage Bonds of a series, or any tranche thereof, are to be
redeemed, the particular Mortgage Bonds to be redeemed will be selected by such
method as shall be provided for the particular series or tranche, or in the
absence of any such provision, by such method as the Bond Registrar deems fair
and appropriate. (See Sections 5.03 and 5.04.)
Any notice of redemption at the option of the Company may state that such
redemption shall be conditioned upon receipt by the New Mortgage Trustee, on or
prior to the dated fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest, if any, on such Mortgage Bonds
and that if such money has not been so received, such notice will be of no force
and effect and the Company will not be required to redeem such Mortgage Bonds.
(See Section 5.04.)
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SECURITY
GENERAL. Except as discussed below, Mortgage Bonds now or hereafter issued
under the New Mortgage will be secured primarily by:
(a) bonds ("First Mortgage Bonds") issued under the Company's Indenture
dated August 1, 1940 (the "First Mortgage"), to The Chase Manhattan Bank
(N.A.), successor by merger to The Chase National Bank of the City of New
York, as trustee (the "First Mortgage Trustee"), and C. J. Heinzelmann,
successor to Carl E. Buckley, as individual trustee, and delivered to the
New Mortgage Trustee under the New Mortgage, which First Mortgage Bonds will
be secured, equally and ratably with all other bonds issued under the First
Mortgage, by a valid first lien on substantially all of the fixed property,
franchises and rights of the Company of a character not expressly excepted
from the lien (which excepted property consists principally of cash,
securities, receivables, personal property held for sale or lease or
consumable in operations, and certain real estate held for resale and not
used or useful in the public utility business of the Company), subject to
permitted encumbrances and liens as defined in the First Mortgage; and
(b) the lien of the New Mortgage on the Company's properties used in the
generation, production, transmission or distribution of electricity or the
distribution of gas in any form and for any purpose in the States of South
Dakota or Nebraska, together with the properties owned by the Company as of
August 1, 1993 located in the States of North Dakota and Iowa which consist
principally of shared ownership interests in electric generating facilities
(the Company does not serve customers in the States of North Dakota and
Iowa), but not, unless the Company otherwise elects, any future acquired
properties in the States of North Dakota and Iowa, which lien is junior to
the lien of the First Mortgage.
As discussed below under "Pledged Bonds," following a merger or
consolidation of another corporation into the Company, the Company could deliver
to the New Mortgage Trustee bonds issued under an existing mortgage on the
properties of such other corporation in lieu of or in addition to bonds issued
under the First Mortgage. In such event, the Mortgage Bonds would be secured,
additionally, by such bonds and by the lien of the New Mortgage on the
properties of such other corporation, which would be junior to the liens of such
existing mortgage and the First Mortgage. The First Mortgage and all such other
mortgages are hereinafter, collectively, called the "Class "A" Mortgages," and
all bonds issued under the Class "A" Mortgages and delivered to the New Mortgage
Trustee are hereinafter collectively called the "Pledged Bonds." If and when no
Class "A" Mortgages are in effect, the New Mortgage will constitute a first
mortgage lien on all property of the Company subject thereto.
PLEDGED BONDS. The Pledged Bonds will be issued and delivered to, and
registered in the name of, the New Mortgage Trustee or its nominee and will be
owned and held by the New Mortgage Trustee, subject to the provisions of the New
Mortgage, for the benefit of the Holders of all Mortgage Bonds Outstanding from
time to time, and the Company will have no interest in such Pledged Bonds.
Except as may be otherwise set forth in the supplemental indenture pursuant to
which any Mortgage Bonds are to be issued, Pledged Bonds issued as the basis for
the authentication and delivery of such Mortgage Bonds (a) will mature on the
same dates, and in the same principal amounts, as such Mortgage Bonds, and (b)
will contain, in addition to any mandatory redemption provisions applicable to
all Pledged Bonds Outstanding under the related Class "A" Mortgage, mandatory
redemption provisions correlative to provisions for mandatory redemption, or for
redemption at the option of the Holder, of such Mortgage Bonds. Pledged Bonds
issued as the basis for authentication and delivery of a series or tranche of
Mortgage Bonds (x) may, but need not, bear interest, any such interest to be
payable at the same times as interest on the Mortgage Bonds of such series or
tranche, and (y) may, but need not, contain provisions for the redemption
thereof at the option of the Company, any such redemption to be made at a
redemption price or prices not less than the principal amount of such Pledged
Bonds. (See Sections 4.02 and 7.01.)
Any payment by the Company of principal of or premium or interest on the
Pledged Bonds held by the New Mortgage Trustee will be applied by the New
Mortgage Trustee to the payment of any principal, premium or interest, as the
case may be, in respect of the Mortgage Bonds which is then due, and, to the
extent of such application, the obligation of the Company under the New Mortgage
to make such payment in
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respect of the Mortgage Bonds will be deemed satisfied and discharged. If, at
the time of any such payment of principal of Pledged Bonds, there shall be no
principal then due in respect to the Mortgage Bonds, the proceeds of such
payment will be deemed to constitute Funded Cash and will be held by the New
Mortgage Trustee as part of the New Mortgaged Property, to be withdrawn, used or
applied as provided in the New Mortgage. If, at the time of any such payment of
premium or interest on Pledged Bonds, there shall be no premium or interest, as
the case may be, then due in respect of the Mortgage Bonds, the proceeds of such
payment will be remitted to the Company at its request. (See Section 7.02 and
"Withdrawal of Cash" below.) Any payment by the Company of principal of or
premium or interest on Mortgage Bonds authenticated and delivered on the basis
of the deposit with the New Mortgage Trustee of Pledged Bonds (other than by
application of the proceeds in respect of such Pledged Bonds) will, to the
extent thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal, premium or interest, as the
case may be, in respect of such Pledged Bonds which is then due.
The New Mortgage Trustee may not sell, assign or otherwise transfer any
Pledged Bonds except to a successor trustee under the New Mortgage. (See Section
7.04.) At the time any Mortgage Bonds of any series or tranche which have been
authenticated and delivered upon the basis of Pledged Bonds cease to be
Outstanding (other than as a result of the application of the proceeds of the
payment or redemption of such Pledged Bonds), the New Mortgage Trustee shall
surrender to or upon the order of the Company an equal principal amount of such
Pledged Bonds having the same Stated Maturity and mandatory redemption
provisions as such Mortgage Bonds. (See Section 7.03.)
At the date of this Prospectus, the only Class "A" Mortgage is the First
Mortgage and the only Pledged Bonds issuable at this time are First Mortgage
Bonds issuable thereunder. The New Mortgage provides that in the event of the
merger or consolidation of another company with or into the Company, an existing
mortgage constituting a lien on properties of such other company prior to the
lien of the New Mortgage may be designated by the Company as an additional Class
"A" Mortgage. Bonds thereafter issued under such additional mortgage would be
Pledged Bonds and could provide the basis for the authentication and delivery of
Mortgage Bonds under the New Mortgage. (See Section 7.06.) When no Pledged Bonds
are Outstanding under a Class "A" Mortgage except for Pledged Bonds held by the
New Mortgage Trustee, then, at the request of the Company and subject to
satisfaction of certain conditions, the New Mortgage Trustee will surrender such
Pledged Bonds for cancellation, and the related Class "A" Mortgage will be
satisfied and discharged, the lien of such Class "A" Mortgage on the Company's
property will cease to exist and the priority of the lien of the New Mortgage
will be increased. (See Section 7.07.)
The New Mortgage contains no restrictions on the issuance of bonds under
Class "A" Mortgages in addition to Pledged Bonds issued to the New Mortgage
Trustee as the basis for the authentication and delivery of Mortgage Bonds.
First Mortgage Bonds may currently be issued under the First Mortgage on the
basis of property additions, retirements of bonds previously issued under the
First Mortgage and cash deposited with the First Mortgage Trustee. As of August
3, 1995, $47,500,000 of First Mortgage Bonds (other than Pledged Bonds) were
outstanding.
LIEN OF THE NEW MORTGAGE. The properties of the Company used in the
generation, production, transmission and distribution of electricity and the
distribution of gas in any form and for any purpose in the States of South
Dakota or Nebraska together with properties owned by the Company as of August 1,
1993 located in the States of North Dakota and Iowa (but not, unless the Company
otherwise elects, any future acquired properties in the States of North Dakota
and Iowa) are subject to the lien of the New Mortgage. Substantially all of such
property, while subject to the lien of the New Mortgage, will be also subject to
the prior lien of the First Mortgage. The Mortgage Bonds will have the benefit
of the prior lien of the First Mortgage on such property, and the benefit of the
prior lien of any additional Class "A" Mortgage on any property subject thereto,
to the extent of the aggregate principal amount of Pledged Bonds, issued under
the respective Class "A" Mortgages, held by the New Mortgage Trustee.
The lien of the New Mortgage is subject to Permitted Liens which include tax
liens and other governmental charges which are not delinquent and which are
being contested, construction and materialmen's liens, certain judgment liens,
easements, reservations and rights of others (including governmental entities)
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in, and defects of title in, certain property of the Company, certain leasehold
interests, liens on the Company's pollution control and sewage and solid waste
facilities and certain other liens and encumbrances. (See Section 1.01.)
There are excepted from the lien of the New Mortgage, among other things,
cash and securities not paid to, deposited with or held by the New Mortgage
Trustee under the New Mortgage; contracts, leases and other agreements of all
kinds, contract rights, bills, notes and other instruments, accounts receivable,
claims, certain intellectual property rights and other general intangibles;
permits, licenses and franchises; automobiles, other vehicles, movable
equipment, aircraft and vessels; all goods, wares and merchandise held for sale
in the ordinary course of business or for use by or for the benefit of the
Company; fuel, materials, supplies and other personal property consumable in the
operations of the Company's business; computers, machinery and equipment; coal,
ore, gas, oil, minerals and timber mined or extracted from the land; gas
transmission lines connecting wells with main or branch trunk lines or field
gathering lines connecting wells with main or branch trunk lines; electric
energy, gas, steam, water and other products generated, produced or purchased;
leasehold interests; and all books and records. (See Granting Clauses.) The
First Mortgage contains similar, but not identical, exceptions.
