<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1998
REGISTRATION NO. 333-47261
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment
No. 2
to
Form S-3
Registration Statement under
The Securities Act of 1933
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<TABLE>
<S> <C> <C>
NEWELL CO. DELAWARE 36-3514169
NEWELL FINANCIAL TRUST I DELAWARE 36-7213787
(Exact name of registrant (State or other jurisdiction of (I.R.S. employer
as specified in its charter) incorporation or organization) identification no.)
</TABLE>
NEWELL CENTER
29 EAST STEPHENSON STREET
FREEPORT, ILLINOIS 61032
(815) 235-4171
(Address, including zip code, and telephone number, including area code, of
principal executive offices)
DALE L. MATSCHULLAT
VICE PRESIDENT-GENERAL COUNSEL
4000 AUBURN STREET
ROCKFORD, ILLINOIS 61101
(Name and address of agent for service)
(815) 969-6101
(Telephone number, including area code, of agent for service)
WITH A COPY TO:
Stuart L. Goodman
Schiff Hardin & Waite
7200 Sears Tower
Chicago, Illinois 60606
(312) 258-5711
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Approximate date of commencement of the proposed sale of the securities to
the public: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If the form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number on the earlier
effective registration statement for the same offering. [
] _______________________
If the form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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SUBJECT TO COMPLETION DATED MAY 14, 1998
10,000,000 PREFERRED SECURITIES
NEWELL LOGO NEWELL FINANCIAL TRUST I
5 1/4% CONVERTIBLE QUARTERLY INCOME PREFERRED SECURITIES
(CONVERTIBLE QUIPS(SM)* SECURITIES)
(LIQUIDATION PREFERENCE $50 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY, AND CONVERTIBLE INTO COMMON STOCK
OF,
NEWELL CO.
------------------------
This Prospectus relates to the 5 1/4% Convertible Quarterly Income Preferred
Securities (the "Preferred Securities") which represent preferred undivided
beneficial interests in the assets of Newell Financial Trust I, a statutory
business trust created under the laws of the State of Delaware (the "Issuer"),
and the shares of common stock, $1.00 par value per share (the "Company Common
Stock"), of Newell Co., a Delaware corporation (the "Company"), issuable upon
conversion of the Preferred Securities. The Preferred Securities were issued and
sold (the "Original Offering") on December 12, 1997 (the "Original Offering
Date") to the Initial Purchasers (as defined herein) and were simultaneously
sold by the Initial Purchasers in transactions exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
in the United States to persons reasonably believed to be qualified
institutional buyers ("QIBs") as defined in Rule 144A under the Securities Act,
and outside the United States to non-U.S. persons in offshore transactions in
reliance on Regulation S under the Securities Act. The Company owns all of the
beneficial interests in the assets of the Issuer represented by the common
securities of the Issuer (the "Common Securities", and, together with the
Preferred Securities, the "Trust Securities"). The Issuer exists for the sole
purpose of issuing the Preferred Securities and the Common Securities and
investing the proceeds thereof in 5 1/4% Convertible Subordinated Debentures due
December 1, 2027 (the "Debentures"), issued by the Company. The Preferred
Securities have a preference under certain circumstances with respect to cash
distributions and amounts payable on liquidation, redemption or otherwise over
the Common Securities. See "Description of the Preferred
Securities--Subordination of Common Securities".
The Preferred Securities and the Company Common Stock issuable upon
conversion of the Preferred Securities (collectively the "Offered Securities")
may be offered and sold from time to time by the holders named herein or by
their transferees, pledgees, donees or their successors (collectively, the
"Selling Holders") pursuant to this Prospectus. The Offered Securities may be
sold by the Selling Holders from time to time directly to purchasers or through
agents, underwriters or dealers. See "Selling Holders" and "Plan of
Distribution." If required, the names of any such agents or underwriters
involved in the sale of the Offered Securities and the applicable agent's
commission, dealer's purchase price or underwriter's discount, if any, will be
set forth in an accompanying supplement to this Prospectus (the "Prospectus
Supplement"). The Selling Holders will receive all of the net proceeds from the
sale of the Offered Securities and will pay all underwriting discounts, selling
commissions and transfer taxes, if any, applicable to any such sale. The Company
is responsible for payment of all other expenses incident to the registration of
the Offered Securities. The Selling Holders and any broker-dealers, agents or
underwriters that participate in the distribution of the Offered Securities may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commission received by them and any profit on the resale of the Offered
Securities purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. See "Plan of Distribution" for a description
of certain indemnification arrangements.
