<PAGE> 1
Filed pursuant to Rule 424(b)(5)
Registration Nos. 333-13831 and
333-13831-02
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 29, 1996)
7,000,000 PREFERRED SECURITIES
PWG CAPITAL TRUST II
8.08% PREFERRED TRUST SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY
PAINE WEBBER GROUP INC.
The 8.08% Preferred Trust Securities (the "Preferred Securities") offered
hereby represent preferred undivided beneficial interests in the assets of PWG
Capital Trust II, a business trust formed under the laws of the State of
Delaware (the "Trust"). Paine Webber Group Inc., 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 common undivided beneficial interests in the assets of
the Trust. The Trust exists for the sole purpose of issuing the Preferred
Securities and Common Securities and investing the proceeds thereof in an
equivalent amount of 8.08% Junior Subordinated Debentures due 2037 of the
Company ("Junior Subordinated Debentures").
(continued on next page)
Application will be made to list the Preferred Securities on the New York
Stock Exchange, Inc. (the "NYSE"). The NYSE symbol for the Preferred Securities
is expected to be "PWJ PrB". If such listing is approved, trading of the
Preferred Securities on the NYSE is expected to commence within a 30-day period
after the date of this Prospectus Supplement. See "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 FOR A DISCUSSION OF CERTAIN
FACTORS RELATING TO THE PREFERRED SECURITIES THAT SHOULD BE CAREFULLY CONSIDERED
BY PROSPECTIVE PURCHASERS.
---------------------
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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
=====================================================================================================================
Proceeds to
PWG Capital Trust
Price to Underwriters' II
Public(1) Compensation(2) (1)(3)(4)
- ---------------------------------------------------------------------------------------------------------------------
Per Preferred Security................................. $25.00 (3) $25.00
- ---------------------------------------------------------------------------------------------------------------------
Total(5)............................................... $175,000,000 (3) $175,000,000
=====================================================================================================================
</TABLE>
(1) Plus accrued distributions, if any, from March 14, 1997, to date of
delivery.
(2) See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in Junior Subordinated Debentures, the Company
has agreed to pay to the Underwriters as compensation ("Underwriters'
Compensation") for their arranging the investment therein of such proceeds
$.7875 per Preferred Security (or $5,512,500 in the aggregate). See
"Underwriting."
(4) Before deducting expenses payable by the Company estimated to be $266,000.
(5) The Trust has granted to the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to 1,050,000 additional Preferred
Securities at the Price to Public for the purpose of covering
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriters' Compensation and Proceeds to PWG Capital
Trust II would be $201,250,000, $6,339,375 and $201,250,000, respectively.
The Preferred Securities are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to their right to reject orders in whole or in part. It is expected that
delivery of the Preferred Securities will be made in book-entry form through the
facilities of The Depository Trust Company ("DTC"), on or about March 14, 1997,
against payment therefor in immediately available funds.
This Prospectus Supplement and the accompanying Prospectus may be used by
the Company, PaineWebber Incorporated ("PaineWebber") or other affiliates of the
Company in connection with offers and sales related to secondary market
transactions in the Preferred Securities at negotiated prices related to
prevailing market prices at the time of sale or otherwise. PaineWebber or such
other Company affiliates may act as principal or agent in such transactions.
---------------------
PAINEWEBBER INCORPORATED
BEAR, STEARNS & CO. INC.
DEAN WITTER REYNOLDS INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES
CORPORATION
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
PRUDENTIAL SECURITIES
INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
---------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MARCH 11, 1997.
<PAGE> 2
(Continued from previous page)
The Preferred Securities and the Common Securities will rank pari passu
with each other and will have equivalent terms; provided that (i) if an Event of
Default (as defined herein) under the Declaration (as defined herein) occurs and
is continuing, the holders of Preferred Securities will have a priority over
holders of the Common Securities with respect to distributions (as defined
herein) and payments upon liquidation, redemption or otherwise and (ii) holders
of Common Securities have the exclusive right (subject to the terms of the
Declaration) to appoint, replace or remove Trustees (as defined in the
accompanying Prospectus) and to increase or decrease the number of Trustees. The
payment of distributions out of moneys held by the Property Trustee (as defined
in the accompanying Prospectus) and payments upon liquidation of the Trust and
on redemption of Preferred Securities, as set forth below, are guaranteed by the
Company on a subordinated basis as and to the extent described herein (the
"Preferred Securities Guarantee"). See "Description of the Preferred Securities
Guarantees" in the accompanying Prospectus. The Preferred Securities Guarantee
covers payments of distributions and other payments on the Preferred Securities
only if and to the extent that the Trust has funds available therefor which will
not be the case unless the Company has made a payment of interest or principal
or other payments on the Junior Subordinated Debentures held by the Trust as its
sole asset. The Preferred Securities Guarantee, when taken together with the
Company's obligations under the Junior Subordinated Debentures and the Indenture
(as defined herein) and its obligations under the Declaration, including its
obligation to pay all costs, expenses, debts and other obligations of the Trust
(other than with respect to the Trust Securities), provides a full and
unconditional guarantee of amounts due on the Preferred Securities. The
obligations of the Company under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all other indebtedness,
liabilities and obligations of the Company and any guarantees, endorsements or
other contingent obligations of the Company in respect of such indebtedness,
liabilities or obligations, including Junior Subordinated Debt Securities (as
defined in the accompanying Prospectus) and senior to all capital stock now or
hereafter issued by the Company and to any guarantee now or hereafter entered
into by the Company in respect of its capital stock. The obligations of the
Company under the Junior Subordinated Debentures are subordinate and junior in
right of payment to all present and future Senior Indebtedness (as defined in
the accompanying Prospectus) and will rank pari passu with the Junior
Subordinated Debt Securities issued by the Company and sold to PWG Capital Trust
I on December 9, 1996. Because the Company is a holding company, the Junior
Subordinated Debentures (and the Company's obligations under the Preferred
Securities Guarantee) are also effectively subordinated to all existing and
future liabilities, including trade payables, of the Company's subsidiaries,
except to the extent that the Company is a creditor of the subsidiaries
recognized as such.
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions at an annual rate of 8.08% of the stated liquidation amount
of $25 per Preferred Security, accruing from the date of original issuance of
the Preferred Securities and payable monthly, in arrears, on the first day of
each month, commencing on April 1, 1997 ("distributions"). Cash distributions in
arrears for more than one month will bear interest thereon at the annual rate of
8.08% of the stated liquidation amount of $25 per Preferred Security (to the
extent permitted by applicable law), compounded monthly. The term
"distributions" as used herein includes such cash distributions and any such
interest payable unless otherwise stated. The distribution rate and the
distribution and other payment dates for the Preferred Securities will
correspond to the interest rate and the interest and other payment dates on the
Junior Subordinated Debentures deposited in the Trust as trust assets. If
principal or interest is not paid on the Junior Subordinated Debentures,
including as a result of the Company's election to extend the interest payment
period on the Junior Subordinated Debentures as described below, the Trust will
not make payments on the Trust Securities. The Junior Subordinated Debentures
provide that, so long as the Company shall not be in default in the payment of
interest on the Junior Subordinated Debentures, the Company shall have the right
to defer payments of interest on the Junior Subordinated Debentures by extending
the interest payment period from time to time for a period not exceeding 60
consecutive monthly interest periods (each, an "Extension Period"). No interest
shall be due and payable during an Extension Period and, as a consequence,
distributions on the Trust Securities will also be deferred, but at the end of
such Extension Period the Company shall pay all interest then accrued and unpaid
on the Junior Subordinated Debentures, together with interest thereon at the
rate specified for the Junior Subordinated Debentures to the extent permitted by
applicable law, compounded monthly ("Compounded Interest"). All references
herein to interest shall include Compounded Interest unless otherwise stated.
There could be multiple Extension Periods of varying lengths throughout the term
of the Junior Subordinated Debentures, each not to exceed 60 consecutive monthly
interest periods or to cause any extension beyond the maturity of the Junior
Subordinated Debentures. During any Extension Period, the Company may not
declare or pay dividends on, or redeem, purchase, acquire or make a distribution
or liquidation payment with
S-2
<PAGE> 3
respect to, any of its common stock or preferred stock or make any payments on
guarantees with respect thereto; provided, however, that the foregoing
restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such preferred stock or (iii) cash payments made by the Company in lieu of
delivering fractional shares upon the redemption, exchange or conversion of any
preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock. See "Risk Factors -- Option
to Extend Interest Payment Period; Tax Impact of Extension;" "Description of the
Junior Subordinated Debentures -- Interest" and "-- Option to Extend Interest
Payment Period."
The Junior Subordinated Debentures are redeemable by the Company (in whole
or in part) from time to time on or after March 1, 2002, or at any time in
certain circumstances upon the occurrence of a Tax Event (as defined herein). If
the Company redeems Junior Subordinated Debentures, the Trust must redeem Trust
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Junior Subordinated Debentures so redeemed at $25 per
Trust Security plus accrued and unpaid distributions thereon (the "Redemption
Price") to the date fixed for redemption. See "Description of the Preferred
Securities -- Mandatory Redemption." The Preferred Securities will be redeemed
upon maturity of the Junior Subordinated Debentures. The Junior Subordinated
Debentures mature on March 1, 2037. In addition, upon the occurrence of a
Special Event (as defined herein) arising from a change in law or a change in
legal interpretation, unless the Junior Subordinated Debentures are redeemed in
the limited circumstances described below, the Trust shall be dissolved with the
result that the Junior Subordinated Debentures will be distributed to the
holders of the Trust Securities, on a pro rata basis, in lieu of any cash
distribution. In the case of a Special Event that is a Tax Event, the Company
will have the right in certain circumstances to redeem the Junior Subordinated
Debentures, which would result in the redemption by the Trust of the Trust
Securities in the same amount on a pro rata basis. If the Junior Subordinated
Debentures are distributed to the holders of the Preferred Securities, the
Company will use its best efforts to have the Junior Subordinated Debentures
listed on the NYSE or on such other exchange as the Preferred Securities are
then listed. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution" and "Description of the Junior Subordinated
Debentures."
In the event of the voluntary or involuntary liquidation, dissolution,
winding up or termination of the Trust, the holders of the Preferred Securities
will be entitled to receive, for each Preferred Security, a liquidation amount
of $25 plus accrued and unpaid distributions thereon (including interest
thereon) to the date of payment, unless in connection with such dissolution, the
Junior Subordinated Debentures are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF THE
PREFERRED SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-3
<PAGE> 4
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 SUBORDINATED OBLIGATIONS UNDER PREFERRED SECURITIES GUARANTEE AND
JUNIOR SUBORDINATED DEBENTURES; DEPENDENCE ON THE COMPANY
The obligations of the Company under the Junior Subordinated Debentures are
unsecured obligations of the Company and will be subordinate and junior in right
of payment to Senior Indebtedness of the Company (as defined in the accompanying
Prospectus and which generally consists of any indebtedness, liabilities or
obligations of the Company, contingent or otherwise, other than the Preferred
Securities Guarantee and any other Preferred Securities Guarantees (as defined
in the accompanying Prospectus)) but senior to its capital stock. The Company's
obligations under the Preferred Securities Guarantee are unsecured and will rank
(i) subordinate and junior in right of payment to all other indebtedness,
liabilities and obligations of the Company and any guarantees, endorsements or
other contingent obligations of the Company in respect of such indebtedness,
liabilities or obligations, including the Junior Subordinated Debentures and any
other series of Junior Subordinated Debt Securities, except those made pari
passu or subordinate by their terms, and (ii) senior to all capital stock now or
hereafter issued by the Company and to any guarantee now or hereafter entered
into by the Company in respect of its capital stock. Because the Company is a
holding company, the Junior Subordinated Debentures (and the Company's
obligations under the Preferred Securities Guarantee) are also effectively
subordinated to all existing and future liabilities, including trade payables,
of the Company's subsidiaries, except to the extent that the Company is a
creditor of the subsidiaries recognized as such. There are no terms in the
Preferred Securities, the Junior Subordinated Debentures or the Preferred
Securities Guarantee that limit the Company's ability to incur additional
indebtedness, including indebtedness that ranks senior to or pari passu with the
Junior Subordinated Debentures and the Preferred Securities Guarantee, or the
ability of its subsidiaries to incur additional indebtedness. As of September
30, 1996, the aggregate outstanding principal amount of Senior Indebtedness was
approximately $3.32 billion (including approximately $484 million of commercial
paper and approximately $65 million of bank loans, but excluding Senior
Indebtedness consisting of guarantees and other commitments and contingent
liabilities and obligations of the type which are generally described in the
note entitled "Commitments and Contingencies" in the notes to the Company's
Consolidated Financial Statements for the fiscal year ended December 31, 1995,
included in the Company's Annual Report on Form 10-K for such fiscal year and in
the notes to the Company's unaudited Consolidated Financial Statements for the
quarter ended September 30, 1996, included in the Company's Quarterly Report on
Form 10-Q for such quarter, each incorporated by reference in the accompanying
Prospectus). See "Description of the Preferred Securities Guarantees -- Status
of the Preferred Securities Guarantees" and "Description of the Junior
Subordinated Debt Securities -- Subordination" in the accompanying Prospectus.
The Trust's ability to make distributions and other payments on the
Preferred Securities is solely dependent upon the Company making interest and
other payments on the Junior Subordinated Debentures deposited in the Trust as
trust assets as and when required. If the Company were not to make distributions
or other payments on the Junior Subordinated Debentures for any reason,
including as a result of the Company's election to defer the payment of interest
on the Junior Subordinated Debentures by extending the interest payment period
for the Junior Subordinated Debentures, the Trust will not make payments on the
Trust Securities. In such an event, holders of the Preferred Securities would
not be able to rely on the Preferred Securities Guarantee since distributions
and other payments on the Preferred Securities are subject to the Preferred
Securities Guarantee only if and to the extent that the Company has made a
payment to the Property Trustee of interest or principal on the Junior
Subordinated Debentures deposited in the Trust as trust assets. Instead, holders
of Preferred Securities would rely on the enforcement (i) by the Property
Trustee of its rights as registered holder of the Junior Subordinated Debentures
against the Company pursuant to the terms of the Indenture or (ii) by such
holder of Preferred Securities of its right against the Company to directly
enforce payments of principal and interest on certain Junior Subordinated
Debentures. However, if the Trust's failure to make distributions on the
Preferred Securities is a consequence of the Company's exercise of its right to
extend the interest payment period for the Junior Subordinated Debentures,
neither the
S-4
<PAGE> 5
Property Trustee nor any holder of Preferred Securities will have any right to
enforce the payment of distributions on the Preferred Securities until an Event
of Default under the Declaration shall have occurred. The Company's obligations
under the Preferred Securities Guarantee are subordinate and junior in right of
payment to all other indebtedness, liabilities and obligations of the Company
and any guarantees, endorsements or other contingent obligations of the Company
in respect of such indebtedness, liabilities or obligations, including the
Junior Subordinated Debentures and any other series of Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms to the
Preferred Securities Guarantee, and senior to its capital stock or to any
guarantee of the Company in respect of its capital stock. The Declaration
provides that each holder of Preferred Securities, by acceptance thereof, agrees
to the provisions of the Preferred Securities Guarantee, including the
subordination provisions thereof, and of the Indenture.
The Declaration provides that the Company shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trust, including any taxes and all costs and expenses with
respect thereto, to which the Trust may become subject, except for United States
withholding taxes. No assurance can be given that the Company will have
sufficient resources to enable it to pay such debts, obligations, costs and
expenses on behalf of the Trust.
If an Event of Default occurs and is continuing, then the holders of
Preferred Securities would rely on the enforcement by the Property Trustee of
its rights as a holder of the Junior Subordinated Debentures against the
Company. In addition, the holders of a majority in liquidation amount of the
Preferred Securities will have the right to direct the time, method, and place
of conducting any proceeding for any remedy available to the Property Trustee or
to direct the exercise of any trust or power conferred upon the Property Trustee
under the Declaration, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the Junior Subordinated
Debentures. If the Property Trustee fails to enforce its rights under the Junior
Subordinated Debentures, any holder of Preferred Securities may, to the extent
permitted by applicable law, after a period of 30 days has elapsed from such
holder's written request, directly institute a legal proceeding against the
Company to enforce the Property Trustee's rights under the Junior Subordinated
Debentures without first instituting any legal proceeding against the Property
Trustee or any other person or entity. If an Event of Default occurs and is
continuing and such event is attributable to the failure of the Company to pay
interest or principal on the Junior Subordinated Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a holder of Preferred Securities may also directly
institute a proceeding for enforcement of payment to such holder of the
principal of or interest on Junior Subordinated Debentures having a principal
amount equal to the aggregate liquidation amount of the Preferred Securities
held by such holder (a "Direct Action") on or after the respective due date
specified in the Junior Subordinated Debentures without first (i) directing the
Property Trustee to enforce the terms of the Junior Subordinated Debentures or
(ii) instituting a legal proceeding against the Company to enforce the Property
Trustee's rights under the Junior Subordinated Debentures. In connection with
such Direct Action, the Company will be subrogated to the rights of such holder
of Preferred Securities under the Declaration to the extent of any payment made
by the Company to such holder of Preferred Securities in such Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debentures unless the
Property Trustee first fails to do so.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX IMPACT OF EXTENSION
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures by
extending the interest payment period from time to time on the Junior
Subordinated Debentures for an Extension Period not exceeding 60 consecutive
monthly interest periods, during which no interest shall be due and payable. In
such an event, monthly distributions on the Preferred Securities would not be
made (but would continue to accrue with interest thereon at the rate of 8.08%
per annum, compounded monthly) by the Trust during any such Extension Period. If
the Company exercises the right to extend an interest payment period, the
Company may not during such Extension Period declare or pay dividends on, or
redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its common stock or preferred stock or make any payments on
guarantees with respect thereto; provided, however, that the foregoing
restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions,
S-5
<PAGE> 6
distributions or payments made by the Company by way of issuance of shares of
its capital stock, (ii) payments of accrued dividends by the Company upon the
redemption, exchange or conversion of any preferred stock of the Company as may
be outstanding from time to time in accordance with the terms of such preferred
stock or (iii) cash payments made by the Company in lieu of delivering
fractional shares upon the redemption, exchange or conversion of any preferred
stock of the Company as may be outstanding from time to time in accordance with
the terms of such preferred stock. See "Description of the Junior Subordinated
Debentures -- Option to Extend Interest Payment Period" for a description of
certain terms of the outstanding preferred stock of the Company.
Prior to the termination of any Extension Period, the Company may further
extend such Extension Period; provided that such Extension Period together with
all such previous and further extensions thereof may not exceed 60 consecutive
monthly interest periods. 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. The Company may also prepay at any
time all or any portion of the interest accrued during an Extension Period.
Consequently, there could be multiple Extension Periods of varying lengths
throughout the term of the Junior Subordinated Debentures, each not to exceed 60
consecutive monthly interest periods or to cause any extension beyond the
maturity of the Junior Subordinated Debentures. See "Description of the
Preferred Securities -- Distributions" and "Description of the Junior
Subordinated Debentures -- Option to Extend Interest Payment Period."
If an Extension Period occurs, the Junior Subordinated Debentures would be
considered to have original issue discount for U.S. Federal income tax purposes
at all times after the beginning of the first Extension Period, including after
the termination of the Extension Period. During such times, each holder, whether
on the cash or accrual method of accounting, will be required to include its pro
rata share of original issue discount into income as it accrues, even though no
cash will be distributed during an Extension Period. Even before the beginning
of the first Extension Period, while the Company will take the position that
original issue discount does not arise, it is possible that all income on the
Junior Subordinated Debentures would be accounted for as original issue
discount, and stated interest would not separately be reported as taxable
income. The Company has no current intention of exercising its option to defer
payments of interest. See "Taxation -- Interest and Original Issue Discount."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence and during the continuation of a Tax Event or
Investment Company Event (as defined herein), which may occur at any time, the
Trust shall, unless the Junior Subordinated Debentures are redeemed in the
limited circumstances described below, be dissolved with the result that, in the
manner described in "Description of the Preferred Securities -- Liquidation
Distribution Upon Dissolution," Junior Subordinated Debentures having an
aggregate principal amount equal to the aggregate stated liquidation amount of,
and bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid distributions on, the Preferred Securities and the Common Securities
would be distributed on a pro rata basis (as defined in the accompanying
Prospectus) to the holders of the Preferred Securities and the Common Securities
in liquidation of the Trust. In the case of a Tax Event, in certain
circumstances, the Company shall have the right to redeem at any time the Junior
Subordinated Debentures, in whole or in part, in which event the Trust will
redeem Preferred Securities and Common Securities on a pro rata basis to the
same extent as the Junior Subordinated Debentures are redeemed. There can be no
assurance as to the market prices for Preferred Securities or the Junior
Subordinated Debentures which may be distributed in exchange for Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Preferred Securities that an investor may purchase, or the
Junior Subordinated Debentures that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Preferred Securities offered hereby. Because holders of
Preferred Securities may receive Junior Subordinated Debentures upon the
occurrence of a Special Event, prospective purchasers of Preferred Securities
are also making an investment decision with regard to the Junior Subordinated
Debentures and should carefully review all the information regarding the Junior
Subordinated Debentures contained herein and in the accompanying Prospectus. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution" and "Description of the Junior Subordinated
Debentures -- General."