Without the consent of the Holders, the Company and the New Mortgage Trustee
may enter into supplemental indentures to subject to the lien of the New
Mortgage additional property, whether or not used in the electric or gas utility
businesses (including property which would otherwise be excepted from such
lien). (See Section 14.01.) Such property, so long as the same would otherwise
constitute Property Additions (as described below), would thereupon constitute
Property Additions and be available as a basis for the issuance of Mortgage
Bonds. (See "Issuance of Additional Mortgage Bonds" below.)
The New Mortgage contains provisions subjecting after-acquired property to
the lien thereof, subject to the prior lien of the First Mortgage. These
provisions are limited in the case of consolidation or merger (whether or not
the Company is the surviving corporation) or sale of substantially all of the
Company's assets. In the event of consolidation or merger or the transfer of all
the mortgaged property as or substantially as an entirety, the New Mortgage will
not be required to be a lien upon any of the properties then owned or thereafter
acquired by the successor corporation, except properties acquired from the
Company in or as a result of such transaction and improvements, extensions and
additions to such properties and renewals, replacements and substitutions of or
for any part or parts of such properties. (See Article Thirteen and
"Consolidation, Merger, Conveyance, Transfer or Lease" below.) In addition,
after-acquired property may be subject to vendors' liens, purchase money
mortgages and other liens thereon at the time of acquisition thereof, including
the lien of any Class "A" Mortgage.
The New Mortgage provides that the New Mortgage Trustee will have a lien,
prior to the lien on behalf of the holders of Mortgage Bonds, upon Mortgaged
Property and any money collected by the New Mortgage Trustee as proceeds of the
Mortgaged Property, for the payment of its reasonable compensation and expenses
and for indemnity against certain liabilities. (See Section 11.07.)
ISSUANCE OF ADDITIONAL MORTGAGE BONDS
The maximum principal amount of Mortgage Bonds which may be issued under the
New Mortgage is limited to $500,000,000, provided that, without the consent of
the Holders, the Company and the New Mortgage Trustee may enter into
supplemental indentures to increase such amount. (See Sections 3.01 and 14.01.)
Mortgage Bonds of any series may be issued from time to time under Article Four
of the New Mortgage on the basis of, and in an aggregate principal amount not
exceeding:
(1) the aggregate principal amount of Pledged Bonds issued and delivered
to the Trustee;
(2) 75% of the Cost or Fair Value (whichever is less) of Property
Additions (as described below) which do not constitute Bonded Property
Additions (being, generally, Property Additions which have been made the
basis of the authentication and delivery of Mortgage Bonds, the release of
mortgaged property or cash withdrawals) after certain deductions and
additions, primarily including adjustments to offset property retirements;
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(3) the aggregate principal amount of Retired Bonds (which consist of
Mortgage Bonds no longer Outstanding under the New Mortgage (including
Mortgage Bonds deposited under any sinking or analogous funds) which have
not been used for certain other purposes under the New Mortgage and which
are not to be paid, redeemed or otherwise retired by the application of
Funded Cash), but if Pledged Bonds have been made the basis for the
authentication and delivery of such Retired Bonds, only if the related Class
"A" Mortgage has been discharged; and
(4) an amount of cash deposited with the Trustee.
In general, the issuance of Mortgage Bonds is subject to Adjusted New
Earnings of the Company for 12 consecutive months within the preceding 18 months
being at least one and three-fourths the Annual Interest Requirements on all
Mortgage Bonds at the time Outstanding, Mortgage Bonds then applied for, all
outstanding Pledged Bonds other than Pledged Bonds held by the New Mortgage
Trustee under the New Mortgage, and all other indebtedness (with certain
exceptions) secured by a lien prior to the lien of the New Mortgage, except that
no such net earnings requirement need be met if the additional Mortgage Bonds to
be issued are to have no Stated Interest Rate prior to Maturity. The Company is
not required to satisfy the net earnings requirement prior to issuance of
Mortgage Bonds as provided in (1) above if the Pledged Bonds issued and
delivered to the New Mortgage Trustee as the basis for such issuance have been
authenticated and delivered under the related Class "A" Mortgage on the basis of
retired Pledged Bonds unless (a) the Stated Maturity of such retired Pledged
Bonds is a date more than five years after the date of the Company Order
requesting the authentication and delivery of such Mortgage Bonds and (b) the
Stated Interest Rate, if any, on such retired Pledged Bonds immediately prior to
Maturity is less than the Stated Interest Rate, if any, on such Mortgage Bonds
to be in effect upon the initial authentication and delivery thereof. In
addition, the Company is not required to satisfy the net earnings requirement
prior to issuance of Mortgage Bonds as provided in (3) above unless (a) the
Stated Maturity of the Retired Bonds is a date more than five years after the
date of the Company Order requesting the authentication and delivery of such
Mortgage Bonds and (b) the Stated Interest Rate, if any, on such Retired Bonds
immediately prior to Maturity is less than the Stated Interest Rate, if any, on
such Mortgage Bonds to be in effect upon the initial authentication and delivery
of such Mortgage Bonds. In general, the interest requirement with respect to
variable interest rate indebtedness, if any, is determined with reference to the
rate or rates in effect on the date immediately preceding such determination or
the rate to be in effect upon initial authentication. (See Section 1.03 and
Article Four).
Adjusted Net Earnings are calculated before, among other things, provisions
for income taxes; depreciation or amortization of property; interest on any
indebtedness and amortization of debt discount and expense; any non-recurring
charge to income of whatever kind or nature (including without limitation the
recognition of expense or impairment due to the non-recoverability of assets or
expense), whether or not recorded as a non-recurring item in the Company's books
of account; and any refund of revenues previously collected or accrued by the
Company subject to possible refund. With respect to Mortgage Bonds of a series
subject to a Periodic Offering (such as a medium-term note program), the New
Mortgage Trustee will be entitled to receive a certificate evidencing compliance
with the net earnings requirements only once, at or prior to the time of the
first authentication and delivery of the Mortgage Bonds of such series (unless
the Company Order requesting the authentication and delivery of such Mortgage
Bonds is delivered on or after the date which is two years after the most recent
Net Earnings Certificate was delivered, in which case an updated certificate
would be required to be delivered). (See Sections 1.03 and 4.01.)
Property Additions generally include any property which is owned by the
Company and is subject to the lien of the New Mortgage, except any property the
cost of acquisition or construction of which is properly chargeable to an
operating expense account of the Company. (See Section 1.04.)
Unless otherwise provided in the applicable Prospectus Supplement, the
Company will issue the Mortgage Bonds on the basis of Pledged Bonds (I.E., First
Mortgage Bonds) issued under its First Mortgage.
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RELEASE OF PROPERTY
The Company may obtain the release from the lien of the New Mortgage of any
Mortgaged Property if the Fair Value of all of the Mortgaged Property (excluding
the Mortgaged Property to be released but including any Mortgaged Property to be
acquired by the Company with the proceeds of, or otherwise in connection with,
such release) equals or exceeds an amount equal to twenty-fifteenths (20/15ths)
of the aggregate principal amount of Mortgage Bonds Outstanding and bonds issued
under Class "A" Mortgages outstanding (other than Pledged Bonds).
The New Mortgage provides simplified procedures for the release of property
which has been released from the lien of a Class "A" Mortgage, minor properties
and property taken by eminent domain, and provides for dispositions of certain
obsolete property and grants or surrender of certain rights without any release
or consent by the New Mortgage Trustee.
If any property released from the lien of the New Mortgage continues to be
owned by the Company after such release, the New Mortgage will not become a lien
on any improvement, extension or addition to such property or renewals,
replacements or substitutions of or for any part or parts of such property. (See
Article Eight.)
WITHDRAWAL OF CASH
Subject to certain limitations, cash held by the New Trustee may (1) be
withdrawn by the Company (a) to the extent of the Cost or Fair Value (whichever
is less) of Unbonded Property Additions, after certain deductions and additions
primarily including adjustments to offset retirements, or (b) in an amount equal
to twenty-fifteenths (20/15ths) of the aggregate principal amount of Mortgage
Bonds that the Company would be entitled to issue on the basis of Retired Bonds
(with the entitlement to such issuance being waived by operation of such
withdrawal), or (c) in an amount equal to twenty-fifteenths (20/15ths) of the
aggregate principal amount of any Outstanding Mortgage Bonds delivered to the
New Trustee, or (2) upon the request of the Company, be applied to (a) the
purchase of Mortgage Bonds (at prices not exceeding twenty-fifteenths (20/15ths)
of the principal amount thereof) or (b) the redemption or payment at Stated
Maturity of Mortgage Bonds (with any Mortgage Bonds received by the New Trustee
pursuant to these provisions being canceled by the New Trustee) (see Section
8.06); provided, however, that cash deposited with the New Mortgage Trustee as
the basis for the authentication and delivery of Mortgage Bonds, as well as cash
representing a payment of principal of Pledged Bonds, may only be withdrawn in
an amount equal to the aggregate principal amount of Mortgage Bonds the Company
would be entitled to issue on any basis (with the entitlement to such issuance
being waived by operation of such withdrawal), or may, upon the request of the
Company, be applied to the purchase, redemption or payment of Mortgage Bonds at
prices not exceeding, in the aggregate, the principal amount thereof (See
Sections 4.05 and 7.02).
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Company may not consolidate with or merge into any other corporation or
convey, transfer or lease the Mortgaged Property as or substantially as an
entirety to any person unless (a) such transaction is on such terms as will
fully preserve the lien and security of the New Mortgage and the rights and
powers of the New Mortgage Trustee and Holders, (b) the corporation formed by
such consolidation or into which the Company is merged or the person which
acquires by conveyance or transfer, or which leases, the Mortgaged Property as
or substantially as an entirety is a corporation organized and existing under
the laws of the United States of America or any state or territory thereof or
the District of Columbia, and such corporation executes and delivers to the New
Mortgage Trustee a supplemental indenture, which contains an assumption by such
corporation of the due and punctual payment of the principal of and premium, if
any, and interest, if any, on the Mortgage Bonds and the performance of all of
the covenants of the Company under the New Mortgage and which contains a grant,
conveyance, transfer and mortgage by the corporation confirming the lien of the
New Mortgage on the Mortgaged Property and subjecting to such lien all property
thereafter acquired by the corporation which shall constitute an improvement,
extension or addition to the Mortgaged Property or a renewal, replacement or
substitution of or for any part thereof, and, at the election of the
corporation, subjecting to the lien of the New Mortgage such other property then
owned or thereafter acquired by the
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corporation as the corporation shall specify, and (c) in the case of a lease,
such lease will be made expressly subject to termination by the Company or the
New Mortgage Trustee at any time during the continuance of an Event of Default.