Each Preferred Security is convertible at any time in the manner described
herein at the option of the holder into shares of Company Common Stock at the
rate of 0.9865 shares of Company Common Stock for each Preferred Security
(equivalent to a conversion price of $50.685 per share of Company Common Stock),
subject to adjustment in certain circumstances. See "Description of the
Preferred Securities--Conversion Rights" and "Description of the Company's
Capital Stock". The last reported sale price of Company Common Stock, which is
listed under the symbol "NWL" on the New York Stock Exchange ("NYSE"), on May
12, 1998 was $46 15/16 per share.
Holders of the Preferred Securities are entitled to receive preferential
cumulative cash distributions from the Issuer at an annual rate of 5 1/4% of the
liquidation preference of $50 per Preferred Security accruing from the date of
original issuance and payable, unless deferred, quarterly in arrears on March 1,
June 1, September 1 and December 1 of each year, commencing March 1, 1998
("Distributions"). The distribution rate and the distribution and other payment
dates for the Preferred Securities correspond to the interest rate and interest
and other payment dates in the Debentures, which are the sole assets of the
Issuer. As a result, if principal or interest is not paid on the Debentures, no
amounts will be paid with respect to the Preferred Securities.
(Continued on page 2)
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
TO BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE OFFERED SECURITIES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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- ---------------------
* QUIPS is a servicemark of Goldman, Sachs & Co.
------------------------
The date of this Prospectus is , 1998.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This Prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
<PAGE> 3
The Company has the right to defer payment of interest on the Debentures at
any time or from time to time for a period not exceeding 20 consecutive quarters
with respect to each deferral period (each, an "Extension Period"), provided
that no Extension Period may extend beyond the stated maturity of the
Debentures. Upon the termination of any such Extension Period and the payment of
all amounts then due on any Interest Payment Date (as defined herein), the
Company may elect to begin a new Extension Period subject to the requirements
described herein. If interest payments on the Debentures are so deferred,
Distributions on the Preferred Securities will also be deferred and the Company
will not be permitted, subject to certain exceptions described herein, to
declare or pay any cash distributions with respect to the Company's capital
stock or debt securities that rank pari passu with or junior to the Debentures.
During an Extension Period, interest on the Debentures will continue to
accrue (and the amount of Distributions to which holders of the Preferred
Securities are entitled will accumulate at 5 1/4% per annum, compounded
quarterly) and holders of Preferred Securities will be required to recognize
interest income for United States Federal income tax purposes. See "Description
of the Debentures--Option to Extend Interest Payment Period" and "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount".
Except as provided below, the Preferred Securities may not be redeemed by
the Issuer prior to December 1, 2001. The Preferred Securities are subject to
redemption, in whole or in part, on or after such date, at the redemption prices
set forth herein, upon any redemption by the Company of Debentures. See
"Description of the Preferred Securities--Optional Redemption". In addition, the
Preferred Securities are subject to mandatory redemption upon the repayment at
maturity or as a result of acceleration of the Debentures. See "Description of
the Preferred Securities--Mandatory Redemption".
Following the occurrence of a Special Event (as herein defined), the
Preferred Securities are also subject to (i) exchange, in the manner described
herein, for Debentures (see "Description of the Preferred Securities--Special
Event Exchange or Redemption") and (ii) redemption, in whole or in part, on or
after December 1, 2001, at 100% of the liquidation preference thereof, plus
accrued and unpaid Distributions thereon, if such Special Event constitutes a
Tax Event (as defined herein). See "Description of Preferred Securities--Special
Event Exchange or Redemption". At any time, the Company has the right to
dissolve the Issuer and, after satisfaction of the liabilities of creditors of
the Issuer as provided by applicable law, cause the Debentures to be distributed
to the holders of the Preferred Securities in dissolution of the Issuer. See
"Description of the Preferred Securities--Distribution of Debentures".