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<PAGE> 7
Recent legislative proposals by the Clinton Administration would prevent
the Company from deducting interest on the Junior Subordinated Debentures. The
proposals would apply to instruments issued on or after the "date of first
committee action." No such committee action has yet occurred. Nevertheless,
there can be no assurance that future legislation would not prevent the Company
from deducting interest on the Junior Subordinated Debentures. Such legislation
would constitute a Tax Event and could result in the distribution of the Junior
Subordinated Debentures to holders of the Preferred Securities or, in certain
circumstances, the redemption of the Junior Subordinated Debentures by the
Company and the distribution of the resulting cash in redemption of the
Preferred Securities. See "Description of the Preferred Securities -- Special
Event Redemption or Distribution" and "Taxation -- Possible Tax Law Changes."
Under current United States Federal income tax law, a distribution of the
Junior Subordinated Debentures upon a Tax Event or Investment Company Event
would not be a taxable event to holders of the Preferred Securities. See
"Taxation -- Distribution of Junior Subordinated Debentures to Holders of
Preferred Securities."
LIMITING VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights, but will
not be able to appoint, remove or replace, or to increase or decrease the number
of, Trustees, which rights are vested exclusively in the Common Securities.
LISTING OF PREFERRED SECURITIES; TRADING PRICES
The Preferred Securities constitute a new issue of securities with no
established trading market. Application will be made to list the Preferred
Securities on the NYSE. However, there can be no assurance that an active market
for the Preferred Securities will develop or be sustained in the future on the
NYSE. Although PaineWebber has indicated to the Company and the Trust that it
intends to make a market in the Preferred Securities as permitted by applicable
laws and regulations, it is not obligated to do so and may discontinue any such
market-making at any time without notice. Accordingly, no assurance can be given
as to the liquidity of, or trading markets for, the Preferred Securities.
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. 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 Junior Subordinated Debentures
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 Junior
Subordinated Debentures deemed disposed of. Accordingly, such a holder will
recognize a capital loss to the extent the selling price (which may not fully
reflect the value of accrued but unpaid interest) is less than the holder's
adjusted tax basis (which will include accrued but unpaid interest). Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States Federal income tax purposes. See "Taxation -- Interest
and Original Issue Discount" and "-- Disposition of the Preferred Securities."
POTENTIAL MARKET VOLATILITY DURING EXTENSION PERIOD
As described above, the Company has the right to extend an interest payment
period on the Junior Subordinated Debentures from time to time for a period not
exceeding 60 consecutive monthly interest periods. If the Company determines to
extend an interest payment period, or if the Company thereafter extends an
Extension Period or prepays interest accrued during an Extension Period as
described above, the market price of the Preferred Securities is likely to be
affected. In addition, as a result of such rights, the market price of the
Preferred Securities (which represent an undivided interest in Junior
Subordinated Debentures) may be more volatile than other securities that do not
have such rights. 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. See "Description of
the Junior Subordinated Debentures -- Option to Extend Interest Payment Period."
S-7
<PAGE> 8
RECENT DEVELOPMENTS
On January 20, 1997, the Company announced operating results (unaudited)
for the fiscal year ended December 31, 1996. Net income was $364.4 million, or
$3.38 per fully diluted common share, and net revenues, including net interest,
were $3,735 million. On February 6, 1997, the Company declared a first quarter
dividend of $.15 per common share, an increase of 25% over the per common share
dividend amount declared in the fourth quarter of 1996.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial information is qualified by
reference to, and should be read in conjunction with, the Company's consolidated
financial statements and notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations," included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (the
"Form 10-K"), which is incorporated by reference in the accompanying Prospectus.
The selected consolidated statement of income data for the years ended December
31, 1993, 1994 and 1995 and the selected consolidated statement of financial
condition data as of December 31, 1994 and 1995 are derived from the Company's
audited consolidated financial statements which are incorporated by reference in
the accompanying Prospectus. The selected unaudited financial information as of
and for the nine months ended September 30, 1995 and 1996 should be read in
conjunction with the Company's audited consolidated financial statements and
notes thereto contained in the Form 10-K and the Company's unaudited
consolidated financial statements and notes thereto contained in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 (the
"Form 10-Q"), which report is also incorporated by reference in the accompanying
Prospectus. Such unaudited information reflects, in the opinion of management,
all adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of its financial position and
results of operations for these periods. Operating results for the nine months
ended September 30, 1996 are not necessarily indicative of the results that may
be expected for the entire year ending December 31, 1996. The selected
consolidated statement of financial condition data as of December 31, 1991,
1992, 1993 and the selected consolidated statement of income data for the years
ended December 31, 1991 and 1992 are derived from audited consolidated financial
statements of the Company which are not included or incorporated by reference in
the accompanying Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1996 1995(1) 1995(1) 1994(2) 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Total revenues................. $ 4,236,438 $ 3,945,713 $ 5,320,090 $ 3,964,077 $ 4,004,717 $ 3,363,731 $ 3,165,895
Net revenues (including net
interest).................... 2,795,244 2,462,607 3,350,279 2,535,424 2,874,005 2,484,489 2,109,771
Net earnings before taxes...... 418,257 23,874 102,677 44,385 407,576 339,115 226,247
Net earnings................... 272,868 21,952 80,750 31,631 246,183 213,175 150,716
Earnings per share:
Primary...................... 2.67 0.00 0.54 0.41 3.11 2.83 2.10
Fully diluted................ 2.55 0.00 0.52 0.41 2.95 2.37 1.67
FINANCIAL CONDITION
Total assets................... $52,773,735 $49,545,151 $45,671,294 $35,856,125 $37,026,909 $26,508,982 $22,621,763
Long-term borrowings and
redeemable preferred stock... 2,752,871 2,609,563 2,622,797 2,501,384 1,936,082 1,150,553 815,728
Stockholders' equity........... 1,675,174 1,565,523 1,552,288 1,630,499 1,195,047 1,080,667 1,050,478
Total capitalization........... 4,428,045 4,175,086 4,175,085 4,131,883 3,131,129 2,231,220 1,866,206
OTHER FINANCIAL DATA
Dividends declared............. $ 0.36 $ 0.36 $ 0.48 $ 0.48 $ 0.38 $ 0.31 $ 0.24
Book value..................... 17.45 15.27 15.62 15.96 16.29 14.24 12.23
</TABLE>
- ---------------
(1) The 1995 results include after-tax charges of $125.9 million ($200 million
before income taxes) and $20.1 million ($30 million before income taxes) in
the second and fourth quarters, respectively, related to the resolution of
the issues arising from the Company's sale of public proprietary limited
partnerships.
(2) The 1994 results include after-tax costs of $36 million ($50 million before
taxes) and $34 million ($57 million before income taxes) related to the
purchase of certain net assets and specific businesses of Kidder, Peabody
Group Inc. and a nonrecurring mutual fund charge, respectively.
S-8
<PAGE> 9
THE FOLLOWING INFORMATION CONCERNING THE COMPANY, PWG CAPITAL TRUST II, THE
PREFERRED SECURITIES, THE PREFERRED SECURITIES GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES IS IN ADDITION TO, AND SHOULD BE READ IN CONJUNCTION
WITH, THE INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS. CAPITALIZED
TERMS USED BUT NOT OTHERWISE DEFINED IN THIS PROSPECTUS SUPPLEMENT HAVE THE SAME
MEANINGS AS IN THE ACCOMPANYING PROSPECTUS.
THE COMPANY
Paine Webber Group Inc. is a holding company which, together with its
operating subsidiaries, forms one of the largest full-service securities and
commodities firms in the industry. Founded in 1879, the Company employs
approximately 15,870 people in 298 offices worldwide.
The Company's principal line of business is to serve the investment and
capital needs of individual, corporate, institutional and public agency clients
through its broker-dealer subsidiary, PaineWebber, and other specialized
subsidiaries. The Company holds memberships in all major securities and
commodities exchanges in the United States, and makes a market in many
securities traded on Nasdaq National Market or on other over-the-counter
markets. Additionally, PaineWebber is a primary dealer in U.S. government
securities.
The Company is comprised of interrelated business groups, including
Research, the Private Client Group, the Municipal Securities Group, Investment
Banking, Asset Management, Global Fixed Income and Commercial Real Estate, and
Global Equities and Transaction Services, which utilize common operational and
administrative personnel and facilities.
The Research Group provides investment advice to institutional and
individual investors, and other business areas of the Company, on approximately
770 companies in 53 industries.
The Private Client Group consists primarily of a domestic branch office
system and consumer product groups through which PaineWebber and certain other
subsidiaries provide clients with financial services and products, including the
purchase and sale of securities, option contracts, commodity and financial
futures contracts, fixed income instruments, mutual funds, trusts and selected
insurance products. The Company may act as a principal or agent in providing
these services. Fees charged vary according to the size and complexity of a
transaction, and the activity level of a client's account.
The Municipal Securities Group originates, underwrites, sells and trades
taxable and tax-exempt issues for municipal and public agency clients.
Through the Investment Banking group, the Company provides financial advice
to, and raises capital for, a broad range of domestic and international
corporate clients. Investment Banking manages and underwrites public and private
offerings, participates as an underwriter in syndicates of public offerings
managed by others, and provides advice in connection with mergers and
acquisitions, restructurings and recapitalizations.
The Asset Management group is comprised of Mitchell Hutchins Asset
Management Inc. ("MHAM"), including Mitchell Hutchins Investment Advisory
division ("MHIA") and Financial Counselors Inc. ("FCI"). The Asset Management
group provides investment advisory and portfolio management services to mutual
funds, institutions, pension funds, endowment funds, individuals and trusts.
Through the Global Fixed Income and Global Equities groups, the Company
places securities for, and executes trades on behalf of, institutional clients
both domestically and internationally. In addition, the Company takes positions
in both listed and over-the-counter equity securities and fixed income
securities to facilitate client transactions or for the Company's own account.
The Commercial Real Estate group provides a full range of capital market
services to real estate clients, including underwriting of debt and equity
securities, principal lending activity, debt restructuring, property sales and
bulk sales services, and a broad range of other advisory services.
S-9
<PAGE> 10
The Transaction Services Group includes correspondent services, prime
brokerage and securities lending businesses, and specialist trading. Through
Correspondent Services Corporation, the Company provides execution and clearing
services to broker-dealers in the U.S. and overseas. The Company also acts as a
specialist responsible for executing transactions and maintaining an orderly
market in certain securities.
The Company's businesses operate in one of the nation's most highly
regulated industries. Violations of applicable regulations can result in the
revocation of broker-dealer licenses, the imposition of censures or fines, and
the suspension or expulsion of a firm. The Company's businesses are regulated by
various agencies, including the Securities and Exchange Commission (the
"Commission"), the NYSE, the Commodity Futures Trading Commission and the
National Association of Securities Dealers, Inc. (the "NASD").
The Company's principal executive offices are located at 1285 Avenue of the
Americas, New York, New York 10019 (Telephone: (212) 713-2000).
For purposes of the foregoing description, all references to the "Company"
refer collectively to Paine Webber Group Inc. and its operating subsidiaries,
unless the context otherwise requires.
PWG CAPITAL TRUST II
PWG Capital Trust II is a business trust formed on October 7, 1996, under
the Delaware Business Trust Act (the "Business Trust Act") pursuant to a
declaration of trust among the Trustees and the Company and the filing of a
certificate of trust with the Secretary of State of the State of Delaware. Such
declaration will be amended and restated in its entirety (as so amended and
restated, the "Declaration") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part, as of the date the Preferred Securities are
initially issued. The Declaration is qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the holders thereof will own all the issued and outstanding
Preferred Securities. The Company will acquire Common Securities in an amount
equal to at least 3% of the total capital of the Trust and will own, directly or
indirectly, all the issued and outstanding Common Securities. The Trust exists
for the purpose of (a) issuing its Trust Securities for cash and investing the
proceeds thereof in an equivalent amount of Junior Subordinated Debentures and
(b) engaging in such other activities as are necessary, convenient or incidental
thereto. The rights of the holders of the Trust Securities, including economic
rights, rights to information and voting rights, are as set forth in the
Declaration, the Business Trust Act and the Trust Indenture Act. The Declaration
does not permit the incurrence by the Trust of any indebtedness for borrowed
money or the making of any investment other than in the Junior Subordinated
Debentures. In the Declaration, the Company has agreed to pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trust, including the fees and expenses of the Trustees and any
taxes and all costs and expenses with respect thereto, to which the Trust may
become subject, except for United States withholding taxes.
S-10
<PAGE> 11
CAPITALIZATION OF THE COMPANY
The following table sets forth the unaudited consolidated capitalization of
the Company at September 30, 1996, and as adjusted to reflect (i) the issuance
and sale of the Preferred Securities (assuming no exercise of the Underwriters'
overallotment option), and the application of the estimated proceeds therefrom,
(ii) the issuance and sale of $195,000,000 of Company-obligated 8.30%
Mandatorily Redeemable Preferred Securities of a Subsidiary Trust and the
application of the proceeds therefrom and (iii) the issuance of $150,000,000 of
7 5/8% Notes Due October 15, 2008. See "Use of Proceeds." The table should be
read in conjunction with the Company's consolidated financial statements and
notes thereto included in the documents incorporated by reference in the
accompanying Prospectus. See "Documents Incorporated by Reference" in the
accompanying Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS EXCEPT
SHARES)
<S> <C> <C>
Long-Term Debt(1):
Medium-Term Senior Notes.......................................... $ 682,001 $ 682,001
Medium-Term Subordinated Notes.................................... 281,150 281,150
7% Notes Due March 1, 2000........................................ 199,731 199,731
6 1/4% Notes Due June 15, 1998.................................... 199,777 199,777
6 1/2% Notes Due November 1, 2005................................. 199,441 199,441
7 5/8% Notes Due February 15, 2014................................ 199,296 199,296
7 3/4% Subordinated Notes Due September 1, 2002................... 174,478 174,478
9 1/4% Notes Due December 15, 2001................................ 150,000 150,000
8 7/8% Notes Due March 15, 2005................................... 123,497 123,497
7 7/8% Notes Due February 15, 2003................................ 99,973 99,973
Convertible Debentures............................................ 14,546 14,546
Zero Coupon Bonds................................................. 21,349 21,349
8 1/4% Notes Due May 1, 2002...................................... 125,000 125,000
6 3/4% Notes Due February 1, 2006................................. 95,201 95,201
7 5/8% Notes Due October 15, 2008................................. -- 149,858
Company-obligated 8.30% Mandatorily Redeemable Preferred Securities
of Subsidiary Trust............................................... -- 195,000
Company-obligated 8.08% Mandatorily Redeemable Preferred Securities
of Subsidiary Trust (2)........................................... -- 175,000
Redeemable Preferred Stock.......................................... 187,431 187,431
Stockholders' Equity:
Convertible Preferred Stock....................................... 100,000 100,000
Common Stock, $1 par value, 200,000,000 shares authorized;
105,435,836 shares issued at September 30, 1996................ 105,436 105,436
Additional Paid-in Capital........................................ 837,265 837,265
Retained Earnings................................................. 936,239 936,239
Common Stock held in Treasury, at cost: 13,115,949 shares at
September 30, 1996............................................. (270,852) (270,852)
Unamortized Cost of Restricted Stock Awards....................... (28,998) (28,998)
Foreign Currency Translation Adjustment........................... (3,916) (3,916)
---------- ----------
Total Capitalization................................................ $4,428,045 $ 4,947,903
========== ==========
</TABLE>
- ---------------
(1) In addition to the indebtedness shown in the foregoing table, the Company
and its consolidated subsidiaries had outstanding at September 30, 1996,
short-term bank loans totalling $467,321 and commercial paper totalling
$483,865.
(2) As described in this Prospectus Supplement, the sole asset of the Trust will
be the Junior Subordinated Debentures.
S-11
<PAGE> 12
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with the
Company's financial statements, with the Preferred Securities shown as
Company-obligated mandatorily redeemable preferred securities of subsidiary
trusts holding solely Company guaranteed related subordinated debt.
USE OF PROCEEDS
The proceeds of the sale of the Preferred Securities will be invested by
the Trust in Junior Subordinated Debentures of the Company. The proceeds from
the issuance of such Junior Subordinated Debentures will be used by the Company
for general corporate purposes.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration which is qualified under the Trust Indenture Act. The Property
Trustee, The Chase Manhattan Bank, but not the other Trustees of the Trust, will
act as the indenture trustee for purposes of the Trust Indenture Act. The terms
of the Preferred Securities and the Declaration include those stated in the
Declaration and those made part of the Declaration by the Trust Indenture Act
and the Business Trust Act. The following summarizes the material terms and
provisions of the Preferred Securities and is qualified in its entirety by
reference to the Declaration, which has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement forms a part, the
Business Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Trust to issue the Preferred Securities,
which represent preferred undivided beneficial interests in the assets of the
Trust, and the Common Securities, which represent common undivided beneficial
interests in the assets of the Trust. All the Common Securities will be owned,
directly or indirectly, by the Company. The Common Securities and the Preferred
Securities rank pari passu with each other and will have equivalent terms except
that (i) if an Event of Default under the Declaration occurs and is continuing,
the holders of Preferred Securities will have a priority over holders of the
Common Securities with respect to distributions and payments upon liquidation,
redemption or otherwise and (ii) holders of Common Securities have the exclusive
right (subject to the terms of the Declaration) to appoint, remove or replace
Trustees and to increase or decrease the number of Trustees. The Declaration
does not permit the issuance by the Trust of any securities or other evidences
of beneficial ownership of, or beneficial interests in, the Trust other than the
Preferred Securities and the Common Securities, the incurrence of any
indebtedness for borrowed money by the Trust or the making of any investment
other than in the Junior Subordinated Debentures. Pursuant to the Declaration,
the Property Trustee will have legal title to, and will hold, the Junior
Subordinated Debentures as trust assets for the benefit of the holders of the
Preferred Securities and the Common Securities. The payment of distributions out
of moneys held by the Property Trustee and payments on redemption of the
Preferred Securities or liquidation of the Trust are guaranteed by the Company
on a subordinated basis as and to the extent described under "Description of the
Preferred Securities Guarantees" in the accompanying Prospectus. The Property
Trustee will hold the Preferred Securities Guarantee for the benefit of holders
of the Preferred Securities. The Preferred Securities Guarantee is a full and
unconditional guarantee from the time of issuance of the Preferred Securities,
but the Preferred Securities Guarantee covers distributions and other payments
on the Preferred Securities only if and to the extent that the Company has made
a payment to the Property Trustee of interest or principal on the Junior
Subordinated Debentures deposited in the Trust as trust assets. See "Voting
Rights."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 8.08% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one month will bear interest thereon at
the rate per annum of 8.08% of the stated liquidation amount of $25 per
Preferred Security
S-12
<PAGE> 13
(to the extent permitted by law), compounded monthly. The term "distributions"
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, and for any period shorter than a 30-day
period on the basis of the actual number of days elapsed.
Distributions on the Preferred Securities will be cumulative, will accrue
from the original date of issuance and, except as otherwise described below,
will be payable monthly in arrears on the first day of each month, commencing on
April 1, 1997, but only if, and to the extent that, interest payments are made
in respect of Junior Subordinated Debentures held by the Property Trustee.