(See Section 13.01.)
Other than the security afforded by the lien of the First Mortgage and the
New Mortgage and the restrictions on the issuance of additional First Mortgage
Bonds and New Mortgage Bonds, there are no provisions of the First Mortgage or
the New Mortgage which afford the holders of the Offered Bonds protection in the
event of a highly leveraged transaction, reorganization, restructuring, merger
or similar transaction involving the Company. Neither the First Mortgage nor the
New Mortgage contain provisions requiring the repurchase of the Offered Bonds
upon a change in control of the Company.
MODIFICATION OF NEW MORTGAGE
Without the consent of any Holders, the Company and the New Mortgage Trustee
may enter into one or more supplemental indentures for any of the following
purposes:
(a) to evidence the succession of another person to the Company and the
assumption by any such successor of the covenants of the Company in the New
Mortgage and in the Mortgage Bonds; or
(b) to add one or more covenants of the Company or other provisions for
the benefit of all Holders or for the benefit of the Holders of, or to
remain in effect only so long as there shall be Outstanding, Mortgage Bonds
of one or more specified series, or one or more tranches thereof, or to
surrender any right or power conferred upon the Company by the New Mortgage;
or
(c) to correct or amplify the description of any property at any time
subject to the lien of the New Mortgage, or better to assure, convey and
confirm to the New Mortgage Trustee any property subject or required to be
subjected to the lien of the New Mortgage, or to subject to the lien of the
New Mortgage additional property; or
(d) to convey, transfer and assign to the New Mortgage Trustee and to
subject to the lien of the New Mortgage with the same force and effect as if
included in the New Mortgage, property of subsidiaries of the Company used
or to be used for one or more purposes which if owned by the Company would
constitute property used or to be used for one or more of the Primary
Purposes of the Company's Business, which property shall for all purposes of
the New Mortgage be deemed to be property of the Company, together with such
other provisions as may be appropriate to express the respective rights of
the New Mortgage Trustee and the Company in regard thereto; or
(e) to change or eliminate any provision of the New Mortgage or to add
any new provision to the New Mortgage, provided that if such change,
elimination or addition adversely affects the interests of the Holders of
the Mortgage Bonds of any series or tranche in any material respect, such
change, elimination or addition will become effective with respect to such
series or tranche only when no Mortgage Bond of such series or tranche
remains outstanding under the New Mortgage; or
(f) to establish the form or terms of the Mortgage Bonds of any series
or tranche as permitted by the New Mortgage; or
(g) to provide for the authentication and delivery of bearer securities
and coupons appertaining thereto representing interest, if any, thereon and
for the procedures for the registration, exchange and replacement thereof
and for the giving of notice to, and the solicitation of the vote or consent
of, the holders thereof, and for any and all other matters incidental
thereto; or
(h) to evidence and provide for the acceptance of appointment by a
successor trustee or by a co-trustee or separate trustee; or
(i) to provide for the procedures required to permit the Company to
utilize, at its option, a noncertificated system of registration for all, or
any series or tranche of, the Mortgage Bonds; or
(j) to change any place where (1) the principal of and premium, if any,
and interest, if any, on the Mortgage Bonds of any series, or any tranche
thereof, will be payable, (2) any Mortgage Bonds of any series, or any
tranche thereof, may be surrendered for registration of transfer, (3) any
Mortgage Bonds
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of any series, or any tranche thereof, may be surrendered for exchange, and
(4) notices and demands to or upon the Company in respect of the Mortgage
Bonds of any series, or any tranche thereof, and the New Mortgage may be
served; or
(k) to cure any ambiguity, to correct or supplement any provision
therein which may be defective or inconsistent with any other provision
therein, or to make any changes to the provisions thereof or to add other
provisions with respect to matters and questions arising under the New
Mortgage, so long as such other changes or additions do not adversely affect
the interests of the Holders of Mortgage Bonds of any series or tranche in
any material respect; or
(l) to reflect changes in Generally Accepted Accounting Principles; or
(m) to provide the terms and conditions of the exchange or conversion,
at the option of the holders of Mortgage Bonds of any series, of the
Mortgage Bonds of such series for or into Mortgage Bonds of other series or
stock or other securities of the Company or any other corporation; or
(n) to change the words "Mortgage Bonds" to "First Mortgage Bonds" in
the descriptive title of all Outstanding Bonds at any time after the
discharge of the First Mortgage; or
(o) to comply with the rules or regulations of any national securities
exchange on which any of the Mortgage Bonds may be listed; or
(p) to modify Section 3.01(a) to increase the aggregate principal amount
of Mortgage Bonds which may be authenticated and delivered under the New
Mortgage. (See Section 14.01.)
Without limiting the generality of the foregoing, if the Trust Indenture Act
is amended after the date of the New Mortgage in such a way as to require
changes to the New Mortgage or the incorporation therein of additional
provisions or so as to permit changes to, or the elimination of, provisions
which, at the date of the New Mortgage or at any time thereafter, were required
by the Trust Indenture Act to be contained in the New Mortgage, the Company and
the New Mortgage Trustee may, without the consent of any Holders, enter into one
or more supplemental indentures to evidence or effect such amendment. (See
Section 14.01.)
Except as provided above, the consent of the Holders of not less than a
majority in aggregate principal amount of the Mortgage Bonds of all series then
Outstanding, considered as one class, is required for the purpose of adding any
provisions to, or changing in any manner, or eliminating any of the provisions
of, the New Mortgage pursuant to one or more supplemental indentures; provided,
however, if less than all of the series of Mortgage Bonds Outstanding are
directly affected by a proposed supplemental indenture, then the consent only of
the Holders of a majority in aggregate principal amount of Outstanding Mortgage
Bonds of all series so directly affected, considered as one class, will be
required; and provided, further, that if the Mortgage Bonds of any series have
been issued in more than one tranche and if the proposed supplemental indenture
directly affects the rights of the Holders of one or more, but less than all,
such tranches, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Mortgage Bonds of all tranches so directly
affected, considered as one class, will be required; and provided, further, that
no such amendment or modification may, without the consent of each Holder of the
Outstanding New Mortgage of each series or tranche directly affected thereby,
(a) change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Mortgage Bond, or reduce the principal amount
thereof or the rate of interest thereon (or the amount of any installment of
interest thereon) or change the method of calculating such rate or reduce any
premium payable upon the redemption thereof, or reduce the amount of the
principal of a Discount Bond that would be due and payable upon a declaration of
acceleration of maturity or change the coin or currency (or other property) in
which any Mortgage Bond or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of redemption, on or after
the redemption date), (b) permit the creation of any lien ranking prior to the
lien of the New Mortgage with respect to all or substantially all of the
Mortgaged Property or terminate the lien of the New Mortgage on all or
substantially all of the Mortgaged Property, or deprive such Holder of the
benefit of the security of the lien of the New Mortgage, (c) reduce the
percentage in principal amount of the Outstanding Mortgage Bonds of such series
or tranche, the consent of the Holders of which is required for any such
supplemental
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indenture, or the consent of the Holder of which is required for any waiver of
compliance with any provision of the New Mortgage or any default thereunder and
its consequences, or reduce the requirements for quorum or voting, or (d) modify
certain of the provisions of the New Mortgage relating to supplemental
indentures, waiver of certain covenants and waivers of past defaults. A
supplemental indenture which changes or eliminates any covenant or other
provision of the New Mortgage which has expressly been included solely for the
benefit of the Holders of, or which is to remain in effect only so long as there
shall be Outstanding Mortgage Bonds of one or more specified series, or one or
more tranches thereof, or modifies the rights of the Holders of Mortgage Bonds
of such series or tranches with respect to such covenant or other provision,
will be deemed not to affect the rights under the New Mortgage of the Holders of
the Mortgage Bonds of any other series or tranche. (See Section 14.02.)
WAIVER
The Holders of at least a majority in aggregate principal amount of all
Mortgage Bonds may waive the Company's obligations to comply with certain
covenants, including the Company's obligation to maintain its corporate
existence and properties, pay taxes and discharge liens, maintain certain
insurance and to make such recordings and filings as are necessary to protect
the security of the Holders and the rights of the New Mortgage Trustee, provided
that such waiver occurs before the time such compliance is required. The Holders
of at least a majority of the aggregate principal amount of Outstanding Mortgage
Bonds of all affected series or tranches, considered as one class, may waive,
before the time for such compliance, compliance with the Company's obligation to
maintain an office or agency where the Mortgage Bonds of such series or tranches
may be surrendered for payment, registration, transfer or exchange, and
compliance with any other covenant specified in a supplemental indenture
respecting such series or tranches. (See Section 6.09.)
EVENTS OF DEFAULT
Each of the following events constitutes an Event of Default under the New
Mortgage:
(1) failure to pay interest on any Mortgage Bond within 60 days after
the same becomes due;
(2) failure to pay principal or premium, if any, on any Mortgage Bond
within 15 days after its Maturity;
(3) failure to perform or breach of any covenant or warranty of the
Company in the New Mortgage (other than a covenant or a warranty a default
in the performance of which or breach of which is dealt with elsewhere under
this paragraph) for a period of 60 days after there has been given to the
Company by the New Mortgage Trustee, or to the Company and the New Mortgage
Trustee by the Holders of at least 50% in principal amount of Outstanding
Mortgage Bonds, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default," unless the New Mortgage Trustee, or the New Mortgage Trustee and
the Holders of a principal amount of Mortgage Bonds not less than the
principal amount of Mortgage Bonds the Holders of which gave such notice, as
the case may be, agree in writing to an extension of such period prior to
its expiration; provided, however, that the New Mortgage Trustee, or the New
Mortgage Trustee and such Holders, as the case may be, will be deemed to
have agreed to an extension of such period if corrective action has been
initiated by the Company within such period and is being diligently pursued;
(4) certain events relating to reorganization, bankruptcy and insolvency
of the Company and appointment of a receiver or trustee for its property; or
(5) the occurrence of a Matured Event of Default under any Class "A"
Mortgage; provided that the waiver or cure of any such Matured Event of
Default and the rescission and annulment of the consequences thereof shall
constitute a waiver of the corresponding Event of Default under the New
Mortgage and a rescission and annulment of the consequences thereof. (See
Section 10.01.)