The Company has, through the Guarantee, the Trust Agreement, the Indenture
(each, as defined herein) and the Debentures, taken together, fully, irrevocably
and unconditionally guaranteed all of the Issuer's obligations under the
Preferred Securities. See "Description of the Guarantee", "Newell Financial
Trust I" and "Description of the Debentures", respectively. The Guarantee of the
Company guarantees the payment of Distributions and payments on liquidation or
redemption of the Preferred Securities, but only in each case to the extent of
funds held by the Issuer, as described herein (the "Guarantee"). See
"Description of the Guarantee". If the Company does not make interest payments
on the Debentures held by the Issuer as a result of the Company's election to
defer payment of interest during an Extension Period, or otherwise, the Issuer
will have insufficient funds to pay Distributions on the Preferred Securities.
The Guarantee does not cover payment of Distributions when the Issuer does not
have sufficient funds to pay such Distributions. The obligations of the Company
under the Guarantee are subordinate and junior in right of payment to all other
liabilities of the Company and will rank pari passu with the most senior
preferred stock, if any, issued from time to time by the Company and any
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company. See "Description
of the Debentures--Subordination".
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The Debentures are subordinate and junior in right of payment to all Senior
Debt (as defined herein) of the Company. The terms of the Debentures place no
limitation on the amount of Senior Debt that may be incurred by the Company or
the amount of indebtedness that may be incurred by its subsidiaries. As of
December 31, 1997, the Company had aggregate indebtedness of approximately
$835.9 million, all of which comprised Senior Debt of the Company. The Company's
obligations under the Debentures are also effectively subordinated to all
existing and future obligations of the Company's subsidiaries.
In the event of the dissolution of the Issuer, after satisfaction of the
creditors of the Issuer as provided by applicable law, the holders of the
Preferred Securities will be entitled to receive a liquidation preference of $50
per Preferred Security plus accumulated and unpaid Distributions thereon to the
date of payment, which may be in the form of a distribution of such amount in
Debentures, subject to certain exceptions. See "Description of the Preferred
Securities--Liquidation Distribution upon Dissolution".
Whenever the Company issues shares of Company Common Stock upon conversion
of Debentures, the Company will, subject to certain conditions, issue, together
with each share of Company Common Stock, such number (which number may be a
fraction) of Rights (as defined herein) as shall at that time be issuable with a
share of Company Common Stock pursuant to the Rights Agreement (as defined
herein).
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<PAGE> 5
DOCUMENTS INCORPORATED BY REFERENCE
The documents listed below filed by the Company with the Securities and
Exchange Commission (the "Commission") are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K and Form 10-K/A for the fiscal
year ended December 31, 1997;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998;
(c) The Company's Current Report on Form 8-K dated March 4, 1998;
(d) The Company's Current Report on Form 8-K dated May 11, 1998;
(e) The description of the Common Stock, contained in the Company's
Registration Statement on Form 8-B dated June 30, 1987; and
(f) The description of the Rights, contained in the Company's Registration
Statement on Form 8-A dated October 25, 1988.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange
Act") subsequent to the date of this Prospectus and prior to the termination of
the offering of the Offered Securities made hereby, shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated by reference or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of the
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statements
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF
THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS WHICH ARE INCORPORATED HEREIN 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: RICHARD H. WOLFF, SECRETARY, NEWELL CO., 4000
AUBURN STREET, ROCKFORD, ILLINOIS 61125 (TELEPHONE: (815) 969-6111).
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. The 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 Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at 7 World Trade Center, New York, New York 10048, and Northwestern
Atrium 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. The Company Common Stock is listed on the NYSE and the Chicago Stock
Exchange ("CSE"), and reports and other information concerning the Company can
also be inspected at the office of the NYSE, 20 Broad Street, New York, New York
10005, and at the offices of the CSE, One Financial Place, 440 South LaSalle
Street, Chicago, Illinois 60605-1070. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
The Company and the Issuer have filed with the Commission a Registration
Statement (which term encompasses any amendments thereto) on Form S-3 under the
Securities Act with respect to the securities offered by this Prospectus (the
"Registration Statement"). This Prospectus, which
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constitutes part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in exhibits to the Registration Statement as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the securities offered by this Prospectus, reference is made to the
Registration Statement, including the exhibits thereto, and the financial
statements and notes thereto filed or incorporated by reference as a part
thereof, which are on file at the offices of the Commission and may be obtained
upon payment of the fee prescribed by the Commission, or may be examined without
charge at the offices of the Commission. Statements made in this Prospectus
concerning the contents of any document referred to herein are not necessarily
complete, and, in each such instance, are qualified in all respects by reference
to the applicable documents filed with the Commission.