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures by
extending the interest payment period from time to time on the Junior
Subordinated Debentures for a period not exceeding 60 consecutive monthly
interest periods and, as a consequence, the Trust would defer monthly
distributions on the Preferred Securities (though such distributions would
continue to accrue with interest thereon at the rate of 8.08% per annum,
compounded monthly) during any such Extension Period. If the Company exercises
the right to extend an interest payment period, the Company may not declare or
pay dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred stock
during such Extension Period or make any guarantee payments with respect
thereto; provided, however, that the foregoing restrictions shall not apply to
(i) dividends, redemptions, purchases, acquisitions, distributions or payments
made by the Company by way of issuance of shares of its capital stock, (ii)
payments of accrued dividends by the Company upon the redemption, exchange or
conversion of any preferred stock of the Company as may be outstanding from time
to time in accordance with the terms of such preferred stock or (iii) cash
payments made by the Company in lieu of delivering fractional shares upon the
redemption, exchange or conversion of any preferred stock of the Company as may
be outstanding from time to time in accordance with the terms of such preferred
stock. Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period; provided that such Extension Period
together with all such previous and further extensions thereof may not exceed 60
consecutive monthly interest periods and may not extend beyond the maturity of
the Junior Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all amounts then due, the Company may commence a new
Extension Period, subject to the above requirements. The Company may also prepay
at any time all or any portion of the interest accrued during an Extension
Period. Consequently, there could be multiple Extension Periods of varying
lengths throughout the term of the Junior Subordinated Debentures, each not to
exceed 60 consecutive monthly interest periods or to cause any extension beyond
the maturity of the Junior Subordinated Debentures. See "Risk Factors -- Option
to Extend Interest Payment Period; Tax Impact of Extension;" "Description of the
Junior Subordinated Debentures -- Interest" and "-- Option to Extend Interest
Payment Period." Subject to prepayments as described above, payments of accrued
distributions will be payable to holders of Preferred Securities as they appear
on the books and records of the Trust on the first record date after the end of
an Extension Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Property Trustee has cash on hand in the Property Account
to permit such payment. The funds available for distribution to the holders of
the Preferred Securities will be limited to payments received by the Property
Trustee in respect of the Junior Subordinated Debentures that are deposited in
the Trust as trust assets. See "Description of the Junior Subordinated
Debentures." If the Company does not make interest payments on the Junior
Subordinated Debentures, the Property Trustee will not make distributions on the
Preferred Securities. Under the Declaration, if and to the extent the Company
does make interest payments on the Junior Subordinated Debentures deposited in
the Trust as trust assets, the Property Trustee is obligated to make
distributions on the Trust Securities on a pro rata basis. The payment of
distributions on the Preferred Securities is guaranteed by the Company on a
subordinated basis as and to the extent set forth under "Description of the
Preferred Securities Guarantees" in the accompanying Prospectus. The Preferred
Securities Guarantee is a full and unconditional guarantee from the time of
issuance of the Preferred Securities, but the Preferred Securities Guarantee
covers distributions and other payments on the Preferred
S-13
<PAGE> 14
Securities only if and to the extent that the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debentures
deposited in the Trust as trust assets.
Distributions on the Preferred Securities will be made to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day (as defined herein) prior to the relevant
distribution payment date. Distributions payable on any Preferred Securities
that are not punctually paid on any distribution payment date as a result of the
Company having failed to make the corresponding interest payment on the Junior
Subordinated Debentures will forthwith cease to be payable to the person in
whose name such Preferred Security is registered on the relevant record date,
and such defaulted distribution will instead be payable to the person in whose
name such Preferred Security is registered on the special record date
established by the Regular Trustees (as defined in the accompanying Prospectus),
which record date shall correspond to the special record date or other specified
date determined in accordance with the Indenture; provided, however, that
distributions shall not be considered payable on any distribution payment date
falling within an Extension Period unless the Company has elected to make a full
or partial payment of interest accrued on the Junior Subordinated Debentures on
such distribution payment date. Distributions on the Preferred Securities will
be paid through the Property Trustee who will hold amounts received in respect
of the Junior Subordinated Debentures in the Property Account (as defined in the
accompanying Prospectus) for the benefit of the holders of the Preferred
Securities and the Common 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 relevant record date will be the fifteenth day of the
month immediately preceding the month in which the relevant payment date occurs.
The Declaration provides that the payment dates or record dates for the
Preferred Securities shall be the same as the payment dates and record dates for
the Junior Subordinated Debentures. All distributions paid with respect to the
Trust Securities shall be paid on a pro rata basis to the holders thereof
entitled thereto. If any date on which distributions are to be made on the
Preferred Securities is not a Business Day, then payment of the distribution to
be made 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, 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. "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 authorized or
required by law to close.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event or an Investment Company Event (each a
"Special Event") shall occur and be continuing, the Trust shall, unless the
Junior Subordinated Debentures are redeemed in the limited circumstances
described below, be dissolved with the result that, after satisfaction of
creditors of the Trust, Junior Subordinated Debentures with an aggregate
principal amount equal to the aggregate stated liquidation amount of the
Preferred Securities and the Common Securities would be distributed on a pro
rata basis to the holders of the Preferred Securities and the Common Securities
in liquidation of such holders' interests in the Trust, within 90 days following
the occurrence of such Special Event; provided, however, that in the case of the
occurrence of a Tax Event, as a condition of such dissolution and distribution,
the Regular Trustees shall have received an opinion of nationally recognized
independent tax counsel experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on any then applicable published revenue
rulings of the Internal Revenue Service, to the effect that the holders of the
Preferred Securities will not recognize any gain or loss for United States
Federal income tax purposes as a result of such dissolution and distribution of
Junior Subordinated Debentures; and, provided further, that, if at the time
there is available to the Company or the Regular Trustees, on behalf of the
Trust, the opportunity to eliminate, within such 90-day period, the Special
Event by taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure, which has no
adverse effect on the Trust or the Company or the holders of the Preferred
Securities, the Company or the Regular Trustees, on behalf of the Trust, will
pursue such measure in lieu of dissolution. Furthermore, if in the case of the
occurrence of a Tax Event, (i) the Regular Trustees
S-14
<PAGE> 15
have received an opinion (a "Redemption Tax Opinion") of nationally recognized
independent tax counsel experienced in such matters that, as a result of such
Tax Event, there is more than an insubstantial risk that the Company would be
precluded from deducting the interest on the Junior Subordinated Debentures for
United States Federal income tax purposes even if the Junior Subordinated
Debentures were distributed to the holders of Trust Securities in liquidation of
such holders' interests in the Trust as described above or (ii) the Regular
Trustees shall have been informed by such tax counsel that a No Recognition
Opinion cannot be delivered to the Trust, the Company shall have the right at
any time, upon not less than 30 nor more than 60 days notice, to redeem the
Junior Subordinated Debentures in whole or in part for cash within 90 days
following the occurrence of such Tax Event, and promptly following such
redemption Preferred Securities and Common Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debentures so redeemed will be redeemed by the Trust at the
Redemption Price on a pro rata basis; provided, however, that if at the time
there is available to the Company or the Regular Trustees, on behalf of the
Trust, the opportunity to eliminate, within such 90-day period, such Tax Event
by taking some ministerial action, such as filing a form or making an election,
or pursuing some other similar reasonable measure, which has no adverse effect
on the Trust, the Company or the holders of the Preferred Securities, the
Company or the Regular Trustees, on behalf of the Trust, will pursue such
measure in lieu of redemption and provided further that the Company shall have
no right to redeem the Junior Subordinated Debentures while the Regular
Trustees, on behalf of the Trust, are pursuing any such ministerial action. The
Common Securities will be redeemed on a pro rata basis with the Preferred
Securities, except that if an Event of Default under the Declaration has
occurred and is continuing, the Preferred Securities will have a priority over
the Common Securities with respect to payment of the Redemption Price.
"Tax Event" means that the Regular Trustees shall have obtained an opinion
of nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that on or after the date of this
Prospectus Supplement as a result of (a) any amendment to, or change 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 (including any announced prospective change) in, an interpretation or
application of any such laws or regulations by any legislative body, court,
governmental agency or regulatory authority (including the enactment of any
legislation and the publication of any judicial decision or regulatory
determination), (c) any interpretation or pronouncement that provides for a
position with respect to such laws or regulations that differs from the
theretofore generally accepted position or (d) any action taken by any
governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or effective or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after the date of this Prospectus Supplement, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
thereof, subject to United States Federal income tax with respect to income
accrued or received on the Junior Subordinated Debentures, (ii) the Trust is, or
will be within 90 days of the date thereof, subject to more than a de minimis
amount of other taxes, duties or other governmental charges or (iii) interest
payable by the Company to the Trust on the Junior Subordinated Debentures is
not, or within 90 days of the date thereof will not be, deductible by the
Company for United States Federal income tax purposes.
"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 or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Trust is or will be considered
an "investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after the date of this
Prospectus Supplement.
On the date fixed for any distribution of Junior Subordinated Debentures,
upon dissolution of the Trust, (i) the Preferred Securities and the Common
Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee,
as the record holder of the Preferred Securities, will receive a registered
global certificate or certificates representing the Junior Subordinated
Debentures to be delivered upon such distribution and (iii) any certificates
representing Preferred Securities not held by DTC or its nominee will be deemed
to
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represent Junior Subordinated Debentures having an aggregate principal amount
equal to the aggregate stated liquidation amount 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 price for the Junior
Subordinated Debentures which may be distributed in exchange for Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Junior Subordinated Debentures which a holder of Preferred
Securities may subsequently receive upon the dissolution of the Trust may trade
at a discount to the price of the Preferred Securities exchanged. If the Junior
Subordinated Debentures are distributed to the holders of Preferred Securities
upon the dissolution of the Trust, the Company will use its best efforts to list
the Junior Subordinated Debentures on the NYSE or on such other exchange on
which the Preferred Securities are then listed.
MANDATORY REDEMPTION
Upon the repayment of the Junior Subordinated Debentures, whether at
maturity, upon redemption or otherwise, the proceeds from such repayment will be
promptly applied to redeem Preferred Securities and Common Securities having an
aggregate liquidation amount equal to the Junior Subordinated Debentures so
repaid, upon not less than 30 nor more than 60 days' notice, at the Redemption
Price. The Common Securities will be entitled to be redeemed on a pro rata basis
with the Preferred Securities, except that if an Event of Default under the
Declaration has occurred and is continuing, the Preferred Securities will have a
priority over the Common Securities with respect to payment of the Redemption
Price. Subject to the foregoing, if fewer than all outstanding Preferred
Securities and Common Securities are to be redeemed, the Preferred Securities
and Common Securities will be redeemed on a pro rata basis. In the event fewer
than all outstanding Preferred Securities are to be redeemed, Preferred
Securities registered in the name of and held by DTC or its nominee will be
redeemed as described under "Book-Entry Only Issuance; The Depository Trust
Company" below.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all monthly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable) then, by 12:00 noon, New York City
time, on the redemption date and provided that the Company has paid to the
Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Junior Subordinated Debentures, the Trust will
irrevocably deposit with DTC funds sufficient to pay the applicable Redemption
Price and will give DTC 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 redemption date, distributions will cease to accrue on the
Preferred Securities called for redemption, such Preferred Securities shall no
longer be deemed to be outstanding 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. Neither the Trustees nor the Trust shall be
required to register or cause to be registered the transfer of any Preferred
Securities which have been so called for redemption. If 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 (and without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption. If the Company fails to repay Junior Subordinated Debentures on
maturity or on the date fixed for redemption or if payment of the Redemption
Price in respect of Preferred Securities is improperly withheld or refused and
not paid by the Property Trustee or by the Company pursuant to the Preferred
Securities Guarantee described under "Description of the Preferred Securities
Guarantees" in the accompanying Prospectus, distributions on the Preferred
Securities
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will continue to accrue from the original redemption date of the Preferred
Securities to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all 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."
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by any national securities exchange or
other organization on which the Preferred Securities are then listed, the
Company pursuant to the Indenture will only redeem Junior Subordinated
Debentures in whole and, as a result, the Trust may only redeem the Preferred
Securities in whole.
Subject to the foregoing and applicable law (including, without limitation,
United States Federal securities laws), the Company or any of 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 dissolution, winding-up or
termination of the Trust, the holders of the Preferred Securities and the Common
Securities at the date of dissolution, winding-up or termination of the Trust
will be entitled to receive on a pro rata basis solely out of the assets of the
Trust, after satisfaction of liabilities to creditors, an amount equal to the
aggregate of the stated liquidation amount of $25 per Trust Security plus
accrued and unpaid distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"), unless, in connection with such
dissolution, winding-up or termination, and after satisfaction of liabilities to
creditors, Junior Subordinated Debentures in an aggregate principal amount equal
to the aggregate stated liquidation amount of such Trust Securities and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
distributions on such Trust Securities shall be distributed on a pro rata basis
to the holders of the Preferred Securities and the Common Securities in exchange
therefor.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities and the Common Securities shall be paid,
subject to the following sentence, on a pro rata basis. The holders of the
Common Securities will be entitled to receive distributions upon any such
dissolution on a pro rata basis with the holders of the Preferred Securities,
except that if an Event of Default under the Declaration has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to payment of the Liquidation Distribution.
Pursuant to the Declaration, the Trust shall terminate: (i) on March 1,
2037; (ii) when all the Trust Securities shall have been called for redemption
and the amounts necessary for redemption thereof shall have been paid to the
holders of Trust Securities in accordance with the terms of the Trust
Securities; or (iii) when all the Junior Subordinated Debentures shall have been
distributed to the holders of Trust Securities in exchange for all the Trust
Securities in accordance with the terms of the Trust Securities.
NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE TRUST
The Trust may not merge or consolidate with or into, or be replaced by, or
sell, transfer or lease all or substantially all its properties and assets to,
any corporation or other entity or, except as expressly permitted hereby, sell
or transfer any Junior Subordinated Debentures to any corporation or other
entity.
DECLARATION EVENTS OF DEFAULT
An Indenture Event of Default (as defined in the accompanying Prospectus)
will constitute an event of default under the Declaration with respect to the
Trust Securities (an "Event of Default"); provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any such Event of Default with respect to the Common Securities until all Events
of Default with respect to the
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Preferred Securities have been cured or waived. Until all such Events of Default
with respect to the Preferred Securities have been so cured or waived, 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 consequently under the Indenture. In the event that
any Event of Default with respect to the Preferred Securities is waived by the
holders of the Preferred Securities as provided in the Declaration, the holders
of Common Securities pursuant to the Declaration have agreed that such waiver
also constitutes a waiver of such Event of Default with respect to the Common
Securities for all purposes under the Declaration without any further act, vote
or consent of the holders of the Common Securities. See "Voting Rights."
Upon the occurrence of an Event of Default, the Property Trustee as the
holder of all the Junior Subordinated Debentures will have the right under the
Indenture to declare the principal of, and interest on, the Junior Subordinated
Debentures to be immediately due and payable. In addition, the Property Trustee
will have the power to exercise all rights, powers and privileges under the
Indenture. If the Property Trustee fails to enforce its rights under the
Declaration (including, without limitation, its rights, powers and privileges as
a holder of the Junior Subordinated Debentures under the Indenture), any holder
of Preferred Securities may, to the extent permitted by applicable law, after a
period of 30 days has elapsed from 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 Declaration, without first
instituting a legal proceeding against the Property Trustee or any other person.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest or principal on the Junior Subordinated Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), then a holder of Preferred Securities may directly institute
suit against the Company for enforcement of payment to such holder of the
principal of or interest on Junior Subordinated Debentures having a principal
amount equal to the aggregate liquidation amount of the Preferred Securities
held by such holder on or after the respective due date specified in the Junior
Subordinated Debentures. The holders of Preferred Securities will not be able to
exercise directly against the Company any other remedy available to the holders
of the Junior Subordinated Debentures unless the Property Trustee first fails to
do so. See "Description of the Junior Subordinated Debentures."
VOTING RIGHTS
Except as provided below, under "Modification and Amendment of the
Declaration" and "Description of the Preferred Securities
Guarantees -- Amendments and Assignment" in the accompanying Prospectus and as
otherwise required by the Business Trust Act, the Trust Indenture Act or the
Declaration, the holders of the Preferred Securities will have no voting rights.
Subject to the requirements of the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right (i) on behalf of all holders of Preferred Securities,
to waive any past default that is waivable under the Declaration and (ii) to
direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under the Declaration, including the right to direct
the Property Trustee, as the holder of the Junior Subordinated Debentures, to
(A) direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee (as defined herein), or executing any
trust or power conferred on the Indenture Trustee with respect to the Junior
Subordinated Debentures, (B) waive any past default that is waivable under
Section 6.06 of the Indenture, or (C) exercise any right to rescind or annul a
declaration that the principal of all the Junior Subordinated Debentures shall
be due and payable; provided, however, that where the taking of any action under
the Indenture would require the consent or vote of (a) holders of Junior
Subordinated Debentures representing a specified percentage greater than a
majority in principal amount of the Junior Subordinated Debentures or (b) each
holder of Junior Subordinated Debentures affected thereby, no such consent or
vote shall be given by the Property Trustee without the prior consent or vote
of, in the case of clause (a) above, holders of Preferred Securities
representing such specified percentage of the aggregate liquidation amount of
the Preferred Securities or, in the case of clause (b) above, each holder of
Preferred Securities affected thereby. The Property Trustee shall
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not revoke any action previously authorized or approved by a vote of the holders
of Preferred Securities. The Property Trustee shall notify all holders of record
of Preferred Securities of any notice of default received from the Indenture
Trustee with respect to the Junior Subordinated Debentures. Other than with
respect to directing the time, method and place of conducting any proceeding for
any remedy available to the Property Trustee or the Indenture Trustee as set
forth above, the Property Trustee shall be under no obligation to take any of
the foregoing actions at the direction of the holders of the Preferred
Securities unless the Property Trustee shall have obtained an opinion of
nationally recognized independent tax counsel recognized as expert in such
matters to the effect that the Trust will not be classified for United States
Federal income tax purposes as an association taxable as a corporation or a
partnership on account of such action and will be treated as a grantor trust for
United States Federal income tax purposes following such action.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of holders of the Preferred Securities will constitute a waiver of the
corresponding Event of Default under the Declaration in respect of the Trust
Securities.
In the event the consent of the Property Trustee as the holder of the
Junior Subordinated Debentures is required under the Indenture with respect to
any amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, 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 any
such amendment, modification or termination under the Indenture would require
the consent or vote of (1) holders of Junior Subordinated Debentures
representing a specified percentage greater than a majority in principal amount
of the Junior Subordinated Debentures or (2) each holder of Junior Subordinated
Debentures affected thereby, the Property Trustee may only give such consent or
vote, in the case of clause (1), at the direction of the holders of Trust
Securities representing such specified percentage of the aggregate liquidation
amount of the Trust Securities or, in the case of clause (2), as directed by
each holder of Trust Securities affected thereby; and, provided further,
however, that 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 nationally recognized
independent tax counsel recognized as expert in such matters to the effect that
the Trust will not be classified for United States Federal income tax purposes
as an association taxable as a corporation or a partnership on account of such
action and will be treated as a grantor trust for United States Federal income
tax purposes following such action.
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 the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken; (ii) a description of any resolution proposed
for adoption at such meeting on which such holders are entitled to vote or of
such matter upon which written consent is sought; and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the holders of Preferred Securities will be required
for the Trust to redeem and cancel Preferred Securities or distribute Junior
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities at such time that are owned by the Company or by any entity directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Company shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
The procedures by which persons owning Preferred Securities registered in
the name of and held by DTC or its nominee may exercise their voting rights are
described under "Book-Entry Only Issuance; The Depository Trust Company" below.
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Holders of the Preferred Securities will have no rights to increase or
decrease the number of Trustees or to appoint, remove or replace a Trustee,
which rights are vested exclusively in the holders of the Common Securities.
MODIFICATION AND AMENDMENT OF THE DECLARATION
The Declaration may be modified and amended with the approval of a majority
of the Regular Trustees, provided that, if any proposed modification or
amendment provides for, or the Regular Trustees otherwise propose to effect, (a)
any action that would adversely affect the powers, preferences or special rights
of the Trust Securities, whether by way of amendment to the Declaration or
otherwise, or (b) the dissolution, winding-up or termination of the Trust other
than pursuant to the terms of the Declaration, then the holders of the
outstanding Trust Securities as a 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, provided that if any amendment or proposal referred to above would
adversely affect only the Preferred Securities or the Common Securities, then
only the affected class will be entitled to vote on such amendment or proposal
and such amendment or proposal shall not be effective except with the approval
of 66 2/3% in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, (i) no amendment or modification may be made
to the Declaration unless the Regular Trustees shall have obtained (a) either a
ruling from the Internal Revenue Service or a written unqualified opinion of
nationally recognized independent tax counsel experienced in such matters to the
effect that such amendment will not cause the Trust to be classified for United
States Federal income tax purposes as an association taxable as a corporation or
a partnership and to the effect that the Trust will continue to be treated as a
grantor trust for purposes of United States Federal income taxation and (b) a
written unqualified opinion of nationally recognized independent counsel
experienced in such matters to the effect that such amendment will not cause the
Trust to be an "investment company" which is required to be registered under the
1940 Act; (ii) certain specified provisions of the Declaration may not be
amended without the consent of all the holders of the Trust Securities; (iii) no
amendment which adversely affects the rights, powers and privileges of the
Property Trustee or the Delaware Trustee shall be made without the consent of
the Property Trustee or the Delaware Trustee, as the case may be; (iv) Article
IV of the Declaration relating to the obligation of the Company to purchase the
Common Securities and to pay certain obligations and expenses of the Trust as
described under "The PWG Trusts" in the accompanying Prospectus may not be
amended without the consent of the Company; and (v) the rights of holders of
Common Securities under Article V of the Declaration to increase or decrease the
number of, and to appoint, replace or remove, Trustees shall not be amended
without the consent of each holder of Common Securities.