REMEDIES
If an Event of Default occurs and is continuing, then the New Mortgage
Trustee or the Holders of not less than a majority in principal amount of
Mortgage Bonds then Outstanding may declare the principal
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amount (or if the Mortgage Bonds are Discount Bonds, such portion of the
principal amount as may be provided for such Discount Bonds pursuant to the
terms of the New Mortgage) of all of the Mortgage Bonds together with premium,
if any, and interest accrued, if any, thereon to be immediately due and payable.
At any time after such declaration of the maturity of the Mortgage Bonds then
Outstanding, but before the sale of any of the Mortgaged Property and before a
judgment or decree for payment of money shall have been obtained by the New
Mortgage Trustee as provided in the New Mortgage, the Event or Events of Default
giving rise to such declaration of acceleration will, without further act, be
deemed to have been waived, and such declaration and its consequences will,
without further act, be deemed to have been rescinded and annulled, if:
(a) the Company has paid or deposited with the New Mortgage Trustee a
sum sufficient to pay:
(1) all overdue interest, if any, on all Mortgage Bonds then
Outstanding;
(2) the principal of and premium, if any, on any Mortgage Bonds then
Outstanding which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed
therefor in such Mortgage Bonds; and
(3) all amounts due to the New Mortgage Trustee as compensation and
reimbursement as provided in the New Mortgage; and
(b) any other Event or Events of Default other than the non-payment of
the principal of Mortgage Bonds which shall have become due solely by such
declaration of acceleration, shall have been cured or waived as provided in
the New Mortgage. (See Sections 10.02 and 10.17.)
The New Mortgage provides that, under certain circumstances and to the
extent permitted by law, if an Event of Default occurs and is continuing, the
New Mortgage Trustee has the power to take possession of, and to hold, operate
and manage, the Mortgaged Property, or with or without entry, sell the Mortgaged
Property. If the Mortgaged Property is sold, whether by the New Mortgage Trustee
or pursuant to judicial proceedings, the principal of the Outstanding Mortgage
Bonds, if not previously due, will become immediately due, together with
premium, if any, and any accrued interest. (See Sections 10.03, 10.04 and
10.05.)
If an Event of Default occurs and is continuing, the Holders of a majority
in principal amount of the Mortgage Bonds then Outstanding will have the right
to direct the time, method and place of conducting any proceedings for any
remedy available to the New Mortgage Trustee or exercising any trust or power
conferred on the New Mortgage Trustee, provided that (a) such direction does not
conflict with any rule of law or with the New Mortgage, and could not involve
the New Mortgage Trustee in personal liability in circumstances where indemnity
would not, in the New Mortgage Trustee's sole discretion, be adequate, (b) such
direction is not unduly prejudicial to the rights of the nonassenting Holders,
and (c) the New Mortgage Trustee may take any other action deemed proper by the
New Mortgage Trustee which is not inconsistent with such discretion. (See
Section 10.16.)
The New Mortgage provides that no Holder of any Mortgage Bond will have any
right to institute any proceeding, judicial or otherwise, with respect to the
New Mortgage, or for the appointment of a receiver or trustee, or for any other
remedy thereunder, unless (a) such Holder has previously given to the New
Mortgage Trustee written notice of a continuing Event of Default; (b) the
Holders of not less than a majority in aggregate principal amount of the
Mortgage Bonds then Outstanding have made written request to the New Mortgage
Trustee to institute proceedings in respect of such Event of Default and have
offered the New Mortgage Trustee reasonable indemnity against cost and
liabilities incurred in complying with such request; and (c) for 60 days after
receipt of such notice, the New Mortgage Trustee has failed to institute any
such proceeding and no direction inconsistent with such request has been given
to the New Mortgage Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of Mortgage Bonds then Outstanding.
Furthermore, no Holder will be entitled to institute any such action if and to
the extent that such action would disturb or prejudice the rights of other
Holders. (See Section 10.11.) Notwithstanding that the right of a Holder to
institute a proceeding with respect to the New Mortgage is subject to certain
conditions precedent, each Holder of a Mortgage Bond has the right, which is
absolute and unconditional, to receive payment of the principal of and premium,
if any, and interest, if any, on such Mortgage Bond when
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due and to institute suit for the enforcement of any such payment, and such
rights may not be impaired without the consent of such Holder. (See Section
10.12.) The New Mortgage provides that the New Mortgage Trustee give the Holders
notice of any default under the New Mortgage to the extent required by the Trust
Indenture Act, unless such default shall have been cured or waived, except that
no such notice to Holders of a default of the character described in paragraph
(3) under "Events of Default" shall be given until at least 45 days after the
occurrence thereof. (See Section 11.02.) The Trust Indenture Act currently
permits the New Mortgage Trustee to withhold notice of default (except for
certain payment defaults) if the New Mortgage Trustee in good faith determines
the withholding of such notice to be in the interests of the Holders.
As a condition precedent to certain actions by the New Mortgage Trustee in
the enforcement of the lien of the New Mortgage and institution of action on the
Mortgage Bonds, the New Mortgage Trustee may require adequate indemnity against
costs, expense and liabilities to be incurred in connection therewith. (See
Sections 10.11 and 11.01.)
In addition to every other right and remedy provided in the New Mortgage,
the New Mortgage Trustee may exercise any right or remedy available to the New
Mortgage Trustee in its capacity as owner and holder of Pledged Bonds which
arises as a result of a default or Matured Event of Default under any Class "A"
Mortgage, whether or not an Event of Default under the New Mortgage has then
occurred and is continuing. (See Section 10.20.)
DEFEASANCE
Any Mortgage Bond or Bonds, or any portion of the principal amount thereof,
will be deemed to have been paid for purposes of the New Mortgage, and the
entire indebtedness of the Company in respect thereof will be deemed to have
been satisfied and discharged, if there has been irrevocably deposited with the
New Mortgage Trustee, in trust: (a) money (including Funded Cash) in the amount
which will be sufficient, or (b) Eligible Obligations (as described below),
which do not contain provisions permitting the redemption or other prepayment
thereof at the option of the issuer thereof, the principal of and the interest
on which when due, without any regard to reinvestment thereof, will provide
monies which will be sufficient, or (c) a combination of (a) and (b) which will
be sufficient, to pay when due the principal of and premium, if any, and
interest, if any, due and to become due on such Mortgage Bond or Bonds or
portions thereof. (See Section 9.01.) For this purpose, Eligible Obligations
include direct obligations of, or obligations unconditionally guaranteed by, the
United States of America, entitled to the benefit of the full faith and credit
thereof, and certificates, depositary receipts or other instruments which
evidence a direct ownership interest in such obligations or in any specific
interest or principal payments due in respect thereof.
While there is no legal precedent directly on point, it is possible that,
for federal income tax purposes, any deposit contemplated in the preceding
paragraph could be treated as a taxable exchange of the related Mortgage Bonds
for an issue of obligations of the trust or a direct interest in the cash and
securities held in the trust. In that case, Holders of such Mortgage Bonds would
recognize gain or loss as if the trust obligations or the cash or securities
deposited, as the case may be, had actually been received by them in exchange
for their Mortgage Bonds. Such Holders thereafter would be required to include
in income a share of the income, gain or loss of the trust. The amount so
required to be included in income could be different from the amount that would
be includible in the absence of such deposit. Prospective investors are urged to
consult their own tax advisors as to the specific consequences to them of such
deposit.
RESIGNATION OF THE NEW MORTGAGE TRUSTEE
The New Mortgage Trustee may resign at any time by giving written notice
thereof to the Company or may be removed at any time by Act of the Holders of a
majority in principal amount of Mortgage Bonds then Outstanding delivered to the
New Mortgage Trustee and the Company. No resignation or removal of the New
Mortgage Trustee and no appointment of a successor trustee will become effective
until the acceptance of appointment by a successor trustee in accordance with
the requirements of the New Mortgage. In addition, so long as no Event of
Default or event which, after notice or lapse of time, or both, would become an
Event of Default has occurred and is continuing, under certain circumstances, if
the Company has delivered to the New Mortgage Trustee a resolution of its Board
of Directors appointing a successor trustee
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and such successor has accepted such appointment in accordance with the terms of
the New Mortgage, the New Mortgage Trustee will be deemed to have resigned and
the successor will be deemed to have been appointed as trustee in accordance
with the New Mortgage. (See Section 11.10.)
CONCERNING THE NEW MORTGAGE TRUSTEE
The Chase Manhattan Bank (N.A.), the Trustee under the New Mortgage, has
been a regular depositary of funds of the Company. As trustee under both the New
Mortgage and the First Mortgage, The Chase Manhattan Bank (N.A.) would have a
conflicting interest for purposes of the Trust Indenture Act if an Event of
Default were to occur under either mortgage. In that case, the New Mortgage
Trustee may be required to eliminate such conflicting interest by resigning
either as New Mortgage Trustee or as First Mortgage Trustee. There are other
instances under the Trust Indenture Act which would require the resignation of
the New Mortgage Trustee, such as an affiliate of the New Mortgage Trustee
acting as underwriter with respect to any of the Mortgage Bonds.