The Declaration further provides that it may be amended without the consent
of the holders of the Trust Securities to (i) cure any ambiguity; (ii) correct
or supplement any provision in the Declaration that may be defective or
inconsistent with any other provision of the Declaration; (iii) to add to the
covenants, restrictions or obligations of the Company; and (iv) to conform to
changes in, or a change in interpretation or application of, certain 1940 Act
requirements by the Commission, which amendment does not adversely affect the
rights, preferences or privileges of the holders.
BOOK-ENTRY ONLY ISSUANCE; 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 DTC or its nominee. One or more fully-registered
global Preferred Securities certificates (each a "Preferred Securities Global
Certificate"), representing the total aggregate number of Preferred Securities,
will be issued and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a global Preferred
Security.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a
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"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. 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 NYSE, the American Stock Exchange, Inc., and the
NASD. Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Upon issuance of a Preferred Securities Global Certificate, DTC will credit
on its book-entry registration and transfer system the number of Preferred
Securities represented by such Preferred Securities Global Certificate to the
accounts of institutions that have accounts with DTC. Ownership of beneficial
interests in a Preferred Securities Global Certificate will be limited to
Participants or persons that may hold interests through Participants. The
ownership interest of each actual purchaser of each Preferred Security
("Beneficial Owner") is in turn to be recorded on the Direct Participants' and
the 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 Participants or the
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.
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. So long as DTC, or its
nominee, is the owner of a Preferred Securities Global Certificate, DTC or such
nominee, as the case may be, will be considered the sole owner and holder of
record of the Preferred Securities represented by such Preferred Securities
Global Certificate for all purposes.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all the
Preferred Securities are being redeemed, DTC will reduce pro rata (subject to
adjustment to eliminate fractional Preferred Securities) the amount of interest
of each Direct Participant in the Preferred Securities to be redeemed.
Although voting with respect to the Preferred Securities is limited, in
those instances in which a vote is required, neither DTC nor Cede & Co. itself
will consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an omnibus proxy to the Trust as soon as possible
after the record date. The omnibus proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached to
the omnibus proxy).
Distribution payments on the Preferred Securities represented by a
Preferred Securities Global Certificate will be made by the Property Trustee 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 and will be the responsibility of
such Participants and not of DTC, the Trust or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of distributions to DTC is the
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responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct Participants and Indirect
Participants.
Except as provided herein, a Beneficial Owner in a Preferred Securities
Global Certificate will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, if a successor securities depositary is not
appointed, Preferred Security certificates will be required to be printed and
delivered. Additionally, the Trust may decide to discontinue use of the system
of book-entry transfers through DTC (or a successor depositary). 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 Trust and the Company believe to be
reliable, but the Trust and the Company take no responsibility for the accuracy
thereof.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
In the event the Preferred Securities do not remain in book-entry only
form, the following provisions will apply:
Payment of distributions and payments on redemption of the Preferred
Securities will be payable, the transfer of the Preferred Securities will be
registrable and Preferred Securities will be exchangeable for Preferred
Securities of other denominations of a like aggregate liquidation amount at the
principal corporate trust office of the Property Trustee in The City of New
York; provided that payment of distributions may be made at the option of the
Regular Trustees on behalf of the Trust by check mailed to the address of the
persons entitled thereto and that the payment on redemption of any Preferred
Security will be made only upon surrender of such Preferred Security to the
Property Trustee.
The Chase Manhattan Bank or one of its affiliates will act as registrar and
transfer agent for the Preferred Securities. The Chase Manhattan Bank will also
act as paying agent and, with the consent of the Regular Trustees, may designate
additional paying agents.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other governmental charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to an Event of Default, undertakes to perform
only such duties as are specifically set forth in the Declaration and, during an
Event of Default, shall exercise and use the same degree of care and skill as a
prudent individual would exercise or use under the circumstances in the conduct
of his or her own affairs. Subject to such provision, 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 Property Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Property Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
The Property Trustee is a depositary for funds and performs other services
for, and transacts other banking business with, the Company in the normal course
of business.
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GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to take such action as
they deem reasonable in order that the Trust will not be deemed to be an
"investment company" required to be registered under the 1940 Act or that the
Trust will not be classified for United States Federal income tax purposes as an
association taxable as a corporation or a partnership and will be treated as a
grantor trust for United States Federal income tax purposes. In this connection,
the Regular Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of the Trust or the Declaration, that
the Regular Trustees determine in their discretion to be reasonable and
necessary or desirable for such purposes, as long as such action does not
adversely affect the interests of holders of the Trust Securities.
The Company and the Regular Trustees on behalf of the Trust will be
required to provide to the Property Trustee annually a certificate as to whether
or not the Company and the Trust, respectively, is in compliance with all the
conditions and covenants under the Declaration.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the Junior Subordinated Debentures in
which the Trust will invest the proceeds from the issuance and sale of the Trust
Securities and which will be deposited in the Trust as trust assets. The terms
of the Junior Subordinated Debentures include those stated in the Indenture
dated as of December 9, 1996, between the Company and The Chase Manhattan Bank,
as trustee (the "Indenture Trustee"), as supplemented by the Second Supplemental
Indenture dated as of March 14, 1997, between the Company and the Indenture
Trustee (as so supplemented, the "Indenture"), forms of which have been filed as
exhibits to the Registration Statement of which this Prospectus Supplement forms
a part, and those made part of the Indenture by the Trust Indenture Act. This
description supplements the description of the general terms and provisions of
the Junior Subordinated Debt Securities set forth in the accompanying Prospectus
under the caption "Description of the Junior Subordinated Debt Securities." The
following description does not purport to be complete and is qualified in its
entirety by reference to the Indenture and the Trust Indenture Act. Whenever
particular provisions or defined terms in the Indenture are referred to herein,
such provisions or defined terms are incorporated by reference herein. Section
references used herein are references to provisions of the Indenture.
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that junior subordinated debentures
may be issued thereunder from time to time in one or more series (collectively,
together with the Junior Subordinated Debentures, the "Subordinated
Debentures"). The Junior Subordinated Debentures constitute a separate series
under the Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Junior Subordinated Debentures may
be distributed to the holders of the Trust Securities upon dissolution of the
Trust. See "Description of the Preferred Securities -- Special Event Redemption
or Distribution."
GENERAL
The Junior Subordinated Debentures are unsecured, subordinated obligations
of the Company, limited in aggregate principal amount to an amount equal to the
sum of (i) the stated liquidation amount of the Preferred Securities issued by
the Trust and (ii) the proceeds received by the Trust upon issuance of the
Common Securities to the Company (which proceeds will be used to purchase an
equal principal amount of Junior Subordinated Debentures).
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The entire principal amount of the Junior Subordinated Debentures will
become due and payable, together with any accrued and unpaid interest thereon,
on March 1, 2037. The Junior Subordinated Debentures are not subject to any
sinking fund.
If Junior Subordinated Debentures are distributed to holders of Preferred
Securities upon dissolution of the Trust, such Junior Subordinated Debentures
will initially be issued as a Global Security (as defined below). As described
herein, under certain limited circumstances, Junior Subordinated Debentures may
be issued in certificated form in exchange for a Global Security. See
"Book-Entry and Settlement" below. In the event that Junior Subordinated
Debentures are issued in certificated form, such Junior Subordinated Debentures
will be in denominations of $25 and integral multiples thereof and may be
transferred or exchanged at the offices described below. Payments on Junior
Subordinated Debentures issued as a Global Security will be made to DTC, a
successor depositary or, in the event that no depositary is used, to a paying
agent for the Junior Subordinated Debentures.
In the event that Junior Subordinated Debentures are issued in certificated
form, payments of principal and interest will be payable, the transfer of the
Junior Subordinated Debentures will be registrable and Junior Subordinated
Debentures will be exchangeable for Junior Subordinated Debentures of other
denominations of a like aggregate principal amount at the corporate trust office
of the Indenture Trustee in The City of 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 and that the payment of principal with respect
to any Junior Subordinated Debenture will be made only upon surrender of such
Junior Subordinated Debenture to the Indenture Trustee.
If the Junior Subordinated Debentures are distributed to the holders of
Preferred Securities upon dissolution of the Trust, the Company will use its
best efforts to list the Junior Subordinated Debentures on the NYSE or on such
other exchange on which the Preferred Securities are then listed.
OPTIONAL REDEMPTION
Except as provided below, the Junior Subordinated Debentures may not be
redeemed prior to March 1, 2002. The Company shall have the right to redeem the
Junior Subordinated Debentures, in whole or in part, from time to time, on or
after March 1, 2002, upon not less than 30 nor more than 60 days notice, at a
redemption price equal to 100% of the principal amount to be redeemed, plus any
accrued and unpaid interest to the redemption date, including interest accrued
during an Extension Period. The Company will also have the right to redeem the
Junior Subordinated Debentures at any time upon the occurrence of a Tax Event if
certain conditions are met as described under "Description of the Preferred
Securities -- Special Event Redemption or Distribution."
If the Company gives a notice of redemption in respect of Junior
Subordinated Debentures (which notice will be irrevocable) then, by 12:00 noon,
New York City time, on the redemption date, the Company will deposit irrevocably
with the Indenture Trustee funds sufficient to pay the applicable redemption
price and will give irrevocable instructions and authority to pay such
redemption price to the holders of the Junior Subordinated Debentures. If notice
of redemption shall have been given and funds deposited as required, then, upon
the date of such deposit, interest will cease to accrue on the Junior
Subordinated Debentures called for redemption, such Junior Subordinated
Debentures will no longer be deemed to be outstanding and all rights of holders
of such Junior Subordinated Debentures so called for redemption will cease,
except the right of the holders of such Junior Subordinated Debentures to
receive the applicable redemption price, but without interest on such redemption
price. If any date fixed for redemption of Junior Subordinated Debentures 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 (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date fixed for redemption. If the redemption price in respect
of Junior Subordinated Debentures is not paid by the Company, interest on such
Junior Subordinated Debentures will continue to accrue, from the original
redemption date to the date of payment, in which case the actual payment date
will be considered the date
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fixed for redemption for purposes of calculating the applicable redemption
price. If fewer than all the Junior Subordinated Debentures are to be redeemed,
the Junior Subordinated Debentures to be redeemed shall be selected by lot or
pro rata or in some other equitable manner determined by the Indenture Trustee.
The Company shall not be required to (i) issue, register the transfer of or
exchange any Junior Subordinated Debentures during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of all or less than all of the Junior Subordinated Debentures and
ending at the close of business on the day of such mailing and (ii) register the
transfer of or exchange any Junior Subordinated Debentures so selected for
redemption, in whole or in part, except the unredeemed portion of any Junior
Subordinated Debentures being redeemed in part. (Section 2.05)
INTEREST
The Junior Subordinated Debentures will bear interest at the rate of 8.08%
per annum from March 14, 1997. Interest will be payable monthly in arrears on
the first day of each month (each, an "Interest Payment Date"), commencing on
April 1, 1997, to the person in whose name such Junior Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. In the event (i) the
Preferred Securities shall not continue to remain in book-entry only form or
(ii) if, following distribution of the Junior Subordinated Debentures to holders
of Trust Securities upon dissolution of the Trust as described under
"Description of the Preferred Securities," the Junior Subordinated Debentures
shall not continue to remain in book-entry only form, the relevant record date
will be the fifteenth day of the month immediately preceding the month in which
the relevant Interest Payment Date occurs. Interest payable on any Junior
Subordinated Debenture that is not punctually paid or duly provided for on any
interest payment date will forthwith cease to be payable to the person in whose
name such Junior Subordinated Debenture is registered on the relevant record
date, and such defaulted interest will instead be payable to the person in whose
name such Junior Subordinated Debenture is registered on the special record date
or other specified date determined in accordance with the Indenture; provided,
however, that interest, shall not be considered payable by the Company on any
Interest Payment Date falling within an Extension Period unless the Company has
elected to make a full or partial payment of interest accrued on the Junior
Subordinated Debentures on such Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and for any period shorter than a
30-day period for which interest is computed, the amount of interest payable
will be computed on the basis of the actual number of days elapsed. If any date
on which interest is payable on the Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company is not in default in the payment of interest on the
Junior Subordinated Debentures, the Company shall have the right to extend the
interest payment period from time to time for a period not exceeding 60
consecutive monthly interest periods. The Company has no current intention of
exercising its right to extend an interest payment period. No interest shall be
due and payable during an Extension Period, except at the end thereof. During
any Extension Period, the Company shall not declare or pay any dividends on, or
redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its common stock or preferred stock or make any guarantee
payments with respect thereto; provided, however, that the foregoing
restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such preferred stock or (iii) cash payments made by the Company in lieu of
delivering fractional shares upon the
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redemption, exchange or conversion of any preferred stock of the Company as may
be outstanding from time to time in accordance with the terms of such preferred
stock.
The Company's outstanding preferred stock consists of $100 million stated
value of 6% Cumulative Convertible Redeemable Preferred Stock, Series A (the
"Convertible Preferred Stock") and $250 million stated value of 9% Cumulative
Redeemable Preferred Stock, Series C (the "Redeemable Preferred Stock"). The
Convertible Preferred Stock is redeemable at any time, in whole or in part, at
the option of the Company at redemption prices declining to $100 per share, plus
accrued and unpaid dividends, by December 16, 2004 and is subject to mandatory
redemption on December 15, 2014. The Convertible Preferred Stock is convertible,
at the option of the holder, into shares of common stock, at any time, in whole
or in part, at a conversion price of $18.13 per share of common stock, subject
to adjustment. The Redeemable Preferred Stock is redeemable, at the option of
the Company, at any time after December 15, 1999, in whole or in part, at a
price of $100 per share, together with accrued but unpaid dividends. The
Redeemable Preferred Stock is subject to mandatory redemption on December 15,
2014.
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 60
consecutive monthly interest periods and may not extend beyond the maturity of
the Junior Subordinated Debentures. On the first Interest Payment Date occurring
at or after the end of each Extension Period, the Company shall pay to the
holders of Junior Subordinated Debentures of record on the record date for such
Interest Payment Date (regardless of who the holders of record may have been on
other dates during the Extension Period) all accrued and unpaid interest on the
Junior Subordinated Debentures, together with interest thereon at the rate
specified for the Junior Subordinated Debentures to the extent permitted by
applicable law, compounded monthly ("Compounded Interest"). 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. The Company
may also prepay at any time all or any portion of the interest accrued during an
Extension Period. Consequently, there could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures, each
not to exceed 60 consecutive monthly interest periods or to cause any extension
beyond maturity of the Junior Subordinated Debentures. The failure by the
Company to make interest payments during an Extension Period would not
constitute a default or an event of default under the Indenture or the Company's
currently outstanding indebtedness.
If the Property Trustee shall be the sole holder of the Junior Subordinated
Debentures, the Company shall give the Property Trustee notice of its selection
of such Extension Period one Business Day prior to the earlier of (i) the next
succeeding date on which the distributions on the Preferred Securities are
payable or (ii) the date the Trust is required to give notice to the NYSE (if
the Preferred Securities are then listed thereon) or other applicable
self-regulatory organization or to holders of the Preferred Securities of the
record date or payment date for such distribution. The Trust shall give notice
of the Company's selection of such Extension Period to the holders of the
Preferred Securities.
If Junior Subordinated Debentures have been distributed to holders of Trust
Securities, the Company shall give the holders of the Junior Subordinated
Debentures notice of its selection of such Extension Period ten Business Days
prior to the earlier of (i) the next succeeding Interest Payment Date or (ii)
the date the Company is required to give notice to the NYSE (if the Junior
Subordinated Debentures are then listed thereon) or other applicable
self-regulatory organization or to holders of the Junior Subordinated Debentures
of the record or payment date for such related interest payment.
COMPOUNDED INTEREST
Payments of Compounded Interest on the Junior Subordinated Debentures held
by the Trust will make funds available to pay any interest on distributions in
arrears in respect of the Preferred Securities pursuant to the terms thereof.
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BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debentures are distributed to holders of
Preferred Securities (see "Description of the Preferred Securities"), such
Junior Subordinated Debentures will be issued in the form of one or more global
certificates (each a "Global Security") registered in the name of the depositary
or its nominee. Except under the limited circumstances described below, Junior
Subordinated Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Junior Subordinated
Debentures in definitive form. The Global Securities described above may not be
transferred except by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the depositary
or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debentures in definitive form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debentures
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the depositary or its nominee or of 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. If Junior Subordinated
Debentures are distributed to holders of Preferred Securities, DTC will act as
securities depositary for the Junior Subordinated Debentures.
For a description of DTC and DTC's book-entry system, see "Description of
Preferred Securities -- Book-Entry Only Issuance; The Depository Trust Company."
As of the date of this Prospectus Supplement, the description herein of DTC's
book-entry system and DTC's practices as they relate to purchases, transfers,
notices and payments with respect to the Preferred Securities apply in all
material respects to any debt obligations represented by one or more Global
Securities held by DTC. The Company may appoint a successor to DTC or any
successor depositary in the event DTC or such successor depositary is unable or
unwilling to continue as a depositary for the Global Securities.
None of the Company, the 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 Junior
Subordinated Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
A Global Security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the depositary or its nominee only
if (i) the depositary notifies the Company that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed; (ii) the depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the depositary
is required to be so registered to act as such depositary and no successor
depositary shall have been appointed; (iii) the Company, in its sole discretion,
determines that such Global Security shall be so exchangeable; or (iv) there
shall have occurred an Indenture Event of Default with respect to such Junior
Subordinated Debentures. Any Global Security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for Junior Subordinated Debentures
registered in such names as the depositary shall direct. It is expected that
such instructions will be based upon directions received by the depositary from
its Participants with respect to ownership of beneficial interests in such
Global Security.
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RELATIONSHIP BETWEEN THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND
THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the Trust exists for the sole purpose of
(a) issuing and selling the Trust Securities evidencing undivided beneficial
interests in the assets of the Trust and investing the proceeds from such
issuance and sale in the Junior Subordinated Debentures and (b) engaging in such
other activities as are necessary, convenient or incidental thereto.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities primarily
because (i) the aggregate principal amount of Junior Subordinated Debentures
held as trust assets will be equal to the sum of the aggregate stated
liquidation amount of the Trust Securities; (ii) the interest rate and interest
and other payment dates on the Junior Subordinated Debentures will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) the Declaration provides that the Company shall pay for all
debts and obligations (other than with respect to the Trust Securities) and all
costs and expenses of the Trust, including any taxes and all costs and expenses
with respect thereto, to which the Trust may become subject, except for United
States withholding taxes; and (iv) the Declaration further provides that the
Trustees shall not cause or permit the Trust, among other things, to engage in
any activity that is not consistent with the limited purposes of the Trust. With
respect to clause (iii) above, however, no assurance can be given that the
Company will have sufficient resources to enable it to pay such debts,
obligations, costs and expenses on behalf of the Trust.
Payments of distributions and other payments due on the Preferred
Securities are guaranteed by the Company on a subordinated basis as and to the
extent set forth under "Description of the Preferred Securities Guarantees" in
the accompanying Prospectus. If the Company does not make interest or other
payments on the Junior Subordinated Debentures, the Trust will not make
distributions or other payments on the Preferred Securities. Under the
Declaration, if and to the extent the Company does make interest or other
payments on the Junior Subordinated Debentures, the Property Trustee is
obligated to make distributions or other payments on the Preferred Securities.
The Preferred Securities Guarantee is a full and unconditional guarantee from
the time of issuance of the Preferred Securities, but the Preferred Securities
Guarantee covers distributions and other payments on the Preferred Securities
only if and to the extent that the Company has made a payment to the Property
Trustee of interest or principal on the Junior Subordinated Debentures deposited
in the Trust as trust assets.
The Property Trustee will have the power to exercise all rights, powers and
privileges under the Indenture with respect to the Junior Subordinated
Debentures, including its rights as the holder of the Junior Subordinated
Debentures to enforce the Company's obligations under the Junior Subordinated
Debentures upon the occurrence of an Indenture Event of Default, and will also
have the right to enforce the Preferred Securities Guarantee on behalf of the
holders of the Preferred Securities. In addition, the holders of at least a
majority in liquidation amount of the Preferred Securities will have the right
to direct the Property Trustee with respect to certain matters under the
Declaration and the Preferred Securities Guarantee. If the Property Trustee
fails to enforce its rights under the Junior Subordinated Debentures, any holder
of Preferred Securities may, to the extent permitted by applicable law, after a
period of 30 days has elapsed from 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 Junior Subordinated
Debentures without first instituting any legal proceeding against the Property
Trustee or any other person or entity. Notwithstanding the foregoing, if an
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Company to pay interest or principal on the Junior
Subordinated Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, the redemption date), then a holder of
Preferred Securities may directly institute suit against the Company for
enforcement of payment to such holder of the principal of or interest on Junior
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities held by such holder on or after
the respective due date specified in the Junior Subordinated Debentures. The
holders of Preferred Securities will not be able to exercise directly against
the Company any other remedy available to the holders of the Junior Subordinated
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Debentures unless the Property Trustee first fails to do so. If the Property
Trustee fails to enforce the Preferred Securities Guarantee, to the extent
permitted by applicable law, any holder of Preferred Securities may institute a
legal proceeding directly against the Company to enforce the Property Trustee's
rights under the Preferred Securities Guarantee without first instituting a
legal proceeding against the Trust, the Property Trustee or any other person or
entity. Notwithstanding the foregoing, if the Company has failed to make a
Guarantee Payment (as defined in the accompanying Propectus), a holder of
Preferred Securities may directly institute a proceeding against the Company for
enforcement of such holder's right to receive payment under the Preferred
Securities Guarantee. The Company waives any right or remedy to require that any
action be brought first against the Trust or any other person or entity before
proceeding directly against the Company. See "Description of the Preferred
Securities" and "Description of the Preferred Securities Guarantees" in the
accompanying Prospectus.
The above mechanisms and obligations, taken together, provide a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities.
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TAXATION
In the opinion of Cravath, Swaine & Moore, counsel to the Company and the
Trust ("Tax Counsel"), the following are the material United States Federal
income tax consequences of the ownership and disposition of Preferred
Securities. Unless otherwise stated, this summary deals only with Preferred
Securities held as capital assets by holders who acquire the Preferred
Securities upon original issuance ("Initial Holders"). It does not deal with
special classes of holders, such as dealers in securities or currencies, life
insurance companies, persons holding Preferred Securities as part of a straddle
or as part of a hedging or conversion transaction, or persons whose functional
currency is not the United States dollar. 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).
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF PREFERRED
SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF
ANY STATE, LOCAL OR OTHER TAX LAWS.
CLASSIFICATION OF THE TRUST
In the opinion of Tax Counsel, under current law and assuming full
compliance with the terms of the Declaration, the Trust will be classified for
United States Federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Accordingly, each holder of Preferred
Securities (a "Securityholder") will be considered the owner of a pro rata
portion of the Junior Subordinated Debentures held by the Trust. Accordingly,
each Securityholder will be required to include in gross income the pro rata
share of income accrued on the Junior Subordinated Debentures.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In the opinion of Tax Counsel, under current law and assuming full
compliance with the Indenture, the Junior Subordinated Debentures will be
classified for United States Federal income tax purposes as indebtedness of the
Company.
INTEREST AND ORIGINAL ISSUE DISCOUNT
If an Extension Period occurs, the Junior Subordinated Debentures would be
considered to have original issue discount at all times after the beginning of
the first Extension Period, including after the termination of the Extension
Period. In addition, the Company's option to defer the payment of interest on
the Junior Subordinated Debentures during an Extension Period might cause the
Junior Subordinated Debentures to be considered initially to be issued with
original issue discount. The Company believes, and will take the position, that
this latter result will not arise because of an exception in the Treasury
Regulations that applies when there is only a "remote" likelihood that an
Extension Period will occur. Assuming that the likelihood of an Extension Period
is in fact remote, Tax Counsel believes that this position is correct although
there is no authority directly on point and the Internal Revenue Service could
take a contrary position.
If the original issue discount rules apply to the Junior Subordinated
Debentures (either following the occurrence of an Extension Period or
initially), each Securityholder, whether on the cash or accrual method of
accounting, will be required to accrue its pro rata share of original issue
discount into income in accordance with a constant yield method based on the
compounding of interest. As a result, income will be required to be reported by
Securityholders before the receipt of cash attributable to such income, and, in
particular, income will be reported during an Extension Period even though no
cash distributions are being made. If the original issue discount rules apply
for a period during which cash distributions are currently being made, the sum
of the daily accruals of income for a monthly period for a Securityholder that
purchased the Preferred Securities for their liquidation value will equal the
cash distribution received by the Securityholder for such month, assuming no
disposition prior to the record date for such distribution.
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If the original issue discount rules apply, actual distributions of stated
interest will not separately be reported as income. In that case, a
Securityholder's tax basis for the Junior Subordinated Debentures will be
increased by original issue discount accrued into income, and decreased by cash
distributions of interest. If the original issue discount rules do not apply,
stated interest will be includible in a Securityholder's gross income as
ordinary interest income in accordance with such holder's regular method of tax
accounting.
Whether or not the original issue discount rules apply, no portion of the
amounts received on the Preferred Securities will be eligible for the corporate
dividends received deduction.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the caption "Description of the Preferred
Securities--Special Event Redemption or Distribution" will be non-taxable and
will result in the Securityholder receiving directly such Securityholder's pro
rata share of the Junior Subordinated Debentures previously held indirectly
through the Trust, with a holding period and tax basis equal to the holding
period and adjusted tax basis such Securityholder was considered to have had in
such Securityholder's pro rata share of the underlying Junior Subordinated
Debentures immediately prior to such distribution. If, however, the Special
Event giving rise to the distribution is a Tax Event which results in the Trust
being treated as an association taxable as a corporation, the distribution would
constitute a taxable event to Securityholders.
MARKET DISCOUNT AND BOND PREMIUM
Securityholders other than Initial Holders may be considered to have
acquired their pro rata interest in the Junior Subordinated Debentures with
market discount, acquisition premium or amortizable bond premium. 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.
DISPOSITION OF THE PREFERRED SECURITIES
Upon a sale, exchange or other disposition of the Preferred Securities
(including a distribution of cash in redemption of a Securityholder's Preferred
Securities upon redemption or repayment of the underlying Junior Subordinated
Debentures, but excluding the distribution of Junior Subordinated Debentures), a
Securityholder will be considered to have disposed of all or part of such
Securityholder's pro rata share of the Junior Subordinated Debentures, and will
recognize gain or loss equal to the difference between the amount realized
(other than amounts attributable to accrued but unpaid interest that is not
treated as original issue discount) and the Securityholder's adjusted tax basis
in such Securityholder's pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. A Securityholder's adjusted tax basis in the
Preferred Securities generally will be its initial purchase price increased by
original issue discount previously includible in such Securityholder's gross
income to the date of disposition and decreased by payments (other than payments
of stated interest that are not treated as original issue discount) received on
the Preferred Securities. Gain or loss will be capital gain or loss (except to
the extent of any accrued interest or market discount not previously included in
income). See "Market Discount and Bond Premium" above. Such gain or loss will be
long-term capital gain or loss if the Preferred Securities have been held for
more than one year.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
individual, corporation, partnership, estate or trust that is, as to the United
States, a non-resident alien individual or a foreign corporation, partnership,
estate or trust.
Under present United States Federal income tax law:
(i) payments by the Trust or any of its paying agents to any holder of
a Preferred Security who or which is a United States Alien Holder will not
be subject to United States Federal income or withholding tax, provided
that (a) the beneficial owner of the Preferred Security does not actually
or constructively
S-31
<PAGE> 32
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; (c) either (A) the beneficial owner of the
Preferred Security certifies to the Trust or its agent, under penalties of
perjury, that it is not a United States holder and provides its name and
address or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "Financial Institution") and holds the Preferred
Security certifies to the Trust or its agent under penalties of perjury
that such statement has been received from the beneficial owner by it or by
a Financial Institution between it and the beneficial owner and furnishes
the Trust or its agent with a copy thereof; and (d) such payments are not
effectively connected with the conduct by the United States Alien Holder of
a trade or business in the United States; and
(ii) A United States Alien Holder of a Preferred Security will 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 unless
(i) the United States Alien Holder is an individual who is present in the
United States for 183 days or more in the taxable year of disposition, and
certain other conditions apply, or (ii) the gain is effectively connected
with the conduct by the United States Alien Holder of a trade or business
in the United States.
INFORMATION REPORTING TO HOLDERS
The Trust will report the interest paid or the original issue discount that
accrued during the year with respect to the Junior Subordinated Debentures, and
any gross proceeds received by the Trust from the retirement or redemption of
the Junior Subordinated Debentures, annually to the holders of record of the
Preferred Securities and the Internal Revenue Service. The Trust currently
intends to deliver such reports to holders of record prior to January 31
following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Preferred Securities may
be subject to a "backup" withholding tax of 31% unless the Securityholder
complies with certain identification requirements. Any withheld amounts will
generally be allowed as a credit against the Securityholder's United States
Federal income tax, provided the required information is timely filed with the
Internal Revenue Service.
POSSIBLE TAX LAW CHANGES
On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget
Proposal, the Clinton Administration proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate issuers
a deduction for interest in respect of certain debt obligations, such as the
Junior Subordinated Debentures, issued on or after the "date of first committee
action" if such debt obligations have a maximum term in excess of 15 years and
are not shown as indebtedness on the issuer's applicable consolidated balance
sheet. No such committee action has yet occurred. Accordingly, if the Proposed
Legislation were enacted in its current form, such legislation would not apply
to the Junior Subordinated Debentures. There can be no assurance, however, that
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Company to deduct the interest payable on the Junior
Subordinated Debentures. Such a change could give rise to a Tax Event. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution."
S-32
<PAGE> 33
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated the date hereof (the "Underwriting Agreement"), the Company and the Trust
have agreed that the Trust will sell to each of the Underwriters named below,
and each of the Underwriters, for whom PaineWebber Incorporated is acting as
representative (the "Representative"), has severally agreed to purchase from the
Trust, the number of Preferred Securities set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
------------------------------------------------------------ --------------------
<S> <C>
PaineWebber Incorporated.................................... 650,000
Bear, Stearns & Co. Inc..................................... 635,000
Dean Witter Reynolds Inc.................................... 635,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 635,000
Goldman, Sachs & Co......................................... 635,000
Lehman Brothers Inc......................................... 635,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 635,000
Morgan Stanley & Co. Incorporated........................... 635,000
Prudential Securities Incorporated.......................... 635,000
Salomon Brothers Inc........................................ 635,000
Smith Barney Inc............................................ 635,000
----------
Total............................................. 7,000,000
==========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the
Preferred Securities offered hereby if any Preferred Securities are purchased by
the Underwriters. In the event of default by an Underwriter, the Underwriting
Agreement provides that, in certain circumstances, the purchase commitment of
the nondefaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Preferred Securities to the public at the public
offering price set forth on the cover page of this Prospectus Supplement, and to
certain dealers at such price less a concession not in excess of $.50 per
Preferred Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $.40 per Preferred Security to certain brokers and
dealers. After the initial public offering, the public offering price and such
concessions may be changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures of the
Company, the Underwriting Agreement provides that the Company will pay as
Underwriters' Compensation for the Underwriters' arranging the investment
therein of such proceeds $.7875 per Preferred Security or $5,512,500 in the
aggregate ($6,339,375 in the aggregate if the Underwriters' over-allotment
option is exercised in full) for the accounts of the several Underwriters.
Pursuant to the Underwriting Agreement, the Trust has granted to the
Underwriters an option, exercisable for 30 days from the date hereof, to
purchase up to 1,050,000 additional Preferred Securities at the price to public
set forth on the cover page hereof. The Underwriters may exercise such option to
purchase solely for the purpose of covering over-allotments, if any, made in
connection with the offering. The Company will pay Underwriters' Compensation in
the amount per Preferred Security set forth above with respect to such
additional Preferred Securities. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional Preferred Securities as the
number set forth next to such Underwriter's name in the preceding table bears to
the total number of Preferred Securities offered by the Underwriters hereby.
During a period of 30 days from the date of this Prospectus Supplement,
neither the Trust nor the Company will, without the prior written consent of the
Representative, directly or indirectly, sell, offer to sell, grant any option
for the sale of, or otherwise dispose of, any Preferred Securities, any security
convertible into
S-33
<PAGE> 34
or exchangeable into or exercisable for Preferred Securities or Junior
Subordinated Debentures or any debt securities substantially similar to the
Junior Subordinated Debentures or equity securities substantially similar to the
Preferred Securities (except for the Junior Subordinated Debentures and the
Preferred Securities offered hereby).
Until the distribution of the Preferred Securities is completed, rules of
the Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Preferred
Securities. As an exception to these rules, the Representative is permitted to
engage in certain transactions that stabilize the price of the Preferred
Securities. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Preferred Securities.
If the Underwriters create a short position in the Preferred Securities in
connection with the offering, i.e., if they sell more shares of Preferred
Securities than are set forth on the cover page of this Prospectus Supplement,
the Representative may reduce that short position by purchasing the Preferred
Securities in the open market.
The Representative may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representative purchases
shares of Preferred Securities in the open market to reduce the Underwriters'
short position or to stabilize the price of the Preferred Securities, they may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Preferred Securities. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Representative will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
Application will be made to list the Preferred Securities on the NYSE. The
NYSE symbol for the Preferred Securities is expected to be "PWJ PrB." If such
listing is approved, trading of the Preferred Securities on the NYSE is expected
to commence within a 30-day period after the date of this Prospectus Supplement.
PaineWebber has advised the Trust that it intends to make a market in the
Preferred Securities. PaineWebber will have no obligation to make a market in
the Preferred Securities, however, and may cease market making activities, if
commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the NYSE, the Underwriters will represent that, at the time of the
consummation of the offering of the Preferred Securities, there will be at least
400 holders of Preferred Securities.
The Representative is a wholly-owned subsidiary of the Company. The
underwriting of the Preferred Securities offered hereby is being conducted in
accordance with Rule 2720 of the NASD Conduct Rules.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or
contribute to payments which the Underwriters may be required to make in respect
thereof.
S-34
<PAGE> 35
PROSPECTUS
- ------------------
PAINE WEBBER GROUP INC.
JUNIOR SUBORDINATED DEBT SECURITIES
PWG CAPITAL TRUST I
PWG CAPITAL TRUST II
PWG CAPITAL TRUST III
PWG CAPITAL TRUST IV
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED BY
PAINE WEBBER GROUP INC.
Paine Webber Group Inc. (the "Company") may offer, from time to time, junior
subordinated debt securities (the "Junior Subordinated Debt Securities")
consisting of debentures, notes or other evidences of indebtedness in one or
more series and in amounts, at prices and on terms to be determined at or prior
to the time of any such offering. The Junior Subordinated Debt Securities when
issued will be unsecured obligations of the Company. The Company's obligations
under the Junior Subordinated Debt Securities will be subordinate and junior in
right of payment to all Senior Indebtedness (as defined herein) of the Company.
PWG Capital Trust I, PWG Capital Trust II, PWG Capital Trust III and PWG
Capital Trust IV (the "PWG Trusts"), each a business trust formed under the laws
of the State of Delaware, may offer and sell, from time to time, preferred
securities ("Preferred Securities") representing undivided beneficial interests
in the assets of the respective PWG Trust. The payment of periodic cash
distributions ("distributions") with respect to Preferred Securities of a PWG
Trust out of moneys held by the Property Trustee (as defined herein) and
payments on liquidation of such PWG Trust and on redemption of Preferred
Securities of such PWG Trust will be guaranteed by the Company on a subordinated
basis as and to the extent described herein (each such guarantee, a "Preferred
Securities Guarantee"). See "Description of the Preferred Securities
Guarantees." A Preferred Securities Guarantee covers payments of distributions
and other payments on the Preferred Securities only if and to the extent that
the applicable PWG Trust has funds available therefor which will not be the case
unless the Company has made a payment of interest or principal or other payments
on the Junior Subordinated Debt Securities held by such PWG Trust as its sole
asset. A Preferred Securities Guarantee, when taken together with the Company's
obligations under the Junior Subordinated Debt Securities held by a PWG Trust
and the Indenture (as defined herein) and its obligations under the Amended and
Restated Declaration of such PWG Trust, including its obligation to pay all
costs, expenses, debts and other obligations of such PWG Trust (other than with
respect to the Trust Securities (as defined herein)), will provide a full and
unconditional guarantee of amounts due on the Preferred Securities of such PWG
Trust. Junior Subordinated Debt Securities may be issued and sold, from time to
time, in one or more series by the Company to a PWG Trust, or a trustee of such
PWG Trust, in connection with the investment of the proceeds from the offering
of Preferred Securities and Common Securities (as defined herein) of such PWG
Trust. The Junior Subordinated Debt Securities purchased by a PWG Trust may be
subsequently distributed pro rata to holders of Preferred Securities and Common
Securities of such PWG Trust in connection with the dissolution of such PWG
Trust upon the occurrence of certain events as may be described in an
accompanying Prospectus Supplement.
Specific terms of the Junior Subordinated Debt Securities of any series or
the Preferred Securities of any PWG Trust in respect of which this Prospectus is
being delivered (the "Offered Securities") will be set forth in a Prospectus
Supplement with respect to such Offered Securities, which will describe, without
limitation and where applicable, the following: (i) in the case of Junior
Subordinated Debt Securities, the specific designation, aggregate principal
amount, authorized denomination, maturity, premium, if any, redemption or
sinking fund provisions, if any, interest rate (which may be fixed or variable),
if any, time and method of calculating interest payments, if any, dates on which
premium, if any, and interest, if any, will be payable, right of the Company, if
any, to defer payment of interest on the Junior Subordinated Debt Securities and
the maximum length of such deferral period, the initial public offering price,
and any listing on a securities exchange and other specific terms of the
offering; and (ii) in the case of Preferred Securities, the specific
designation, number of securities, liquidation amount per security, initial
public offering price, and any listing on a securities exchange, distribution
rate (or method of calculation thereof), dates on which distributions shall be
payable and dates from which distributions shall accrue, voting rights (if any),
terms for any conversion or exchange into other securities, any 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 Junior Subordinated Debt Securities of the Company. Unless
otherwise indicated in an accompanying Prospectus Supplement, the Company does
not intend to list any of the Offered Securities on a national securities
exchange.
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering. Any Prospectus Supplement relating to any
series of Offered Securities will contain information concerning certain United
States Federal income tax considerations, if applicable, to the Offered
Securities. By separate prospectus, the form of which is included in the
Registration Statement of which this Prospectus is a part, the Company may offer
from time to time senior debt securities and/or subordinated debt securities
each of which will be direct, unsecured obligations of the Company. The
aggregate initial public offering price of the securities to be offered by this
Prospectus and such other prospectus shall not exceed $500,000,000.
The Offered Securities may be sold (i) directly to purchasers, (ii) through
agents designated from time to time, (iii) to dealers or (iv) through
underwriters or a group of underwriters. If agents of the Company and/or any PWG
Trust or underwriters are involved in the sale of the Offered Securities, their
names will be set forth in the applicable Prospectus Supplement. If agents of
the Company and/or any PWG Trust, or underwriters or dealers are involved in the
sale of the Offered Securities, descriptions of their compensation and
indemnification arrangements and the net proceeds to the Company and/or any PWG
Trust will be set forth in the applicable Prospectus Supplement.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
---------------------
This Prospectus and the related Prospectus Supplement may be used by the
Company, PaineWebber Incorporated ("PaineWebber"), a wholly owned subsidiary of
the Company, or other affiliates of the Company in connection with offers and
sales related to secondary market transactions in the Offered Securities at
negotiated prices related to prevailing market prices at the time of sale or
otherwise. PaineWebber or such other Company affiliates may act as principal or
agent in such transactions.
---------------------
The date of this Prospectus is November 29, 1996.
<PAGE> 36
IN CONNECTION WITH AN OFFERING OR DISTRIBUTION, THE UNDERWRITERS OR, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, THE AGENTS FOR SUCH OFFERING OR DISTRIBUTION
MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE OFFERED SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE, IN ANY OVER-THE-COUNTER MARKET OR OTHERWISE AND, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The registration
statement of which this Prospectus forms a part, as well as reports, proxy
statements and other information filed by the Company, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material may also be accessed electronically by
means of the Commission's home page on the Internet at http://www.sec.gov. In
addition, reports, proxy statements and other information concerning the Company
can also be inspected at the offices of the New York Stock Exchange, Inc. (the
"NYSE"), 20 Broad Street, New York, New York and the Pacific Stock Exchange, 301
Pine Street, San Francisco, California.