TRANSFER
The transfer of the Mortgage Bonds may be registered, and Mortgage Bonds may
be exchanged for other Mortgage Bonds of the same series and tranche, of
authorized denominations and of like tenor and aggregate principal amount, at
the office of The Chase Manhattan Bank (N.A.), as Bond Registrar for the
Mortgage Bonds, in Brooklyn, New York. The Company may change the place for
registration of transfer of the Mortgage Bonds, may appoint one or more
additional Bond Registrars (including the Company) and may remove any Bond
Registrar, all at its discretion. (See Section 6.02.) The applicable Prospectus
Supplement will identify any new place for registration of transfer and
additional Bond Registrar appointed, and will disclose the removal of any Bond
Registrar effected, prior to the date of such Prospectus Supplement. Except as
otherwise provided in the applicable Prospectus Supplement, no service charge
will be made for any transfer or exchange of the Mortgage Bonds, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of the Mortgage Bonds. The Company will not be required to issue, and
no Bond Registrar will be required to register, the transfer of or to exchange
(a) Mortgage Bonds of any series (including the Mortgage Bonds) during a period
of 15 days prior to giving any notice of redemption, or (b) any Mortgage Bond
selected for redemption in whole or in part, except the unredeemed portion of
any Mortgage Bond being redeemed in part. (See Section 3.05.)
DESCRIPTION OF THE 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 terms and
provisions may apply to the Subordinated Debt Securities so offered will be
described in the Prospectus Supplement relating to such Debt Securities.
The Subordinated Debt Securities may be issued, in one or more series, from
time to time under an Indenture dated as of August 1, 1995 (the "Indenture"),
between the Company and The Chase Manhattan Bank (N.A.), as trustee (the
"Indenture Trustee"), which shall act as indenture trustee for the purposes of
the Trust Indenture Act of 1939, as amended. The form of the Indenture is filed
as an exhibit to the Registration Statement. Capitalized terms used in this
section which are not otherwise defined in this Prospectus shall have the
meanings set forth in the Indenture.
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.
GENERAL
The Subordinated Debt Securities will be direct, unsecured, subordinated
obligations of the Company.
The Indenture does not limit the aggregate principal amount of Subordinated
Debt Securities that may be issued thereunder and provides that Subordinated
Debt Securities may be issued thereunder from time to
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time in one or more series. The Subordinated Debt Securities are issuable in one
or more series pursuant to an indenture supplement to the Indenture or a
resolution of the Company's Board of Directors or a special committee thereof
(each, a "Supplemental Indenture").
The Restated Certificate of Incorporation of the Company limits, subject to
certain exceptions, the amount of unsecured indebtedness that the Company may
issue or assume, without the consent of the holders of a majority of the total
number of shares of preferred stock then outstanding, to 25% of the aggregate of
(i) the total principal amount of all outstanding bonds or other securities
representing secured indebtedness of the Company, and (ii) the total of the
capital stocks and premiums thereon and the surplus of the Company as then
stated on the Company's books. At June 30, 1995, the Company could have issued
approximately $64 million of unsecured indebtedness (such as the Subordinated
Debt Securities) without violating this provision.
Reference is made to the Prospectus Supplement relating to any 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
percentage of the principal amount at which such Subordinated Debt Securities
will be issued and, if other than the principal amount thereof, the portion of
the principal amount thereof payable upon acceleration of the maturity thereof,
or the method by which such portion shall be determined; (4) the date or dates
on which the principal of such Subordinated Debt Securities will be payable; (5)
the rights, if any, to defer payments of interest on the Subordinated Debt
Securities by extending the interest payment period, and the duration of such
extensions; (6) the subordination terms of the Subordinated Debt Securities of
such series; (7) the rate or rates at which such Subordinated Debt Securities
will bear interest, or the method by which such rate or rates shall be
determined, and the date or dates from which such interest shall accrue, or the
method by which such date or dates shall be determined; (8) the dates on which
such interest will be payable and the Regular Record Dates for any Interest
Payment Dates and the basis on which interest shall be calculated; (9) the
dates, if any, on which, the price or prices at which the 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; (10) the date, if any, after which, and the price or prices at
which, the Subordinated 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; (11)
whether and under what circumstances the Company will pay Additional Amounts as
contemplated by Section 1005 of the Indenture on such Subordinated Debt
Securities to any Holder who is not a United States person (including any
modification to the definition of such term as provided for in the Indenture as
originally executed) in respect to any tax, assessment or governmental charge
and, if so, whether the Company will have the option to redeem such Subordinated
Debt Securities rather than pay such Additional Amounts (and the terms of any
such option); (12) any deletions from, modifications of or additions to the
Events of Default or covenants of the Company with respect to such Subordinated
Debt Securities, whether or not such Events of Default or covenants are
consistent with the Events of Default or covenants set forth herein; (13) any
security for such Subordinated Debt Securities; and (14) any other terms of such
Subordinated Debt Securities. For a description of the terms of any series of
the 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 Subordinated Debt Securities will be issued in United States dollars in
fully registered form, without coupons, in denominations of $25 or any integral
multiple thereof. No service charge will be made for any transfer or exchange of
the Subordinated Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
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.
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The Indenture does not contain any provisions that may afford the Holders of
Subordinated Debt Securities protection in the event of a highly leveraged
transaction or other transaction involving the Company that may occur in
connection with a takeover attempt resulting in a decline in the credit rating
of the Subordinated Debt Securities. The Indenture also does not contain any
provisions that would limit the ability of the Company to incur indebtedness.
REGISTRATION AND TRANSFER
Subordinated Debt Securities will be issued as Registered Securities and
either will be in certificated form or will be represented by Global Securities.
Registered Securities will be issuable in denominations of $25 and integral
multiples of $25 or in such other denominations as may be in the terms of the
Subordinated Debt Securities.
Registered Securities will be exchangeable for other Registered Securities
of the same series and of a like aggregate principal amount and tenor of
different authorized denominations. Registered Securities may be presented for
registration of transfer (duly endorsed or accompanied by a written instrument
of transfer), at the corporate trust office of the Indenture Trustee in New
York, New York, or at the office of any transfer agent designated by the Company
for such purpose with respect to any series of Subordinated Debt Securities and
referred to in any Prospectus Supplement. No service charge will be made for any
transfer or exchange of Subordinated Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If any Prospectus Supplement refers to
any transfer agent (in addition to the Indenture Trustee) initially designated
by the Company with respect to any series of Subordinated Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location at which any such transfer agent acts, except
that, if Subordinated Debt Securities of a series are issuable solely as
Registered Securities, the Company will be required to maintain a transfer agent
in each Place of Payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Subordinated Debt
Securities.
In the event of any redemption of any Subordinated Debt Securities, the
Company shall not be required to: (i) issue, register the transfer of or
exchange any Subordinated Debt Securities during a period beginning at the
opening of business 15 days before any selection of Subordinated Debt Securities
of that series to be redeemed and ending at the close of business on the day of
mailing of the relevant notice of redemption; (ii) register the transfer of or
exchange any Subordinated Debt Securities, or portion thereof, called for
redemption, except the unredeemed portion of any Subordinated Debt Security
being redeemed in part; or (iii) issue, register the transfer of or exchange any
Subordinated Debt Securities that has been surrendered for repayment at the
option of the Holder, except the portion if any, thereof not to be so repaid.
GLOBAL 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), which will be deposited with, or on behalf of, a depositary (the
"Depositary") or its nominee identified in the applicable Prospectus Supplement.
In such 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 (i) a whole by
the Depositary for such Global Security to a nominee of such Depositary, by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary, or by any nominee to a successor Depositary or
a nominee of such successor Depositary, and (ii) 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 Debt
Security that is executed by the Company and authenticated and delivered by the
Indenture 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
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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 the interest rate.
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 that 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 Subordinated
Debt 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 Subordinated 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, then 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.
CONSOLIDATION, MERGER AND SALE
The Indenture does not contain any covenant which restricts the Company's
ability to merge or consolidate with or into any other corporation, sell or
convey all or substantially all of its assets to any person, firm or corporation
or otherwise engage in restructuring transactions.
EVENTS OF DEFAULT
The Indenture provides, with respect to any series of Subordinated Debt
Securities outstanding thereunder, that any one or more of the following events
that has occurred and is continuing shall constitute an
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Event of Default: (i) default in the payment of any interest upon or any
Additional Amounts payable in respect of any Subordinated Debt Security of that
series, or of any coupon appertaining thereto, when the same becomes due and
payable and continues for 30 days; provided, however, that, a valid extension of
the interest payment period by the Company for the Subordinated Debt Securities
shall not constitute a default in the payment of interest for this purpose, and
provided further that, if Subordinated Debt Securities are issued to a NWPS
Trust, or a trustee of such trust, in connection with the issuance of Trust
Securities by such NWPS Trust, said 30-day period will be replaced by a ten-day
period; (ii) default in the payment of the principal of or any premium on any
Subordinated Debt Security of that series when due, whether at maturity, upon
redemption, by declaration or otherwise; provided, however, that, a valid
extension of the maturity of the Subordinated Debt Securities shall not
constitute a default for this purpose; (iii) default in the deposit of any
sinking fund payment, when and as due by the terms of any Subordinated Debt
Securities of that series; (iv) default in the performance or breach of any
covenant or agreement of the Company in the Indenture with respect to any
Subordinated Debt Security of that series, continued for 60 days after written
notice to the Company from the Indenture Trustee or from the holders of at least
25% of the outstanding Subordinated Debt Securities of that series; (v) certain
events in bankruptcy, insolvency or reorganization of the Company; (vi) the
voluntary or involuntary dissolution, winding-up or termination of a NWPS Trust
to which (or to a trustee of such trust to which) Subordinated Debt Securities
were issued in connection with the issuance of Trust Securities by such NWPS
Trust, except in connection with the distribution of Subordinated Debt
Securities to the holders of Trust Securities in liquidation of such NWPS Trust,
the redemption of all of the Trust Securities of such NWPS Trust, or certain
mergers, consolidations or amalgamations, each as permitted by the Declaration
of such NWPS Trust; and (vii) any other Event of Default provided with respect
to Subordinated Debt Securities of that series. The Company is required to file
annually with the Indenture Trustee an officer's certificate as to the Company's
compliance with all conditions and covenants under the Indenture. The Indenture
provides that the Indenture Trustee may withhold notice to the Holders of
Subordinated Debt Securities of any default, except in the case of a default on
the payment of the principal of (or premium), if any, or interest on any
Subordinated Debt Securities or the payment of any sinking fund installment with
respect to such Subordinated Debt Securities if it considers it in the interest
of the Holders of Subordinated Debt Securities to do so.