This Prospectus constitutes a part of the Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed with the Commission under the Securities Act of 1933 (the
"Securities Act") with respect to the Offered Securities. This Prospectus does
not contain all of the information set forth in such Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Reference is made to such Registration Statement and to the
exhibits relating thereto for further information with respect to the Company,
the PWG Trusts and the Offered Securities. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission or incorporated by
reference herein are not necessarily complete, and in each instance reference is
made to the copy of such document so filed for a more complete description of
the matter involved. Each such statement is qualified in its entirety by such
reference.
No separate financial statements of any of the PWG Trusts have been
included or incorporated by reference herein. The Company and the PWG Trusts do
not consider that such financial statements would be material to holders of the
Preferred Securities because (i) all the voting securities of each PWG Trust
will be owned, directly or indirectly, by the Company, a reporting company under
the Exchange Act, (ii) each PWG Trust is a newly formed special purpose entity,
has no operating history, has no independent operations and is not engaged in,
and does not propose to engage in, any activity other than issuing Trust
Securities representing undivided beneficial interests in the assets of such PWG
Trust and investing the proceeds thereof in Junior Subordinated Debt Securities
issued by the Company and (iii) the obligations of each PWG Trust under the
Preferred Securities of such PWG Trust will be fully and unconditionally
guaranteed by the Company as described herein. See "The PWG Trusts,"
"Description of the Preferred Securities," "Description of the Preferred
Securities Guarantees" and "Description of the Junior Subordinated Debt
Securities." The PWG Trusts are business trusts formed under the laws of the
State of Delaware. The Company, as of the date of this Prospectus, beneficially
owns all the beneficial interests in each PWG Trust. Each holder of Preferred
Securities of a PWG Trust will be furnished annually with unaudited financial
statements of such PWG Trust as soon as available after the end of such PWG
Trust's fiscal year.
2
<PAGE> 37
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995, the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996 and the Company's Current
Report on Form 8-K dated January 18, 1996, as filed with the Commission pursuant
to the Exchange Act (File No. 1-7367), are hereby incorporated by reference in
this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Offered Securities shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
respective date of filing of each such document. Any statement contained herein,
in any Prospectus Supplement or in any 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 herein, in any
Prospectus Supplement or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge upon written or oral request by any
person, including any beneficial owner, to whom this Prospectus is delivered, a
copy of any of or all the documents referred to above which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents. Requests for such copies should be directed to Assistant
Secretary, Paine Webber Group Inc., 1285 Avenue of the Americas, New York, New
York 10019, telephone (212) 713-2722.
USE OF PROCEEDS
Each PWG Trust will use all proceeds received from the sale of its Trust
Securities to purchase Junior Subordinated Debt Securities from the Company.
Unless otherwise set forth in the applicable Prospectus Supplement,
proceeds from the sale of Junior Subordinated Debt Securities will be used by
the Company for general corporate purposes, including , but not limited to,
funding investments in or extensions of credit to subsidiaries, repayments of
indebtedness of the Company or its subsidiaries, and possible acquisitions. The
precise amount and timing of the application of the funds will depend upon
future requirements and the availability of other funds to the Company and its
subsidiaries. Management of the Company expects that the Company and its
subsidiaries will engage in additional financings as needs arise.
RATIOS OF EARNINGS
TO FIXED CHARGES AND EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for the Company
for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31 SEPTEMBER
---------------------------------------- 30
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges........... 1.2 1.4 1.3 1.0 1.1 1.3
Ratio of earnings to combined fixed charges
and preferred stock dividends.............. 1.2 1.3 1.3 1.0 1.0 1.3
</TABLE>
For purposes of computing the ratio of earnings to fixed charges and the
ratio of earnings to combined fixed charges and preferred stock dividends,
"earnings" consist of earnings before taxes on income and fixed charges and
"fixed charges" consist of interest expense incurred on securities sold under
repurchase agreements, short-term and long-term borrowings and that portion of
rental expense estimated to be representative of the interest factor.
3
<PAGE> 38
THE COMPANY
Paine Webber Group Inc. is a holding company which, together with its
operating subsidiaries, forms one of the largest full-service securities and
commodities firms in the industry. Founded in 1879, the Company employs
approximately 15,800 people in 302 offices worldwide.
The Company's principal line of business is to serve the investment and
capital needs of individual, corporate, institutional and public agency clients
through its broker-dealer subsidiary, PaineWebber, and other specialized
subsidiaries. The Company holds memberships in all major securities and
commodities exchanges in the United States, and makes a market in many
securities traded on Nasdaq National Market or on other over-the-counter
markets. Additionally, PaineWebber is a primary dealer in U.S. government
securities.
The Company is comprised of interrelated business groups, including
Research, the Private Client Group, the Municipal Securities Group, Investment
Banking, Asset Management, Global Fixed Income and Commercial Real Estate, and
Global Equities and Transaction Services, which utilize common operational and
administrative personnel and facilities.
The Research Group provides investment advice to institutional and
individual investors, and other business areas of the Company, on approximately
890 companies in 62 industry sectors.
The Private Client Group consists primarily of a domestic branch office
system and consumer product groups through which PaineWebber and certain other
subsidiaries provide clients with financial services and products, including the
purchase and sale of securities, option contracts, commodity and financial
futures contracts, fixed income instruments, mutual funds, trusts and selected
insurance products. The Company may act as a principal or agent in providing
these services. Fees charged vary according to the size and complexity of a
transaction, and the activity level of a client's account.
The Municipal Securities Group originates, underwrites, sells and trades
taxable and tax-exempt issues for municipal and public agency clients.
Through the Investment Banking group, the Company provides financial advice
to, and raises capital for, a broad range of domestic and international
corporate clients. Investment Banking manages and underwrites public and private
offerings, participates as an underwriter in syndicates of public offerings
managed by others, and provides advice in connection with mergers and
acquisitions, restructurings and recapitalizations.
The Asset Management group is comprised of Mitchell Hutchins Asset
Management Inc. ("MHAM"), Mitchell Hutchins Institutional Investors Inc.
("MHII") and Mitchell Hutchins Investment Advisory division ("MHIA"). MHAM and
MHII provide investment advisory and portfolio management services to pension
and endowment funds. MHAM also provides investment advisory and portfolio
management services to individuals and mutual funds. MHIA provides portfolio
management services to individuals, trusts and institutions.
Through the Global Fixed Income and Global Equities Groups, the Company
places securities for, and executes trades on behalf of, institutional clients
both domestically and internationally. In addition, the Company takes positions
in both listed and over-the-counter equity securities and fixed income
securities to facilitate client transactions or for the Company's own account.
The Commercial Real Estate Group provides a full range of capital market
services to real estate clients, including underwriting of debt and equity
securities, principal lending activity, debt restructuring, property sales and
bulk sales services, and a broad range of other advisory services.
The Transaction Services Group includes correspondent services, prime
brokerage and securities lending businesses, and specialist trading. Through
Correspondent Services Corporation, the Company provides execution and clearing
services to broker-dealers in the U.S. and overseas. The Company also acts as a
specialist responsible for executing transactions and maintaining an orderly
market in certain securities.
The Company's businesses operate in one of the nation's most highly
regulated industries. Violations of applicable regulations can result in the
revocation of broker-dealer licenses, the imposition of censures or fines, and
the suspension or expulsion of a firm. The Company's businesses are regulated by
various agencies,
4
<PAGE> 39
including the Commission, the NYSE, the Commodity Futures Trading Commission and
the National Association of Securities Dealers, Inc. (the "NASD").
The Company's principal executive offices are located at 1285 Avenue of the
Americas, New York, New York 10019 (Telephone: (212) 713-2000).
For purposes of the foregoing description, all references to the "Company"
refer collectively to Paine Webber Group Inc. and its operating subsidiaries,
unless the context otherwise requires.
THE PWG TRUSTS
Each of PWG Capital Trust I, PWG Capital Trust II, PWG Capital Trust III
and PWG Capital Trust IV is a business trust formed on October 7, 1996 under the
Delaware Business Trust Act (the "Business Trust Act") pursuant to a separate
declaration of trust among the Trustees (as defined herein) of such PWG Trust
and the Company and the filing of a certificate of trust with the Secretary of
State of the State of Delaware. Such declaration will be amended and restated in
its entirety (as so amended and restated, the "Declaration") substantially in
the form filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, as of the date the Preferred Securities of such PWG
Trust are initially issued. Each Declaration will be qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
This description summarizes the material terms of the Declarations and is
qualified in its entirety by reference to the form of Declaration, which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part, and the Trust Indenture Act.
TRUST SECURITIES
Upon issuance of any Preferred Securities by a PWG Trust, the holders
thereof will own all the issued and outstanding Preferred Securities of such PWG
Trust. The Company will acquire securities representing common undivided
beneficial interests in the assets of each PWG Trust (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securities") in an
amount equal to at least 3% of the total capital of such PWG Trust and will own,
directly or indirectly, all the issued and outstanding Common Securities of each
PWG Trust. The Preferred Securities and the Common Securities will rank pari
passu with each other and will have equivalent terms; provided that (i) if a
Declaration Event of Default (as defined herein) under the Declaration of a PWG
Trust occurs and is continuing, the holders of Preferred Securities of such PWG
Trust will have a priority over holders of the Common Securities of such PWG
Trust with respect to payments in respect of distributions and payments upon
liquidation, redemption and maturity and (ii) holders of Common Securities have
the exclusive right (subject to the terms of the Declaration) to appoint, remove
or replace the Trustees and to increase or decrease the number of Trustees. Each
PWG Trust exists for the purpose of (a) issuing its Preferred Securities, (b)
issuing its Common Securities to the Company, (c) investing the proceeds from
the sale of the Trust Securities in Junior Subordinated Debt Securities of the
Company and (d) engaging in only such other activities as are necessary,
convenient or incidental thereto. The rights of the holders of the Preferred
Securities, including economic rights, rights to information and voting rights,
are set forth in the applicable Declaration, the Business Trust Act and the
Trust Indenture Act.
POWERS AND DUTIES OF TRUSTEES
The number of trustees (the "Trustees") of each PWG Trust shall initially
be five. Three of such Trustees (the "Regular Trustees") are individuals who are
employees or officers of the Company. The fourth such trustee will be The Chase
Manhattan Bank, which is unaffiliated with the Company and which will serve as
the property trustee (the "Property Trustee") and act as the indenture trustee
for purposes of the Trust Indenture Act. The fifth such trustee is Chase
Manhattan Bank Delaware, an affiliate of The Chase Manhattan Bank that has its
principal place of business in the State of Delaware (the "Delaware Trustee").
Pursuant to each Declaration, legal title to the Junior Subordinated Debt
Securities purchased by a PWG Trust will be held by the Property Trustee for the
benefit of the holders of the Trust Securities of such PWG
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Trust, and the Property Trustee will have the power to exercise all rights,
powers and privileges under the Indenture (as defined under "Description of the
Junior Subordinated Debt Securities") with respect to such Junior 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 in respect of the Junior Subordinated Debt
Securities purchased by a PWG Trust for the benefit of the holders of Trust
Securities. The Property Trustee will promptly make distributions to the holders
of the Trust Securities of a PWG Trust out of funds from the Property Account of
such PWG Trust. The Preferred Securities Guarantees are separately qualified
under the Trust Indenture Act and will be held by The Chase Manhattan Bank,
acting in its capacity as indenture trustee with respect thereto, for the
benefit of the holders of the applicable Preferred Securities. As used in this
Prospectus and any accompanying Prospectus Supplement, the term "Property
Trustee" with respect to a PWG Trust refers to The Chase Manhattan Bank acting
either in its capacity as a Trustee under the relevant Declaration and the
holder of legal title to the Junior Subordinated Debt Securities purchased by
such PWG Trust or in its capacity as indenture trustee under, and the holder of,
the applicable Preferred Securities Guarantee, as the context may require. The
Company, as the direct or indirect owner of all the Common Securities of each
PWG Trust, will have the exclusive right (subject to the terms of the related
Declaration) to appoint, remove or replace Trustees and to increase or decrease
the number of Trustees, provided that the number of Trustees shall be at least
five (unless the Trustee that acts as the Property Trustee also acts as the
Delaware Trustee, in which case the number of Trustees shall be at least three)
and the majority of Trustees shall be Regular Trustees. The term of a PWG Trust
will be set forth in the applicable Prospectus Supplement, but may terminate
earlier as provided in the Declaration of such PWG Trust.
The duties and obligations of the Trustees of a PWG Trust shall be governed
by the Declaration of such PWG Trust. Under its Declaration, each PWG Trust
shall not, and the Trustees of such PWG Trust shall cause such PWG Trust not to,
engage in any activity other than in connection with the purposes of such PWG
Trust or other than as required or authorized by such Declaration. In
particular, each PWG Trust shall not, and the Trustees of such PWG Trust shall
cause such PWG Trust not to, (a) invest any proceeds received by such PWG Trust
from holding the Junior Subordinated Debt Securities purchased by such PWG
Trust, but shall promptly distribute from the Property Account of such PWG Trust
all such proceeds to holders of its Trust Securities pursuant to the terms of
the Declaration of such PWG Trust and of such Trust Securities; (b) acquire any
assets other than as expressly provided in such Declaration; (c) possess trust
property for other than a trust purpose; (d) make any loans, other than loans
represented by such Junior Subordinated Debt Securities; (e) possess any power
or otherwise act in such a way as to vary the assets of such PWG Trust or the
terms of its Trust Securities in any way whatsoever; (f) issue any securities or
other evidences of beneficial ownership of, or beneficial interests in, such PWG
Trust other than its Trust Securities; (g) incur any indebtedness for borrowed
money or (h)(i) direct the time, method and place of exercising any trust or
power conferred upon the Indenture Trustee (as defined under "Description of the
Junior Subordinated Debt Securities") with respect to the Junior Subordinated
Debt Securities deposited in such PWG Trust as trust assets, (ii) waive any past
default that is waivable under the applicable Indenture, (iii) exercise any
right to rescind or annul any declaration that the principal of all of the
Junior Subordinated Debt Securities deposited in such PWG Trust as trust assets
shall be due and payable or (iv) consent to any amendment, modification or
termination of such Indenture or such Junior Subordinated Debt Securities, in
each case where such consent shall be required, unless in the case of this
clause (h) the Property Trustee shall have received an unqualified opinion of
nationally recognized independent tax counsel recognized as expert in such
matters to the effect that such action will not cause such PWG Trust to be
classified for United States Federal income tax purposes as an association
taxable as a corporation or a partnership and that such PWG Trust will continue
to be classified as a grantor trust for United States Federal income tax
purposes.
BOOKS AND RECORDS
The books and records of each PWG Trust will be maintained at the principal
office of such PWG Trust and will be open for inspection by a holder of
Preferred Securities of such PWG Trust or such holder's representative for any
purpose reasonably related to such holder's interest in such PWG Trust during
normal
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business hours. Each holder of Preferred Securities will be furnished annually
with unaudited financial statements of the applicable PWG Trust as soon as
available after the end of such PWG Trust's fiscal year.
VOTING
Except as provided under the Business Trust Act, the applicable Declaration
and the Trust Indenture Act, holders of Preferred Securities will have no voting
rights.
THE PROPERTY TRUSTEE
The Property Trustee, for the benefit of the holders of the Trust
Securities of a PWG Trust, is authorized under each Declaration to exercise all
rights under the Indenture with respect to the Junior Subordinated Debt
Securities deposited in such PWG Trust as trust assets, including its rights as
the holder of such Junior Subordinated Debt Securities to enforce the Company's
obligations under such Junior Subordinated Debt Securities upon the occurrence
of an Indenture Event of Default. The Property Trustee is also authorized to
enforce the rights of holders of Preferred Securities of a PWG Trust under the
related Preferred Securities Guarantee. If any PWG Trust's failure to make
distributions on the Preferred Securities of such PWG Trust is a consequence of
the Company's exercise of any right under the terms of the Junior Subordinated
Debt Securities deposited in such PWG Trust as trust assets to extend the
interest payment period for such Junior Subordinated Debt Securities, the
Property Trustee will have no right to enforce the payment of distributions on
such Preferred Securities until a Declaration Event of Default (as defined
herein) shall have occurred. Holders of at least a majority in liquidation
amount of the Preferred Securities of a PWG Trust will have the right to direct
the Property Trustee for such PWG Trust with respect to certain matters under
the Declaration for such PWG Trust and the related Preferred Securities
Guarantee. If the Property Trustee fails to enforce its rights under the
Indenture or fails to enforce the applicable Preferred Securities Guarantee, a
holder of Preferred Securities of a PWG Trust may institute a legal proceeding
against the Company to enforce such rights or such Preferred Securities
Guarantee, as the case may be, as described under "Description of the Preferred
Securities" and "Description of the Preferred Securities Guarantees -- Status of
the Preferred Securities Guarantees."
DISTRIBUTIONS
Pursuant to each Declaration, distributions on the Preferred Securities of
a PWG Trust must be paid on the dates payable to the extent that the Property
Trustee has cash on hand in the Property Account of such PWG Trust to permit
such payment. The funds available for distribution to the holders of the
Preferred Securities of a PWG Trust will be limited to payments received by the
Property Trustee in respect of the Junior Subordinated Debt Securities that are
deposited in such PWG Trust as trust assets. If the Company does not make
interest payments on the Junior Subordinated Debt Securities deposited in a PWG
Trust as trust assets, the Property Trustee will not make distributions on the
Preferred Securities of such PWG Trust. Under the Declaration, if and to the
extent the Company does make interest payments on the Junior Subordinated Debt
Securities deposited in a PWG Trust as trust assets, the Property Trustee is
obligated to make distributions on the Trust Securities of such PWG Trust on a
pro rata basis (as defined below). The payment of distributions on the Preferred
Securities of a PWG Trust is guaranteed by the Company on a subordinated basis
as and to the extent set forth under "Description of the Preferred Securities
Guarantees." A Preferred Securities Guarantee is a full and unconditional
guarantee from the time of issuance of the Preferred Securities of a PWG Trust,
but such Preferred Securities Guarantee covers distributions and other payments
on such Preferred Securities only if and to the extent that the Company has made
a payment to the Property Trustee of interest or principal on the Junior
Subordinated Debt Securities deposited in such PWG Trust as trust assets. As
used in this Prospectus, the term "pro rata basis" shall mean pro rata to each
holder of Trust Securities of a PWG Trust according to the aggregate liquidation
amount of the Trust Securities of such PWG Trust held by the relevant holder in
relation to the aggregate liquidation amount of all Trust Securities of such PWG
Trust outstanding unless, in relation to a payment, a Declaration Event of
Default under the Declaration has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each holder of the
Preferred Securities of such PWG Trust pro rata according to the aggregate
liquidation amount of the Preferred Securities held by the relevant holder in
relation to the aggregate liquidation amount of all the Preferred Securities of
such PWG Trust outstanding, and only after satisfaction
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of all amounts owed to the holders of such Preferred Securities, to each holder
of Common Securities of such PWG Trust pro rata according to the aggregate
liquidation amount of such Common Securities held by the relevant holder in
relation to the aggregate liquidation amount of all Common Securities of such
PWG Trust outstanding.
EVENTS OF DEFAULT
If an Indenture Event of Default occurs and is continuing with respect to
Junior Subordinated Debt Securities deposited in a PWG Trust as trust assets, an
Event of Default under the Declaration (a "Declaration Event of Default") of
such PWG Trust will occur and be continuing with respect to any outstanding
Trust Securities of such PWG Trust. In such event, each Declaration provides
that the holders of Common Securities of the applicable PWG Trust will be deemed
to have waived any such Declaration Event of Default with respect to such Common
Securities until all Declaration Events of Default with respect to the Preferred
Securities of such PWG Trust have been cured or waived. Until all such
Declaration Events of Default with respect to the Preferred Securities of such
PWG Trust have been so cured or waived, the Property Trustee will be deemed to
be acting solely on behalf of the holders of the Preferred Securities of such
PWG Trust and only the holders of such Preferred Securities will have the right
to direct the Property Trustee with respect to certain matters under such
Declaration and consequently under the Indenture. In the event that any
Declaration Event of Default with respect to the Preferred Securities of a PWG
Trust is waived by the holders of the Preferred Securities of such PWG Trust as
provided in the Declaration of such PWG Trust, the holders of Common Securities
of such PWG Trust pursuant to such Declaration have agreed that such waiver also
constitutes a waiver of such Declaration Event of Default with respect to such
Common Securities for all purposes under such Declaration without any further
act, vote or consent of the holders of such Common Securities.