If an Event of Default, other than certain events with respect to
bankruptcy, insolvency and reorganization of the Company or any Significant
Subsidiary, occurs and is continuing with respect to Subordinated Debt
Securities of a particular series, the Indenture Trustee or the Holders of not
less than 25% in principal amount of Outstanding Subordinated Debt Securities of
that series may declare the Outstanding Subordinated Debt Securities of that
series due and payable immediately. If an Event of Default with respect to
certain events of bankruptcy, insolvency or reorganization of the Company or any
Significant Subsidiary with respect to Subordinated Debt Securities of a
particular series shall occur and be continuing, then the principal of all the
Outstanding Subordinated Debt Securities of that series, and accrued and unpaid
interest thereon, shall automatically be due and payable without any act on the
part of the Indenture Trustee or any Holder.
Subject to the provisions relating to the duties of the Indenture Trustee,
if an Event of Default with respect to Subordinated Debt Securities of a
particular series occurs and is continuing, the Indenture Trustee shall be under
no obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders of Subordinated Debt Securities of
such series, unless such Holders shall have offered to the Indenture Trustee
reasonable indemnity and security against the costs, expenses and liabilities
that might be incurred by it in compliance with such request. Subject to such
provisions for the indemnification of the Indenture Trustee, the Holders of a
majority in principal amount of the Outstanding Subordinated Debt Securities of
such series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee
under the Indenture, or exercising any trust or power conferred on the Indenture
Trustee with respect to the Subordinated Debt Securities of that series. The
Indenture Trustee may refuse to follow directions in conflict with law or the
Indenture that may involve the Indenture Trustee in personal liability or may be
unduly prejudicial to Holders not joining therein.
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The Holders of not less than a majority in principal amount of the
Outstanding Subordinated Debt Securities of any series may, on behalf of the
Holders of all the Subordinated Debt Securities of such series and any related
coupons, waive any past default under the Indenture with respect to such series
and its consequences, except a default (i) in the payment of the principal of
(or premium, if any) or interest on or Additional Amounts payable in respect of
any Subordinated Debt Security of such series unless such default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration and any applicable premium has been deposited
with the Indenture Trustee or (ii) in respect of a covenant or provision that
cannot be modified or amended without the consent of the Holder of each
Outstanding Subordinated Debt Security of such series affected thereby.
MODIFICATION OR WAIVER
Modification and amendment of the Indenture may be made by the Company and
the Indenture Trustee with the consent of the Holders of not less than a
majority in principal amount of all Outstanding Subordinated Debt Securities or
any series that are affected by such modification or amendment; provided that,
no such modification or amendment may, without the consent of the Holder of each
Outstanding Subordinated Debt Security of such series, among other things, (i)
change the Stated Maturity of the principal of (or premium, if any, on) or any
installment of principal of or interest on any Subordinated Debt Security of
such series, (ii) reduce the principal amount or the rate of interest on or any
Additional Amounts payable in respect of, or any premium payable upon the
redemption of, any Subordinated Debt Security of such series, or change the
redemption provisions of any Subordinated Debt Securities (iii) change any
obligation of the Company to pay Additional Amounts in respect of any
Subordinated Debt Security of such series, (iv) reduce the amount of principal
of a Subordinated Debt Security of such series that is an Original Issue
Discount Security and would be due and payable upon a declaration of
acceleration of the Maturity thereof, (v) adversely affect any right of
repayment at the option of the Holder of any Subordinated Debt Security of such
series, (vi) change the place or currency of payment of principal of, or any
premium or interest on, any Subordinated Debt Security of such series, (vii)
impair the right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof or any Redemption Date or Repayment Date
therefor, (viii) reduce the above-stated percentage of Holders of Outstanding
Subordinated Debt Securities of such series necessary to modify or amend the
Indenture or to consent to any waiver thereunder or reduce the requirements for
voting or quorum described below, (ix) modify the change of control provisions,
if any, or (x) modify the foregoing requirements or reduce the percentage of
Outstanding Subordinated Debt Securities of such series necessary to waive any
past default.
Modification and amendment of the Indenture may be made by the Company and
the Indenture Trustee without the consent of any Holder, for any of the
following purposes: (i) to evidence the succession of another person to the
Company as obligor under the Indenture; (ii) to add to the covenants of the
Company for the benefit of the Holders of all or any series of Subordinated Debt
Securities; (iii) to add Events of Default for the benefit of the Holders of all
or any series of Subordinated Debt Securities; (iv) to change or eliminate any
provisions of the Indenture, provided that any such change or elimination shall
become effective only when there are no Outstanding Subordinated Debt Securities
of any series created prior thereto that are entitled to the benefit of such
provision; (v) to establish the form or terms of Subordinated Debt Securities of
any series; (vi) to secure the Subordinated Debt Securities; (vii) to provide
for the acceptance of appointment by a successor Indenture Trustee or facilitate
the administration of the trusts under the Indenture by more than one Indenture
Trustee; and (viii) to close the Indenture with respect to the authentication
and delivery of additional series of Subordinated Debt Securities, or to cure
any ambiguity, defect or inconsistency in the Indenture, provided such action
does not adversely affect the interest of Holders of Subordinated Debt
Securities of any series.
CERTAIN COVENANTS
If Subordinated Debt Securities are issued to a NWPS Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such NWPS
Trust and (i) there shall have occurred any event that would constitute an Event
of Default or (ii) the Company shall be in default with respect to its payment
of any obligations under the related Guarantee or Common Securities Guarantee,
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
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liquidation payment with respect to, any of its capital stock, 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 issued by the Company that
rank pari passu with or junior to such Subordinated Debt Securities; provided,
however, that, restriction (a) above does not apply to any stock dividends paid
by the Company where the dividend stock is the same stock as that on which the
dividend is being paid.
If Subordinated Debt Securities are issued to a NWPS Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such NWPS
Trust, and the Company shall have given notice of its election to defer payments
of interest on such Subordinated Debt Securities by extending the interest
payment period as provided in the Indenture and such period, or any extension
thereof, shall be continuing then (a) the Company shall not declare or pay
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, 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 issued by
the Company that rank pari passu with or junior to such Subordinated Debt
Securities; provided, however, that, the restriction (a) above does not apply to
any stock dividends paid by the Company, where the dividend stock is the same as
that on which the dividend is being paid.
If Subordinated Debt Securities are issued to a NWPS Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such NWPS
Trust, for so long as such Trust Securities remain outstanding, the Company will
covenant (i) to directly or indirectly maintain 100% ownership of the Common
Securities of such NWPS Trust; provided, however, that any permitted successor
of the Company under the Indenture may succeed to the Company's ownership of
such Common Securities and (ii) to use its reasonable efforts to cause such NWPS
Trust (a) to remain a statutory business trust, except in connection with the
distribution of Subordinated Debt Securities to the holders of Trust Securities
in liquidation of such NWPS Trust, the redemption of all of the Trust Securities
of such NWPS Trust, or certain mergers, consolidations or amalgamations, each as
permitted by the Declaration of such NWPS Trust, and (b) to otherwise continue
to be classified as a grantor trust for United States federal income tax
purposes.
SECURITY AND SUBORDINATION
Any security for the Subordinated Debt Securities will be described in the
Prospectus Supplement that will accompany this Prospectus. The Subordinated Debt
Securities will be subordinated and junior in right of payment to certain other
indebtedness of the Company to the extent set forth in the Prospectus Supplement
that will accompany this Prospectus.
GOVERNING LAW
The Indenture and the Subordinated Debt Securities will be governed by, and
construed in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Subordinated Debt Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities that might be incurred thereby. The Indenture Trustee is not
required to expand or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
DEFEASANCE
The Indenture provides that, except as may be provided in respect of any
series of Subordinated Debt Securities, the provisions of Article Fourteen shall
apply to the Subordinated Debt Securities of any series and the Company may
elect either to (a) except in respect of any Subordinated Debt Securities to
which a NWPS Trust or a trustee of such trust is the holder, defease and be
discharged from any and all obligations with respect to such Subordinated Debt
Securities (except for the obligation to pay Additional Amounts, if any, to a
holder who is not a United States person upon the occurrence of certain events
of tax, assessment or
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governmental charge with respect to payments on such Subordinated Debt
Securities and the obligations to register the transfer or exchange of such
Subordinated Debt Securities, to replace temporary or mutilated, destroyed, lost
or stolen Subordinated Debt Securities, to maintain an office or agency in
respect of such Subordinated Debt Securities, and to hold moneys for payment in
trust) ("Defeasance") or (b) be released from its obligations with respect to
such Subordinated Debt Securities under Section 1402 or, if provided pursuant to
Section 1403 of the Indenture, its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not constitute
a default or an Event of Default with respect to such Subordinated Debt
Securities ("covenant defeasance"), in either case, upon the irrevocable deposit
by the Company with the Indenture Trustee (or other qualifying trustee), in
trust, of an amount, in such Currency in which such Subordinated Debt Securities
are then specified as payable at Stated Maturity, or Government Obligations (as
defined below), or both, applicable to such Subordinated Debt Securities (with
such applicability being determined on the basis of the currency, currency unit
or composite currency in which such Subordinated Debt Securities are then
specified as payable at Stated Maturity) which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest, if
any, on such Subordinated Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company has
delivered to the Indenture Trustee an Opinion of Counsel (as specified in the
Indenture) to the effect that the Holders of such Subordinated Debt Securities
will not recognize income, gain or loss for United States federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to United States federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred; provided that, such Opinion of Counsel, in
the case of defeasance under clause (a) above, must refer to and be based upon a
revenue ruling of the Internal Revenue Service or a change in applicable United
States federal income tax law occurring after the date of the Indenture.