RECORD HOLDERS
Each Declaration provides that the Trustees of the applicable PWG Trust may
treat the person in whose name a certificate representing Preferred Securities
of such PWG Trust is registered on the books and records of such PWG Trust as
the sole holder thereof and of the Preferred Securities represented thereby for
purposes of receiving distributions and for all other purposes and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such certificate or in the Preferred Securities represented thereby on the part
of any person, whether or not such Trustees shall have actual or other notice
thereof. Preferred Securities will be issued in fully registered form. Unless
otherwise specified in a Prospectus Supplement, Preferred Securities will be
represented by a global certificate registered on the books and records of such
PWG Trust in the name of a depositary (the "Depositary") named in an
accompanying Prospectus Supplement or its nominee. Under each Declaration:
(i) the applicable PWG Trust and the Trustees thereof shall be
entitled to deal with the Depositary for all purposes, including the
payment of distributions and receiving approvals, votes or consents under
such Declaration and, except as set forth in such Declaration with respect
to the Property Trustee, shall have no obligation to persons owning a
beneficial interest in Preferred Securities of such PWG Trust ("Preferred
Security Beneficial Owners") registered in the name of and held by the
Depositary or its nominee; and
(ii) the rights of Preferred Security Beneficial Owners shall be
exercised only through the Depositary and shall be limited to those
established by law and agreements between such Preferred Security
Beneficial Owners and the Depositary and/or its participants. With respect
to Preferred Securities registered in the name of and held by the
Depositary or its nominee, all notices and other communications required
under such Declaration shall be given to, and all distributions on such
Preferred Securities shall be given or made to, the Depositary.
The specific terms of the depositary arrangement with respect to the Preferred
Securities of a PWG Trust will be disclosed in the applicable Prospectus
Supplement.
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DEBTS AND OBLIGATIONS
In each Declaration, the Company has agreed to pay for all debts and
obligations (other than with respect to the Trust Securities of the applicable
PWG Trust) and all costs and expenses of such PWG Trust, including the fees and
expenses of its Trustees and any taxes and all costs and expenses with respect
thereto, to which such PWG Trust may become subject, except for United States
withholding taxes. The foregoing obligations of the Company under each
Declaration are for the benefit of, and shall be enforceable by, any person to
whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof. Any such
Creditor may enforce such obligations of the Company directly against the
Company and the Company will irrevocably waive any right or remedy to require
that any such Creditor take any action against any PWG Trust or any other person
before proceeding against the Company. The Company will agree in each
Declaration to execute such additional agreements as may be necessary or
desirable in order to give full effect to the foregoing.
The business address of each PWG Trust is c/o PaineWebber Group Inc., 1285
Avenue of the Americas, New York, NY 10019, telephone number (212) 713-2000.
DESCRIPTION OF THE PREFERRED SECURITIES
Each PWG 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 PWG Trust authorizes the Regular Trustees of such PWG
Trust to issue on behalf of such PWG Trust one series of Preferred Securities.
Each 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 related
Declaration or made part of such Declaration by the Trust Indenture Act.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a PWG Trust for specific terms, including (i) the specific
designation of such Preferred Securities, (ii) the number of Preferred
Securities issued by such PWG Trust, (iii) the annual distribution rate (or
method of calculation thereof) for Preferred Securities issued by such PWG
Trust, the date or dates upon which such distributions shall be payable and the
record date or dates for the payment of such distributions, (iv) whether
distributions on Preferred Securities issued by such PWG 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 PWG Trust
shall be cumulative, (v) the amount or amounts which shall be paid out of the
assets of such PWG Trust to the holders of Preferred Securities of such PWG
Trust upon voluntary or involuntary dissolution, winding-up or termination of
such PWG Trust, (vi) the obligation or right, if any, of such PWG Trust to
purchase or redeem Preferred Securities issued by such PWG 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 PWG Trust shall or may
be purchased or redeemed, in whole or in part, pursuant to such obligation or
right, (vii) the voting rights, if any, of Preferred Securities issued by such
PWG Trust in addition to those required by law, including the number of votes
per Preferred Security and any requirement for the approval by the holders of
Preferred Securities, or of Preferred Securities issued by one or more PWG
Trusts, or of both, as a condition to specified actions or amendments to the
Declaration of such PWG Trust, (viii) terms for any conversion or exchange into
other securities and (ix) any other relevant rights, preferences, privileges,
limitations or restrictions of Preferred Securities issued by such PWG Trust
consistent with the Declaration of such PWG Trust or with applicable law. All
Preferred Securities offered hereby will be guaranteed by the Company as and to
the extent set forth below under "Description of the Preferred Securities
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 PWG Trust
will issue one series of Common Securities. The Declaration of each PWG Trust
authorizes the Regular Trustees of such PWG Trust to issue on behalf of such PWG
Trust one series of Common Securities having such terms, including
distributions, redemption, voting, liquidation rights and such other rights or
such restrictions, as shall be set
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forth therein. The terms of the Common Securities issued by a PWG Trust will be
substantially identical to the terms of the Preferred Securities issued by such
PWG Trust and the Common Securities will rank pari passu and payments will be
made thereon on a pro rata basis with the Preferred Securities except that, if a
Declaration Event of Default occurs and is continuing, the rights of the holders
of such Common Securities to payment in respect of distributions and payments
upon liquidation, redemption and maturity will be subordinated to the rights of
the holders of such Preferred Securities. Except in certain limited
circumstances, the Common Securities issued by a PWG Trust will also carry the
right to vote and to appoint, remove or replace any of the Trustees of such PWG
Trust. All the Common Securities of a PWG Trust will be directly or indirectly
owned by the Company.
If a Declaration Event of Default with respect to any PWG Trust occurs and
is continuing, then the holders of Preferred Securities of such PWG Trust would
rely on the enforcement by the Property Trustee of its rights as a holder of the
Junior Subordinated Debt Securities deposited in such PWG Trust against the
Company. In addition, the holders of a majority in liquidation amount of such
Preferred Securities will have the right to direct the time, method, and place
of conducting any proceeding for any remedy available to the Property Trustee or
to direct the exercise of any trust or power conferred upon the Property Trustee
under the Declaration of such PWG Trust, including the right to direct the
Property Trustee to exercise the remedies available to it as a holder of such
Junior Subordinated Debt Securities. If the Property Trustee fails to enforce
its rights under such Junior Subordinated Debt Securities deposited in such PWG
Trust, any holder of such Preferred Securities may, to the extent permitted by
applicable law, after a period of 30 days has elapsed from such holder's written
request, institute a legal proceeding against the Company to enforce the
Property Trustee's rights under such Junior Subordinated Debt Securities without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. If a Declaration Event of Default with respect to any PWG
Trust occurs and is continuing and such event is attributable to the failure of
the Company to pay interest or principal on the Junior Subordinated Debt
Securities on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities of such PWG Trust may also directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on such
Junior Subordinated Debt Securities having a principal amount equal to the
aggregate liquidation amount of such Preferred Securities held by such holder (a
"Direct Action") on or after the respective due date specified in such Junior
Subordinated Debt Securities without first (i) directing the Property Trustee to
enforce the terms of such Junior Subordinated Debt Securities or (ii)
instituting a legal proceeding against the Company to enforce the Property
Trustee's rights under such Junior Subordinated Debt Securities. In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of such Preferred Securities under such Declaration to the extent of any
payment made by the Company to such holder of such Preferred Securities in such
Direct Action. The holders of Preferred Securities of a PWG Trust will not be
able to exercise directly any other remedy available to the holders of the
Junior Subordinated Debt Securities unless the Property Trustee first fails to
do so.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees that will be executed and delivered by the Company for the
benefit of the holders from time to time of Preferred Securities of a PWG Trust.
Each Preferred Security Guarantee will be separately qualified under the Trust
Indenture Act and will be held by The Chase Manhattan Bank, acting in its
capacity as indenture trustee with respect thereto (the "Guarantee Trustee"),
for the benefit of holders of the Preferred Securities of the applicable PWG
Trust. The terms of each Preferred Securities Guarantee will be those set forth
in such Preferred Securities Guarantee and those made part of such Preferred
Securities Guarantee by the Trust Indenture Act. This description summarizes the
material terms of the Preferred Securities Guarantees and is qualified in its
entirety by reference to the form of Preferred Securities Guarantee, which is
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, and the Trust Indenture Act. Section and Article references used herein
are references to the provisions of the form of Preferred Securities Guarantee.
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GENERAL
Pursuant to each Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the Preferred Securities issued by the applicable PWG
Trust, the Guarantee Payments (as defined herein), to the extent not paid by
such PWG Trust, regardless of any defense, right of set-off or counterclaim that
such PWG Trust may have or assert. The following distributions and other
payments with respect to Preferred Securities issued by a PWG Trust to the
extent not made or paid by such PWG Trust (the "Guarantee Payments"), will be
subject to the Preferred Securities Guarantee (without duplication): (i) any
accrued and unpaid distributions on such Preferred Securities, but only if and
to the extent that in each case the Company has made a payment to the Property
Trustee of interest on the Junior Subordinated Debt Securities deposited in such
PWG Trust as trust assets, (ii) the redemption price, including all accrued and
unpaid distributions to the date of redemption, with respect to any Preferred
Securities called for redemption by such PWG Trust, but only if and to the
extent that in each case the Company has made a payment to the Property Trustee
of interest or principal on such Junior Subordinated Debt Securities, and (iii)
upon a voluntary or involuntary dissolution, winding-up or termination of such
PWG Trust (other than in connection with the distribution of such Junior
Subordinated Debt Securities to the holders of such Preferred Securities or the
redemption of all such Preferred Securities upon the maturity or redemption of
such Junior 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 PWG Trust has funds
available therefor, and (b) the amount of assets of such PWG Trust remaining
available for distribution to holders of such Preferred Securities upon
liquidation of such PWG 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 the applicable Preferred Securities or by causing the
applicable PWG Trust to pay such amounts to such holders.
The Preferred Securities Guarantee is a full and unconditional guarantee
from the time of issuance of the applicable Preferred Securities, but the
Preferred Securities Guarantee covers distributions and other payments on such
Preferred Securities only if and to the extent that the Company has made a
payment to the Property Trustee of interest or principal on the Junior
Subordinated Debt Securities deposited in the applicable PWG Trust as trust
assets. If the Company does not make interest or principal payments on the
Junior Subordinated Debt Securities deposited in the applicable PWG Trust as
trust assets, the Property Trust will not make distributions on the Preferred
Securities of such PWG Trust and the PWG Trust will not have funds available
therefor.
The Company's obligations under the Declaration for each PWG Trust, the
Preferred Securities Guarantee issued with respect to Preferred Securities
issued by such PWG Trust, the Junior Subordinated Debt Securities purchased by
such PWG Trust and the Indenture in the aggregate will provide a full and
unconditional guarantee on a subordinated basis by the Company of payments due
on the Preferred Securities issued by such PWG Trust.
CERTAIN COVENANTS OF THE COMPANY
In each Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities issued by the applicable PWG Trust remain
outstanding, the Company will not declare or pay any dividends on, or redeem,
purchase, acquire or make a distribution or liquidation payment with respect to,
any of its common stock or preferred stock or make any guarantee payment with
respect thereto, if at such time (i) the Company shall be in default with
respect to its Guarantee Payments or other payment obligations under such
Preferred Securities Guarantee, (ii) there shall have occurred any Declaration
Event of Default under the related Declaration or (iii) in the event that Junior
Subordinated Debt Securities are issued to the applicable PWG Trust in
connection with the issuance of Trust Securities by such PWG Trust, the Company
shall have given notice of its election to defer payments of interest on such
Junior Subordinated Debt Securities by extending the interest payment period as
provided in the terms of the Junior Subordinated Debt Securities and such
period, or any extension thereof, is continuing; provided, however, that the
foregoing restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such preferred stock or (iii) cash payments
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made by the Company in lieu of delivering fractional shares upon the redemption,
exchange or conversion of any preferred stock of the Company as may be
outstanding from time to time in accordance with the terms of such preferred
stock. In addition, so long as any Preferred Securities of a PWG Trust remain
outstanding, the Company has agreed (i) to remain the sole direct or indirect
owner of all the outstanding Common Securities issued by such PWG Trust and not
to cause or permit such Common Securities to be transferred except to the extent
permitted by the Declaration of such PWG Trust, provided 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 reasonable efforts to cause
such PWG Trust to continue to be treated as a grantor trust for United States
Federal income tax purposes, except in connection with a distribution of Junior
Subordinated Debt Securities. (Section 6.01)
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of the applicable Preferred Securities (in which case no consent will
be required), each Preferred Securities 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 PWG Trust. The
manner of obtaining any such approval of holders of such Preferred Securities
will be set forth in an accompanying Prospectus Supplement. (Section 9.02) All
guarantees and agreements contained in a Preferred Securities 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 PWG Trust then outstanding. Except in connection
with a consolidation, merger, conveyance, transfer or lease of assets involving
the Company that is permitted under the Indenture, the Company may not assign
its obligations under any Preferred Securities Guarantee. (Section 9.01)
TERMINATION OF THE PREFERRED SECURITIES GUARANTEES
Each Preferred Securities Guarantee will terminate and be of no further
force and effect as to the Preferred Securities issued by the applicable PWG
Trust upon full payment of the redemption price of all Preferred Securities of
such PWG Trust, or upon distribution of the Junior Subordinated Debt Securities
to the holders of the Preferred Securities of such PWG Trust in exchange for all
the Preferred Securities issued by such PWG Trust, or upon full payment of the
amounts payable upon liquidation of such PWG Trust. Notwithstanding the
foregoing, each Preferred Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities issued by the applicable PWG Trust must restore payment of any sums
paid under such Preferred Securities or such Preferred Securities Guarantee.
(Article VII)
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Company's obligations under each Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
indebtedness, liabilities and obligations of the Company and any guarantees,
endorsements or other contingent obligations of the Company in respect of such
indebtedness, liabilities or obligations, including the Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Company and to any
guarantee now or hereafter entered into by the Company in respect of any of its
capital stock. The Company's obligations under each Preferred Securities
Guarantee will rank pari passu with each other Preferred Securities Guarantee.
(Section 6.02) Because the Company is a holding company, the Company's
obligations under each Preferred Securities Guarantee are also effectively
subordinated to all existing and future liabilities, including trade payables,
of the Company's subsidiaries, except to the extent that the Company is a
creditor of the subsidiaries recognized as such. Each Declaration provides that
each holder of Preferred Securities issued by the applicable PWG Trust, by
acceptance thereof, agrees to the subordination provisions and other terms of
the related Preferred Securities Guarantee.
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Each Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the Company to enforce its rights under such
Preferred Securities Guarantee without first instituting a legal proceeding
against any other person or entity). Each Preferred Securities Guarantee will be
deposited with the Guarantee Trustee, to be held for the benefit of the holders
of the Preferred Securities issued by the applicable PWG Trust. The Guarantee
Trustee shall enforce such Preferred Securities Guarantee on behalf of the
holders of such Preferred Securities. The holders of not less than a majority in
aggregate liquidation amount of the Preferred Securities issued by the
applicable PWG Trust have the right to direct the time, method and place of
conducting any proceeding for any remedy available in respect of the related
Preferred Securities Guarantee, including the giving of directions to the
Guarantee Trustee. If the Guarantee Trustee fails to enforce a Preferred
Securities Guarantee as above provided, any holder of Preferred Securities
issued by the applicable PWG Trust may institute a legal proceeding directly
against the Company to enforce its rights under such Preferred Securities
Guarantee, without first instituting a legal proceeding against the applicable
PWG Trust, or any other person or entity. Notwithstanding the foregoing, if the
Company has failed to make a Guarantee Payment, a holder of Preferred Securities
may directly institute a proceeding against the Company for enforcement of such
holder's right to receive payment under the Preferred Securities Guarantee. The
Company will waive any right or remedy to require that any action be brought
first against a PWG Trust or any other person or entity before proceeding
directly against the Company. (Section 5.04)
MISCELLANEOUS
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 Preferred Securities Guarantee 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 to
be complied with by it under each Preferred Securities Guarantee. (Section 2.04)
The Guarantee Trustee, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the applicable
Preferred Securities Guarantee and, after default with respect to a Preferred
Securities Guarantee, shall exercise the same degree of care as a prudent
individual would exercise under the circumstances 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 Preferred Securities
Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable security and indemnity against the costs, expenses and
liabilities that might be incurred thereby. (Section 3.02)
GOVERNING LAW
The Preferred Securities Guarantees will be governed by, and construed in
accordance with, the laws of the State of New York. (Section 9.06)
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Junior Subordinated Debt Securities may be issued from time to time in one
or more series under an Indenture (the "Indenture") between the Company and The
Chase Manhattan Bank, as trustee (the "Indenture Trustee"). The Indenture has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The following description summarizes the material terms of the
Indenture, and is qualified in its entirety by reference to the Indenture and
the Trust Indenture Act. Whenever particular provisions or defined terms in the
Indenture are referred to herein, such provisions or defined terms are
incorporated by reference herein. Section references used herein are references
to provisions of the Indenture.
GENERAL
The Junior Subordinated Debt Securities will be unsecured, junior
subordinated obligations of the Company. The Indenture does not limit the amount
of additional indebtedness the Company or any of its subsidiaries may incur.
Since the Company is a holding company, the Company's rights and the rights of
its
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creditors, including the holders of Junior Subordinated Debt Securities, to
participate in the assets of any subsidiary upon the latter's liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors, except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary.
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that Junior Subordinated Debt
Securities may be issued thereunder from time to time in one or more series. The
Junior Subordinated Debt Securities are issuable in one or more series pursuant
to an indenture supplemental to the Indenture.
In the event Junior Subordinated Debt Securities are issued to a PWG Trust
or a Trustee of such PWG Trust in connection with the issuance of Trust
Securities by such PWG Trust, such Junior Subordinated Debt Securities
subsequently may be distributed pro rata to the holders of such Trust Securities
in connection with the dissolution of such PWG Trust upon the occurrence of
certain events described in the applicable Prospectus Supplement. Only one
series of Junior Subordinated Debt Securities will be issued to a PWG Trust or a
Trustee of such PWG Trust in connection with the issuance of Trust Securities by
such PWG Trust.
Reference is made to the Prospectus Supplement which will accompany this
Prospectus for the following terms of the series of Junior Subordinated Debt
Securities being offered thereby (to the extent such terms are applicable to the
Junior Subordinated Debt Securities): (i) the specific designation of such
Junior Subordinated Debt Securities, aggregate principal amount and purchase
price; (ii) any limit on the aggregate principal amount of such Junior
Subordinated Debt Securities; (iii) the date or dates on which the principal of
such Junior Subordinated Debt Securities is payable and the right, if any, to
extend such date or dates; (iv) the rate or rates at which such Junior
Subordinated Debt Securities will bear interest or the method of calculating
such rate or rates, if any; (v) the date or dates from which such interest shall
accrue, the interest payment dates on which such interest will be payable or the
manner of determination of such interest payment dates and the record dates for
the determination of holders to whom interest is payable on any such interest
payment dates; (vi) the right, if any, to extend the interest payment periods
and the duration of such extension; (vii) the period or periods within which,
the price or prices at which, and the terms and conditions upon which, such
Junior Subordinated Debt Securities may be redeemed, in whole or in part, at the
option of the Company; (viii) the obligation, if any, of the Company to redeem
or purchase such Junior Subordinated Debt Securities pursuant to any sinking
fund or analogous provisions or at the option of the holder thereof and the
period or periods within which, the price or prices at which, and the terms and
conditions upon which, such Junior Subordinated Debt Securities shall be
redeemed or purchased, in whole or part, pursuant to such obligation; (ix) any
applicable United States Federal income tax consequences, including whether and
under what circumstances the Company will pay additional amounts on the Junior
Subordinated Debt Securities held by a person who is not a U.S. person in
respect of any tax, assessment or governmental charge withheld or deducted and,
if so, whether the Company will have the option to redeem such Junior
Subordinated Debt Securities rather than pay such additional amounts; (x) the
form of such Junior Subordinated Debt Securities; (xi) if other than
denominations of $25 or any integral multiple thereof, the denominations in
which such Junior Subordinated Debt Securities shall be issuable; (xii) any and
all other terms with respect to such series, including any modification of or
additions to the events of default or covenants provided for with respect to the
Junior Subordinated Debt Securities, and any terms which may be required by or
advisable under applicable laws or regulations not inconsistent with the
Indenture; and (xiii) whether such Junior Subordinated Debt Securities are
issuable as a global security, and in such case, the identity of the depositary.
(Section 2.01)
Unless otherwise indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issued in United States dollars in fully
registered form without coupons in denominations of $25 or integral multiples
thereof. Junior Subordinated Debt Securities may be presented for exchange and
Junior Subordinated Debt Securities in registered form may be presented for
transfer in the manner, at the places and subject to the restrictions set forth
in the Junior Subordinated Debt Securities and the applicable Prospectus
Supplement. Such services will be provided without charge, other than any tax or
other governmental charge
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payable in connection therewith, but subject to the limitations provided in the
Indenture. Junior Subordinated Debt Securities in bearer form and the coupons,
if any, appertaining thereto will be transferable by delivery.
Junior Subordinated Debt Securities may bear interest at a fixed rate or a
floating rate. Junior Subordinated Debt Securities bearing no interest or
interest at a rate that at the time of issuance is below the prevailing market
rate will be sold at a discount below their stated principal amount. Special
United States Federal income tax considerations applicable to any such
discounted Junior Subordinated Debt Securities or to certain Junior Subordinated
Debt Securities issued at par which are treated as having been issued at a
discount for United States Federal income tax purposes will be described in the
applicable Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO THE JUNIOR SUBORDINATED DEBT
SECURITIES
If Junior Subordinated Debt Securities are issued to a PWG Trust in
connection with the issuance of Trust Securities by such PWG Trust, the Company
will covenant in the Indenture that, so long as the Preferred Securities of such
PWG Trust remain outstanding, the Company will not declare or pay any dividends
on, or redeem, purchase, acquire or make a distribution or liquidation payment
with respect to, any of its common stock or preferred stock or make any
guarantee payments with respect thereto if at such time (i) the Company shall be
in default with respect to its Guarantee Payments or other payment obligations
under the related Preferred Securities Guarantee or (ii) there shall have
occurred any Indenture Event of Default with respect to such Junior Subordinated
Debt Securities provided, however, that the foregoing restrictions shall not
apply to (i) dividends, redemptions, purchases, acquisitions, distributions or
payments made by the Company by way of issuance of shares of its capital stock,
(ii) payments of accrued dividends by the Company upon the redemption, exchange
or conversion of any preferred stock of the Company as may be outstanding from
time to time in accordance with the terms of such preferred stock or (iii) cash
payments made by the Company in lieu of delivering fractional shares upon the
redemption, exchange or conversion of any preferred stock of the Company as may
be outstanding from time to time in accordance with the terms of such preferred
stock. In addition, if Junior Subordinated Debt Securities are issued to a PWG
Trust in connection with the issuance of Trust Securities by such PWG Trust, for
so long as the Preferred Securities of such PWG Trust remain outstanding, the
Company has agreed (i) to remain the sole direct or indirect owner of all the
outstanding Common Securities issued by such PWG Trust and not to cause or
permit such Common Securities to be transferred except to the extent permitted
by the Declaration of such PWG Trust; provided that any permitted successor of
the Company under the Indenture may succeed to the Company's ownership of such
Common Securities, (ii) to comply fully with all its obligations and agreements
under such Declaration and (iii) not to take any action which would cause such
PWG Trust to cease to be treated as a grantor trust for United States Federal
income tax purposes, except in connection with a distribution of Junior
Subordinated Debt Securities.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debt Securities are
subordinate and junior in right of payment to all Senior Indebtedness of the
Company. No payment by the Company on account of principal of (or premium, if
any) or any interest on the Junior Subordinated Debt Securities may be made if
any default or event of default with respect to any Senior Indebtedness shall
have occurred and be continuing and written notice thereof shall have been given
to the Indenture Trustee by the Company or to the Company and the Indenture
Trustee by the holders of at least 10% in principal amount of any kind or
category of any Senior Indebtedness (or a representative or trustee on their
behalf). Upon any acceleration of the principal due on the Junior Subordinated
Debt Securities or any payment or distribution of assets of the Company to
creditors upon any dissolution, winding up, liquidation or reorganization,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all principal of (and premium, if any) and interest due or to
become due on all Senior Indebtedness must be paid in full before the holders of
Junior Subordinated Debt Securities will be entitled to receive or retain any
payment (other than shares of stock or subordinated indebtedness provided by a
plan of reorganization or adjustment which does not alter the rights of holders
of Senior Indebtedness). Subject to the payment in full of all Senior
Indebtedness, the holders of
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the Junior Subordinated Debt Securities are to be subrogated to the rights of
the holders of Senior Indebtedness to receive payments or distributions of
assets of the Company applicable to Senior Indebtedness until the Junior
Subordinated Debt Securities are paid in full. By reason of such subordination,
in the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness, as well as general creditors of the Company, may recover more,
ratably, than the holders of the Junior Subordinated Debt Securities. If this
Prospectus is being delivered in connection with a series of Junior Subordinated
Debt Securities, the accompanying Prospectus Supplement will set forth the
approximate amount of Senior Indebtedness outstanding as of the end of the most
recent fiscal quarter.
The term "Senior Indebtedness" shall mean (i) the principal of, premium, if
any, and accrued and unpaid interest on (a) indebtedness of the Company for
money borrowed, whether outstanding on the date of execution of the Indenture or
thereafter created, incurred or assumed, (b) guarantees by the Company of
indebtedness for money borrowed by any other person, whether outstanding on the
date of execution of the Indenture or thereafter created, incurred or assumed,
(c) indebtedness evidenced by notes, debentures, bonds or other instruments of
indebtedness for the payment of which the Company is responsible or liable, by
guarantees or otherwise, whether outstanding on the date of execution of the
Indenture or thereafter created, incurred or assumed, and (d) obligations of the
Company under any agreement to lease, or any lease of, any real or personal
property, whether outstanding on the date of execution of the Indenture or
thereafter created, incurred or assumed, (ii) any other indebtedness, liability
or obligation, contingent or otherwise, of the Company and any guarantee,
endorsement or other contingent obligation of the Company in respect of any
indebtedness, liability or obligation, whether outstanding on the date of
execution of the Indenture or thereafter created, incurred or assumed, and (iii)
modifications, renewals, extensions and refundings of any such indebtedness,
liabilities, obligations or guarantees; unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such indebtedness, liabilities, obligations or guarantees, or such
modification, renewal, extension or refunding thereof, are not superior in right
of payment to the Junior Subordinated Debt Securities; provided, however, that
Senior Indebtedness shall not include any obligation of the Company to any
subsidiary. The Junior Subordinated Debt Securities of any series are not
superior in right of payment to the securities of any series (or coupons
appertaining thereto) issued pursuant to the Indenture dated as of March 15,
1988, between the Company and Chase Manhattan Bank Delaware (formerly known as
Chemical Bank (Delaware)), as amended or supplemented from time to time, or any
securities ranking pari passu in right of payment with any such securities (or
coupons), all of which shall constitute Senior Indebtedness. Notwithstanding
anything to the contrary in the Indenture or the Junior Subordinated Debt
Securities, Senior Indebtedness shall not include any indebtedness of the
Company which, by its terms or the terms of the instrument creating or
evidencing it, is subordinate in right of payment to, or pari passu with, the
Junior Subordinated Debt Securities. The Indenture does not contain any
limitation on the amount of Senior Indebtedness that can be incurred by the
Company.
The Company's rights and the rights of its creditors (including holders of
Senior Indebtedness and Junior Subordinated Debt Securities) to participate in
any distribution of assets of any subsidiary of the Company upon its liquidation
or reorganization or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of the Company
itself as a creditor of the subsidiary may be recognized. Also, dividend
payments and advances to the Company by PaineWebber are restricted by the
provisions of the net capital rules of the Commission and the NYSE and covenants
in various loan agreements. The operations of the Company are conducted through
its subsidiaries and, therefore, the Company is dependent upon the earnings and
cash flow of its subsidiaries to meet its obligations, including obligations
under the Senior Indebtedness and Junior Subordinated Debt Securities. The
Senior Indebtedness and Junior Subordinated Debt Securities will be effectively
subordinated to all indebtedness of the Company's subsidiaries. As of September
30, 1996, the aggregate amount of indebtedness of the Company's subsidiaries
(such indebtedness consisting of short-term borrowings and excluding short-term
and long-term borrowings owed directly or indirectly to the Company or another
subsidiary) to which holders of the Senior Indebtedness and Junior Subordinated
Debt Securities would have been structurally subordinated was approximately $405
million.
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INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Indenture Event of
Default" with respect to a series of Junior Subordinated Debt Securities:
(a) failure for 30 days to pay interest on the Junior Subordinated
Debt Securities of such series when due; provided that a valid extension of
the interest payment period by the Company shall not constitute a default
in the payment of interest for this purpose;
(b) failure to pay principal of or premium, if any, on the Junior
Subordinated Debt Securities of such series when due whether at maturity,
upon redemption, by declaration or otherwise, or to make any sinking fund
or analogous payment with respect to Junior Subordinated Debt Securities of
such series;
(c) failure to observe or perform any other covenant contained in the
Indenture with respect to such series for 90 days after written notice to
the Company from the Indenture Trustee or the holders of at least 25% in
principal amount of the outstanding Junior Subordinated Debt Securities of
such series; or
(d) certain events in bankruptcy, insolvency or reorganization of the
Company.
In each and every such case, unless the principal of all the Junior Subordinated
Debt Securities of such series shall have already become due and payable, either
the Indenture Trustee or the holders of not less than 25% in aggregate principal
amount of the Junior Subordinated Debt Securities of such series then
outstanding, by notice in writing to the Company (and to the Indenture Trustee
if given by such holders), may declare the principal of all the Junior
Subordinated Debt Securities of such series to be due and payable immediately,
and upon any such declaration the same shall become and shall be immediately due
and payable. (Section 6.01)
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of the applicable series have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee. (Section 6.06) The Indenture Trustee or the
holders of not less than 25% in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of such series may declare the principal due
and payable immediately upon an Indenture Event of Default with respect to such
series, but the holders of a majority in aggregate outstanding principal amount
of Junior Subordinated Debt Securities of such series may annul such declaration
and waive the default if the default has been cured and a sum sufficient to pay
all matured installments of interest and principal otherwise than by
acceleration and any premium has been deposited with the Indenture Trustee.
(Sections 6.01 and 6.06)
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of a series may, on behalf of the holders of
all the Junior Subordinated Debt Securities of such series, waive any past
default, except a default in the payment of principal, premium, if any, or
interest on Junior Subordinated Securities of such series (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal otherwise than by acceleration and any premium has been deposited
with the Indenture Trustee) or a call for redemption of Junior Subordinated Debt
Securities of such series. (Section 6.06) The Company is required to file
annually with the Indenture Trustee a certificate as to whether or not the
Company is in compliance with all the conditions and covenants under the
Indenture. (Section 5.03)
If a series of Junior Subordinated Debt Securities is issued to a PWG Trust
in connection with the issuance of Trust Securities of such PWG Trust, then,
under the applicable Declaration, an Indenture Event of Default with respect to
such series of Junior Subordinated Debt Securities will constitute a Declaration
Event of Default.
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Indenture Trustee may,
without the consent of any holders of Junior Subordinated Debt Securities, enter
into supplemental indentures for the purposes, among other things, of adding to
the Company's covenants, adding additional Events of Default, establishing the
form
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or terms of any series of Junior Subordinated Debt Securities or, provided such
action shall not adversely affect the interests of the holders of any series of
Junior Subordinated Debt Securities in any material respect, curing ambiguities
or inconsistencies in such Indenture or making other provisions. (Section 9.01)
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the outstanding Junior Subordinated Debt Securities of each
series affected thereby, to modify the Indenture or any supplemental indenture
affecting the rights of the holders of such Junior Subordinated Debt Securities;
provided that no such modification may, without the consent of the holder of
each outstanding Junior Subordinated Debt Security affected thereby, (i) extend
the fixed maturity of any Junior Subordinated Debt Securities of any series,
reduce the principal amount thereof, reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the redemption
thereof, without the consent of the holder of each Junior Subordinated Debt
Security so affected, or (ii) reduce the percentage of Junior Subordinated Debt
Securities, the holders of which are required to consent to any such
modification, without the consent of the holders of each Junior Subordinated
Debt Security then outstanding and affected thereby. (Section 9.02)
BOOK ENTRY AND SETTLEMENT
If any Junior Subordinated Debt Securities of a series are represented by
one or more global securities (each, a "Global Security"), the applicable
Prospectus Supplement will describe the circumstances, if any, under which
beneficial owners of interests in any such Global Security may exchange such
interests for Junior Subordinated Debt Securities of such series and of like
tenor and principal amount in any authorized form and denomination. Principal
of, and any premium and interest on, a Global Security will be payable in the
manner described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Junior Subordinated Debt Securities to be represented by
a Global Security will be described in the applicable Prospectus Supplement.
CONSOLIDATION, MERGER AND SALE
The Indenture provides that the Company, without the consent of the Holders
of any of the Junior Subordinated Debt Securities, may consolidate with or merge
into any other Person or convey, transfer or lease its assets substantially as
an entirety to any Person or may acquire or lease the assets of any Person
substantially as an entirety or may permit any Person to consolidate with or
merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company provided that: (i) the successor is
a corporation organized under the laws of any domestic jurisdiction; (ii) the
successor corporation, if other than the Company, assumes the Company's
obligations under the Indenture and the Junior Subordinated Debt Securities
issued thereunder; (iii) immediately after giving effect to the transaction, no
Event of Default and no event that, after notice or lapse of time, or both,
would become an Event of Default, shall have occurred and be continuing; and
(iv) certain other conditions are met. (Section 10.01)
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Junior Subordinated Debt Securities of a
series (except in each case for certain obligations to register the transfer or
exchange of such Junior Subordinated Debt Securities, replace stolen, lost or
mutilated Junior Subordinated Debt Securities of such series, maintain paying
agencies and hold moneys for payment in trust) if (i) the Company irrevocably
deposits with the Indenture Trustee cash or U.S. Government Obligations, as
trust funds, in an amount certified to be sufficient to pay at maturity (or upon
redemption) the principal of, premium, if any, and interest on all outstanding
Junior Subordinated Debt Securities of such series; (ii) such deposit will not
result in a breach or violation of, or constitute a default under, any agreement
or instrument to which the Company is a party or by which it is bound; (iii) the
Company delivers to the Indenture Trustee an opinion of counsel to the effect
that the holders of the Junior Subordinated Debt Securities of such series will
not recognize income, gain or loss for United States Federal income tax purposes
as a result of such defeasance and that such defeasance will not otherwise alter
holders' United States Federal income tax
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treatment of principal, premium and interest payments on the Junior Subordinated
Debt Securities of such series (such opinion must be based on a ruling of the
Internal Revenue Service or a change in United States Federal income tax law
occurring after the date of the Indenture, since such a result would not occur
under current tax law); (iv) the Company delivers to the Indenture Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the defeasance contemplated by
such provision have been complied with; and (v) no event or condition shall
exist that, pursuant to the subordination provisions applicable to the Junior
Subordinated Debt Securities of such series, would prevent the Company from
making payments of principal of, premium, if any, and interest on the Junior
Subordinated Debt Securities of such series at the date of the irrevocable
deposit referred to above. (Section 11.01)
GOVERNING LAW
The Indenture and the Junior Subordinated Debt Securities will be governed
by, and construed in accordance with, the laws of the State of New York.
(Section 13.05)
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to an Indenture Event of Default, undertakes
to perform only such duties as are specifically set forth in the Indenture and,
during an Indenture Event of Default, shall exercise and use the same degree of
care and skill as a prudent individual would exercise or use under the
circumstances in the conduct of his or her own affairs. (Section 7.01) 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
Junior Subordinated Debt Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities that might be incurred
thereby. (Section 7.02) The Indenture Trustee is not required to expend or risk
its own funds or otherwise incur personal financial liability in the performance
of its duties if the Indenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it. (Section 7.01)
The Chase Manhattan Bank is a depositary for funds and performs other
services for, and transacts other banking business with, the Company in the
normal course of business.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly owned subsidiary
of the Company; provided that, in the event of any such assignment, the Company
will remain jointly and severally liable for all such 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 other than
by the Company to a successor or purchaser pursuant to a consolidation, merger
or sale permitted by the Indenture. (Section 13.11)
ERISA MATTERS
The Company, PaineWebber and other affiliates of the Company may each be
considered a "party in interest" (within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or a "disqualified person"
(within the meaning of Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code")) with respect to many employee benefit plans ("Plans") that
are subject to ERISA. The purchase of Offered Securities by a Plan that is
subject to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including individual
retirement arrangements and other plans described in Section 4975(e)(1) of the
Code) and with respect to which the Company, PaineWebber or any other affiliate
of the Company is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such Offered Securities are acquired
pursuant to and in accordance with an applicable exemption. Any pension or other
employee benefit plan proposing to acquire any Offered Securities should consult
with its counsel.
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PLAN OF DISTRIBUTION
The Company may sell any series of Junior Subordinated Debt Securities and
the PWG Trusts may sell the Preferred Securities being offered hereby (i)
directly to one or more purchasers, (ii) through agents designated from time to
time and/or (iii) through underwriters or dealers or a group of underwriters.
The applicable Prospectus Supplement will set forth the terms of the offering of
any Offered Securities, including the name or names of any underwriters, the
purchase price of the Offered Securities and the proceeds to the Company and/or
any PWG Trust 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 and any
securities exchanges on which the Offered Securities may be listed. If a bidding
or auction process is utilized, it will be described in the applicable
Prospectus Supplement.
If underwriters are used in the sale, 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 managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the applicable Prospectus Supplement, 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. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
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 Offered Securities will be named, and any commissions payable by the
Company to such agents will be set forth, in the applicable Prospectus
Supplement. Unless otherwise indicated in the applicable Prospectus Supplement,
any such agent will be acting on a best efforts basis for the period of its
appointment.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and such Prospectus Supplement will set forth
the commission payable for the solicitation of such contracts.
Any underwriters, dealers or agents participating in the distribution of
Offered Securities may be deemed to be underwriters and any discounts or
commissions received by them on the sale or resale of Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Agents and underwriters may be entitled under agreements entered into with the
Company to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments which the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for, the Company in the ordinary course of business.
All Offered Securities will be a new issue of securities with no
established trading market. Certain agents through whom, and underwriters to
whom, Offered Securities are sold by the Company for public offering and sale
may make a market in such Offered Securities, but such agents and underwriters
will not be obligated to do so and may discontinue any market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for any Offered Securities.
PaineWebber or one or more other affiliates of the Company may participate
in distributions of the Offered Securities. All distributions of the Offered
Securities will conform to the requirements set forth in the applicable sections
of Rule 2720 of the Conduct Rules of the NASD.
20
<PAGE> 55
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, certain
matters of Delaware law relating to the validity of the Preferred Securities
will be passed upon by Richards, Layton & Finger, Wilmington, Delaware. The
validity of the Preferred Securities Guarantees and the Junior Subordinated Debt
Securities and certain other matters will be passed upon for the Company by
Cravath, Swaine & Moore, New York, New York and for the agents or underwriters,
if any, by Brown & Wood LLP, New York, New York. Cravath, Swaine & Moore and
Brown & Wood LLP act from time to time as legal counsel to the Company and its
subsidiaries on various matters.
EXPERTS
The consolidated financial statements of the Company for the year ended
December 31, 1995, incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
21
<PAGE> 56
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PAINE WEBBER
GROUP INC., PWG CAPITAL TRUST II OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AT
ANY TIME DOES NOT IMPLY THAT THE INFORMATION THEY CONTAIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors.......................... S-4
Recent Developments................... S-8
Selected Consolidated Financial
Data................................ S-8
The Company........................... S-9
PWG Capital Trust II.................. S-10
Capitalization of the Company......... S-11
Accounting Treatment.................. S-12
Use of Proceeds....................... S-12
Description of the Preferred
Securities.......................... S-12
Description of the Junior Subordinated
Debentures.......................... S-23
Relationship Between the Preferred
Securities, the Junior Subordinated
Debentures and the Preferred
Securities Guarantee................ S-28
Taxation.............................. S-30
Underwriting.......................... S-33
PROSPECTUS
Available Information................. 2
Documents Incorporated by Reference... 3
Use of Proceeds....................... 3
Ratios of Earnings to Fixed Charges
and Earnings to Combined Fixed
Charges and Preferred Stock
Dividends........................... 3
The Company........................... 4
The PWG Trusts........................ 5
Description of the Preferred
Securities.......................... 9
Description of the Preferred
Securities Guarantees............... 10
Description of the Junior Subordinated
Debt Securities..................... 13
ERISA Matters......................... 19
Plan of Distribution.................. 20
Legal Matters......................... 21
Experts............................... 21
============================================
</TABLE>
======================================================
PAINEWEBBER(TM)
7,000,000 Preferred Securities
PWG Capital Trust II
8.08% Preferred Trust Securities
fully and unconditionally
guaranteed by
Paine Webber Group Inc.
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
PAINEWEBBER INCORPORATED
BEAR, STEARNS & CO. INC.
DEAN WITTER REYNOLDS INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
--------------------------------
MARCH 11, 1997
======================================================