"Government Obligations" means securities that are (i) direct obligations of
the government that issued the Currency in which the Subordinated Debt
Securities of a particular series are payable, for the payment of which its full
faith and credit is pledged, or (ii) obligations of a person controlled or
supervised by and acting as an agency or instrumentality of the government that
issued the Currency in which the Subordinated Debt Securities of such series are
payable, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America or such other government,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest in or principal of the Government
Obligation evidenced by such depository receipt.
Unless otherwise provided in the Prospectus Supplement, if, after the
Company has deposited funds and/or Government Obligations to effect defeasance
or covenant defeasance relating thereto with respect to Subordinated Debt
Securities of any series, (a) the Holder of a Subordinated Debt Security of such
series is entitled to and does elect, pursuant to the terms of such Subordinated
Debt Security, to receive payment in a currency other than that in which such
deposit has been made in respect of such Subordinated Debt Security or (b) the
currency in which such deposit has been made in respect of any Subordinated Debt
Security of such series ceases to be used by its government of issuance, then
the indebtedness represented by such Subordinated Debt Security shall be deemed
to have been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium, if any) and interest, if any, on such
Subordinated Debt Security as they become due out of the proceeds yielded by
converting the amount so deposited in respect of such Subordinated Debt Security
into the Currency in which such Subordinated Debt Security becomes
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payable as a result of such election or such cessation of usage based on the
applicable Market Exchange Rate. Unless otherwise provided in the Prospectus
Supplement, all payments of principal of (and premium, if any) and interest, if
any, and Additional Amounts, if any, on any Subordinated Debt Security that is
payable in a Foreign Currency that ceases to be used by its government of
issuance shall be made in U. S. Dollars.
In the event the Company effects covenant defeasance with respect to (i) any
Subordinated Debt Securities and any related coupons and (ii) such Subordinated
Debt Securities are declared due and payable because of the occurrence of any
Event of Default, other than the Event of Default described in clause (iii) or
(v) under "Events of Default," with respect to any covenant for which there has
been defeasance, the Currency and/or Government Obligations on deposit with the
Indenture Trustee will be sufficient to pay amounts due on such Subordinated
Debt Securities at the time of their Stated Maturity but may not be sufficient
to pay amounts due on such Subordinated Debt Securities at the time of the
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The Prospectus Supplement may further describe the provisions, if any,
permitting such defeasance or covenant defeasance, including any modifications
to the provisions described above, with respect to the Subordinated Debt
Securities of or within a particular series and any related coupons.
MISCELLANEOUS
The Company will have the right at all times to assign any of its respective
rights or obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of the Company; provided, that, in the event of any such assignment,
the Company will remain liable for all of their respective obligations. Subject
to the foregoing, the Indenture will be binding upon and inure to the benefit of
the parties thereto and their respective successors and assigns. The Indenture
provides that it may not otherwise be assigned by the parties thereto.
DESCRIPTION OF THE PREFERRED SECURITIES
Each NWPS 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 NWPS Trust authorizes the Regular Trustees of such NWPS
Trust to issue on behalf of such NWPS Trust one series of Preferred Securities.
The Declaration will be qualified as an indenture under 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.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a NWPS Trust for specific terms, including (i) the distinctive
designation of such Preferred Securities, (ii) the number of Preferred
Securities issued by such NWPS Trust, (iii) the annual distribution rate (or
method of determining such rate) for Preferred Securities issued by such NWPS
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
NWPS 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 NWPS Trust shall be cumulative, (v) the amount or amounts which shall be
paid out of the assets of such NWPS Trust to the holders of Preferred Securities
of such NWPS Trust upon voluntary or involuntary dissolution, winding-up or
termination of such NWPS Trust, (vi) the obligation, if any, of such NWPS Trust
to purchase or redeem Preferred Securities issued by such NWPS 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 NWPS Trust shall be
purchased or redeemed, in whole or in part, pursuant to such obligation, (vii)
the voting rights, if any, of Preferred Securities issued by such NWPS Trust in
addition to those required by law, including the number of votes per Preferred
Security and any
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requirement for the approval by the holders of Preferred Securities, or of
Preferred Securities issued by one or more NWPS Trusts or of both, as a
condition to specified action or amendments to the Declaration of such NWPS
Trust, and (viii) any other relevant rights, preferences, privileges,
limitations or restrictions of Preferred Securities issued by such NWPS Trust
consistent with the Declaration of such NWPS 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 Guarantees." Certain 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 NWPS Trust
will issue one series of Common Securities. The Declaration of each NWPS Trust
authorizes the Regular Trustees of each trust to issue on behalf of such NWPS
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 a NWPS Trust will be
substantially identical to the terms of the Preferred Securities issued by such
NWPS 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 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 and to appoint, remove or replace
any of the NWPS Trustees of a NWPS Trust. All of the Common Securities of a NWPS
Trust will be directly or indirectly owned by the Company.
DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guarantees that
will be executed and delivered by the Company for the benefit of the holders,
from time to time, of Preferred Securities. Each Guarantee will be qualified as
an indenture under the Trust Indenture Act. Wilmington Trust Company will act as
indenture trustee under each Guarantee (the "Guarantee Trustee"). The terms of
each Guarantee will be those set forth in each Guarantee and those made part of
each Guarantee by the Trust Indenture Act. The summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the form of Guarantee, which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, and
the Trust Indenture Act. Each Guarantee will be held by the Guarantee Trustee
for the benefit of the holders of the Preferred Securities of the applicable
NWPS Trust.
GENERAL
Pursuant to each Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth herein, to pay in full to the holders of the
Preferred Securities issued by a NWPS Trust, the Guarantee Payments (as defined
herein) (except to the extent paid by such NWPS Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which such NWPS
Trust may have or assert. The following payments with respect to Preferred
Securities issued by a NWPS Trust (the "Guarantee Payments"), to the extent not
paid by such NWPS Trust will be subject to the Guarantee (without duplication):
(i) any accrued and unpaid distributions that are required to be paid on such
Preferred Securities, to the extent the Company has made a payment of interest
or principal on the Subordinated Debt Securities, (ii) the redemption price,
including all accrued and unpaid distributions to the date of redemption (the
"Redemption Price"), to the extent the Company has made a payment of interest or
principal on the Subordinated Debt Securities, with respect to any Preferred
Securities called for redemption by such NWPS Trust, and (iii) upon a voluntary
or involuntary dissolution, winding-up or termination of such NWPS 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 upon the maturity or redemption of the Subordinated Debt 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 NWPS Trust has funds legally available therefor and (b) the amount
of assets of such NWPS Trust remaining available for distribution to
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holders of such Preferred Securities in liquidation of such NWPS 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 such NWPS Trust to pay such amounts to such holders.
Each Guarantee will be a full and unconditional guarantee with respect to
the Preferred Securities issued by the applicable NWPS Trust from the time of
issuance of such Preferred Securities but will not apply to any payment of
distributions due to the extent such NWPS Trust shall lack funds legally
available therefor as a result of a failure by the Company to make payments of
interest or principal on the Subordinated Debt Securities. If the Company does
not make interest payments on the Subordinated Debt Securities purchased by such
NWPS Trust, such NWPS Trust will not pay distributions on the Preferred
Securities issued by a NWPS Trust and will not have funds legally available
therefor. See "Description of the Subordinated Debt Securities."
The Company and NWPS Capital believe that the rights of the holders of the
Preferred Securities and the obligations of the Company under the Declaration,
the Guarantees, the Preferred Securities, the Common Securities, the Indenture,
the Supplemental Indenture and the Subordinated Debt Securities collectively
provide the substantial equivalent of a full and unconditional guarantee by the
Company of payments due on the Preferred Securities.
The Company has also agreed to irrevocably and unconditionally guarantee the
obligations of the NWPS Trusts with respect to the Common Securities (the
"Common Securities Guarantee") to the same extent as the Guarantees, except
that, upon an event of default under the Indenture, holders of Preferred
Securities under the Guarantees shall have priority over holders of Common
Securities under the Common Securities Guarantees with respect to distributions
and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Guarantee, the Company will covenant that, so long as any Preferred
Securities issued by the applicable NWPS Trust remain outstanding, if there
shall have occurred any event that would constitute an event of default under
such Guarantee or the Declaration of such NWPS Trust, then (a) the Company shall
not declare or pay any dividend on, or make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock 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 issued by the Company which rank pari passu with or junior to such
Subordinated Debt Securities. However, each Guarantee will except from the
foregoing any stock dividends paid by the Company where the dividend stock is of
the same as that on which the dividend is being paid.
MODIFICATION OF THE GUARANTEES; ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of Preferred Securities (in which case no vote will be
required), each Guarantee may be amended only with the prior approval of the
holders of not less than 66 2/3% in liquidation amount of the outstanding
Preferred Securities issued by the applicable NWPS Trust. The manner of
obtaining any such approval of holders of such Preferred Securities will be set
forth in an accompanying Prospectus Supplement. All guarantees and agreements
contained in a Guarantee shall bind the successors, assignees, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Preferred Securities of the applicable NWPS Trust then
outstanding.
EVENTS OF DEFAULT
An Event of Default under the Guarantee will occur upon the failure of the
Company to perform any of its payments or other obligations thereunder. The
holders of a majority in liquidation amount of the Preferred Securities to which
a Guarantee relates have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce such Guarantee, any holder of
Preferred Securities relating to such Guarantee may, after such holder's written
request to the Guarantee Trustee to enforce the Guarantee,
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institute a legal proceeding directly against the Company to enforce the
Guarantee Trustee's rights under such Guarantee without first instituting a
legal proceeding against the relevant NWPS Trust, the Guarantee Trustee or any
other person or entity.
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under each of the Guarantees and as to any default in such performance.
The Company is required to file annually with the Guarantee Trustee an
officer's certificate as to the Company's compliance with all conditions under
each of the Guarantees.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to a Guarantee, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provision, the Guarantee Trustee is under no obligation
to exercise any of the powers vested in it by a Guarantee Agreement at the
request of any holder of Preferred Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate as to the Preferred Securities issued by the
applicable NWPS Trust upon full payment of the Redemption Price of all Preferred
Securities of the NWPS Trust, upon distribution of the Subordinated Debt
Securities held by the NWPS Trust to the holders of the Preferred Securities of
such NWPS Trust, or upon full payment of the amounts payable in accordance with
the Declaration of such NWPS Trust upon liquidation of such NWPS Trust. Each
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
NWPS Trust must restore payment of any sums paid under such Preferred Securities
or such Guarantee.
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Company and
will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, (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 a NWPS Trust by acceptance thereof
agrees to the subordination provisions and other terms of the applicable
Guarantee.
Each Guarantee will constitute a guarantee of payment and not of collection
(allowing the guaranteed party to institute a legal proceeding directly against
the guarantor to enforce its rights under a Guarantee without instituting a
legal proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
internal laws of the State of New York.
DESCRIPTION OF THE COMMON STOCK
GENERAL
Under the Company's Restated Certificate of Incorporation, as amended (the
"Charter"), the Company is authorized to issue three classes of capital stock:
300,000 shares of Cumulative Preferred Stock, par value $100 per share, of which
26,000 shares of 4 1/2% Cumulative Preferred Stock and 40,000 shares of 5 1/4%
Cumulative Preferred Stock are outstanding; 200,000 shares of Preference Stock,
par value $50 per share, none of which are outstanding; and 20,000,000 shares of
Common Stock, par value $3.50 per share, 7,677,232 of which were outstanding as
of June 8, 1995. The Cumulative Preferred Stock and the Preference Stock may be
issued at any time by the Board of Directors in such series with such terms as
it may fix in resolutions providing for the issuance thereof.
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The following statements are summaries of certain provisions relating to the
Common Stock contained in the Charter, the Company's First Mortgage Bond
Indenture, as supplemented to date (the "1940 Indenture"), and the Company's New
Mortgage (the 1940 Indenture and the New Mortgage Indenture are referred to
together as the "Bond Indentures"). Such summaries are not complete descriptions
of the provisions of the Charter and the Bond Indentures and are qualified in
their entirety by reference thereto. The Charter and the Bond Indentures are
contained in exhibits to reports and registration statements which have been
filed with the Commission (see "Available Information").
DIVIDEND RIGHTS
Subject to the limitations described in the following three paragraphs,
dividends may be paid on the Common Stock out of funds legally available for
that purpose, when and as declared by the Company's Board of Directors.
The Company may not declare or pay cash dividends on the Common Stock unless
full dividends on all Cumulative Preferred Stock and on any Preference Stock
then outstanding for the current and all past quarterly dividend periods have
been paid or provided for. Also, dividends on the Common Stock may not be paid
unless the Company has complied with all sinking fund requirements for those
series of the Cumulative Preferred Stock and any Preference Stock which have
such requirements.
Under the terms of the Charter, for so long as shares of Cumulative
Preferred Stock are outstanding, the following dividend limitations may not be
exceeded unless authorized by the holders of two-thirds of the outstanding
shares of such stock: dividends (other than dividends payable in Common Stock)
and other distributions on, or acquisitions by the Company for value of, Common
Stock (a) may not exceed 50% of the Company's Net Income Available for Common
Stock for the preceding 12-months' period if the "common stock equity" of the
Company is less than 20% of "total capitalization" (each calculated as required
by the Charter) and (b) may not exceed 75% of such Net Income if such
capitalization ratio is 20% or more but less than 25%. If such capitalization
ratio is 25% or more, no such dividend, distribution or acquisition shall be
declared, paid or effected which would reduce such ratio to less than 25%,
except to the extent permitted by clauses (a) and (b). Pursuant to these
provisions, at March 31, 1995, retained earnings were not restricted as to
availability for cash dividends on the Common Stock and the Company's "common
stock equity" was 47% of its "total capitalization".
The Bond Indentures and certain purchase agreements relating to presently
outstanding Cumulative Preferred Stock contain covenants limiting the funds
available for payment of cash dividends and other distributions on the Common
Stock (for payment as well as purchases of Common Stock by the Company). Under
the most restrictive of existing covenants in the Bond Indentures or in such
purchase agreements, at March 31, 1995, a total of approximately $46,271,000 was
available for cash dividends on the Common Stock. In addition, under the 1940
Indenture cash dividends on the Common Stock and purchases of Common Stock may
be made only if the aggregate amount expended for maintenance and provided for
depreciation by the Company subsequent to January 1, 1946, plus Net Income
Available for Common Stock earned after December 31, 1945, which remains after
such dividend (or purchase) is equal to not less than the total of 3 1/2% of the
fixed tangible property, plant and equipment of the Company for each full year,
and a proportionate percentage for any fractional year, which shall have elapsed
between January 1, 1946, and the date of such proposed action.
VOTING RIGHTS
Of the three classes of the Company's authorized capital stock, the Common
Stock is the general voting stock. Holders of Common Stock are entitled to one
vote for each share held. Except in the case of certain dividend arrearages on
the Cumulative Preferred Stock or Preference Stock, the Common Stock is the only
class of stock entitled to be voted for the election of directors.
LIQUIDATION RIGHTS
In the event of a liquidation (whether voluntary or involuntary) or
reduction in the Company's capital resulting in any distribution of assets to
its stockholders, the holders of the Common Stock are entitled to
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receive, pro rata according to the number of shares held by each, all of the
assets of the Company remaining for distribution after payment to the holders of
the Cumulative Preferred Stock and Preference Stock of the full preferential
amounts to which they are entitled.
CERTAIN OTHER FEATURES
Holders of Common Stock do not have any preemptive right to subscribe to or
acquire any additional stock or other securities issued by the Company.
TRANSFER AGENTS AND REGISTRARS
The Transfer Agent and Registrars for the Common Stock are Norwest Bank,
Minnesota, and the Company.
PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
The Company's Charter currently provides for the classification of the Board
of Directors into three classes. The Charter limits the number of directors that
may be elected to not less than nine nor more than twelve (exclusive of such
number of Directors as may be elected by any class of shares of the Company
other than the Common Stock on account of specified dividend arrearages in
accordance with the Charter) and provides that vacancies on the Board of
Directors are to be filled by a majority vote of directors and that directors so
chosen shall hold office until the end of the full term of the class in which
the vacancy occurred. A vote of the holders of 75% of the Company's outstanding
voting stock is required to amend these provisions. In addition, under the
Charter and the Delaware General Corporation Law, directors of the Company may
only be removed for cause. Removal for cause must be approved by either a
majority vote of directors (excluding the director or directors subject to
removal) or by a vote of the holders of at least a majority of the Company's
outstanding voting stock.
In addition, the "fair price provisions" of Charter require that certain
proposed business combinations between the Company and any person who is the
beneficial owner of more than 10% of the outstanding voting shares of the
Company (an "interested party") must be approved by the holders of 75% of the
voting shares, unless certain fair price and procedural requirements are met or
the business combination is approved by a majority of "Continuing Directors,"
those directors who were elected prior to the time a person became an interested
person and any other director so designated by such directors. A vote of the
holders of 75% of the Company's outstanding voting stock is required to amend
the fair price provisions.
LEGAL OPINIONS
The validity of the Offered Securities offered hereby will be passed upon
for the Company and the NWPS Trusts by Schiff Hardin & Waite, 7200 Sears Tower,
233 South Wacker Drive, Chicago, Illinois 60606. Certain legal matters will be
passed upon for any underwriters, dealers or agents by Winthrop, Stimson, Putnam
& Roberts, One Battery Park Plaza, New York, New York 10004. Certain matters of
Delaware law relating to the validity of the Preferred Securities will be passed
upon by Richards, Layton & Finger, Wilmington, Delaware, special Delaware
counsel to the Company and the NWPS Trusts. Schiff Hardin & Waite may rely on
the opinion of Richards, Layton & Finger as to certain matters of Delaware law.
Legal opinions relating to the Company's franchises, titles to its properties,
the lien of the New Mortgage and the lien of the First Mortgage (and certain
other matters) will be given as to South Dakota law by Churchill, Manolis,
Freeman, Kludt & Kaufman, Huron, South Dakota, local counsel for the Company, as
to Nebraska law by Shamberg, Wolf, McDermott & Depue, Grand Island, Nebraska,
local counsel for the Company, as to North Dakota law by Pearce and Durick,
Bismarck, North Dakota, local counsel for the Company, and as to Iowa law by
Nymann & Kohl, Sioux City, Iowa, local counsel for the Company.
The statements made in this Prospectus as to matters of law and legal
conclusions under the captions "The NWPS Trusts", "Description of the Mortgage
Bonds", "Description of the Subordinated Debt Securities", "Description of the
Preferred Securities", "Description of the Guarantees" and "Description of the
Common Stock" have been prepared under the supervision of, and reviewed by,
Schiff Hardin & Waite, counsel for the Company, and such statements are made on
the authority of that firm.
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EXPERTS
The audited financial statements of the Company incorporated by reference in
this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants as indicated in their report with respect thereto and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in auditing and accounting in giving such report.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities in any of the following ways:
(i) through underwriters, dealers or agents, including Morgan Stanley & Co.
Incorporated; (ii) directly to a limited number of purchasers or to a single
purchaser; (iii) through agents; or (iv) through any combination of the above.
The Prospectus Supplement, with respect to the respective 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 price to the
public of the Offered Securities and the proceeds to the Company from such sale,
any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers. Any initial public offering price and
any 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 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 page of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating hereto, 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 the Offered Securities in respect of
which this Prospectus is delivered, the Company 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 or through agents
designated by the Company 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 commissions payable by the Company 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
reasonable efforts basis for the period of its appointment.
The Offered Securities may be sold directly by the Company 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 entered
into with the Company to indemnification by the Company 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
in the ordinary course of business.
Each series of Offered Securities will be a new issue of securities and,
unless listed on a national securities exchange, will have no established
trading market. Any underwriter to whom Offered Securities of
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any series are sold for public offering and sale may make a market in such
series of Offered Securities, but such underwriters will not be obligated to do
so and may discontinue any market making at any time without notice. If so
indicated in the Prospectus Supplement for any series of Offered Securities, the
Offered Securities of such series may be listed on a national securities
exchange. No assurance can be given as to the liquidity of, or the trading
market for, any Offered Securities.
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