No separate financial statements of the Issuer have been included herein.
The Issuer and the Company do not consider that such financial statements would
be material to potential investors because the Issuer is a newly organized
special purpose entity, has no operating history or independent operations and
is not engaged in and does not propose to engage in any activity other than
holding as trust assets the Debentures and issuing the Preferred Securities and
Common Securities and the Company has fully and unconditionally guaranteed all
of the Issuer's obligations under the Preferred Securities. See "Newell
Financial Trust I", "Description of the Preferred Securities", "Description of
the Guarantee" and "Description of the Debentures".
The terms the "Company" and "Newell Co." refer collectively to Newell Co.
and its subsidiaries and divisions (referred to herein as "divisions", even if
separately incorporated), unless the context otherwise requires.
FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this Prospectus or in the accompanying
Prospectus Supplement and in the documents incorporated by reference herein or
therein may constitute forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements may relate to, but are not limited to, such matters
as sales, income, earnings per share, return on equity, capital expenditures,
dividends, capital structure, free cash flow, debt to capitalization ratios,
internal growth rates, future economic performance, management's plans, goals
and objectives for future operations and growth or the assumptions relating to
any of the forward-looking information. Such statements generally are
accompanied by words such as "intend", "anticipate", "believe", "estimate",
"project", "expect", "should" or similar statements. The Company cautions that
forward-looking statements are not guarantees since there are inherent
difficulties in predicting future results, and that actual results could differ
materially from those expressed or implied in the forward-looking statements.
Factors that could cause actual results to differ include, but are not limited
to, those discussed below and the matters set forth in this Prospectus or in the
accompanying Prospectus Supplement and the documents incorporated by reference
herein or therein. This section is included pursuant to the Reform Act and with
the intention of obtaining the benefits of the so-called "safe harbor"
provisions of the Reform Act.
RETAIL ECONOMY
The Company's business depends on the strength of the retail economies in
various parts of the world, primarily in the U.S. and to a lesser extent in Asia
(including Australia and New Zealand), Canada, Europe (including the Middle East
and Africa) and Latin America (including Mexico, Central America and South
America), which are affected by such factors as consumer demand, the condition
of the consumer products retail industry and weather conditions. In recent
years, the consumer products retail industry has been characterized by intense
competition and consolidation among both product suppliers and retailers.
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NATURE OF THE MARKETPLACE
The Company competes with numerous other manufacturers and distributors of
consumer products, many of which are large and well established. In addition,
the Company's principal customers are volume purchasers, many of which are much
larger than the Company and have strong bargaining power with suppliers. The
rapid growth of large mass merchandisers, such as discount stores, warehouse
clubs, home centers and office superstores, together with changes in consumer
shopping patterns, have contributed to a significant consolidation of the retail
industry and the formation of dominant multi-category retailers. Other trends
among retailers are to require manufacturers to maintain or reduce product
prices or deliver products with shorter lead times, or for the retailer to
import generic products directly from foreign sources. The combination of these
market influences has created an intensely competitive environment in which the
Company's principal customers continuously evaluate which product suppliers to
use, resulting in pricing pressures and the need for ongoing improvements in
customer service.
GROWTH BY ACQUISITION
The acquisition of companies that sell branded, staple consumer product
lines to volume purchasers is one of the foundations of the Company's growth
strategy. The Company's ability to continue to make sufficient strategic
acquisitions at reasonable prices and to integrate the acquired businesses
within a reasonable period of time are important factors in the Company's future
earnings growth.
FOREIGN OPERATIONS
Foreign operations, which include manufacturing in Canada, Mexico,
Colombia, Venezuela and many countries in Europe and importing products from the
Far East, increasingly are becoming important to the Company's business. Foreign
operations can be affected by factors such as currency devaluation and other
currency fluctuations, tariffs, nationalization, exchange controls, limitations
on foreign investment in local businesses and other political, economic and
regulatory risks.
RISK FACTORS
Prospective purchasers of the Offered Securities should carefully review
the information contained elsewhere in this Prospectus and in the accompanying
Prospectus Supplement or incorporated by reference herein and therein and should
particularly consider the following matters.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE DEBENTURES
The obligations of the Company under the Guarantee issued by the Company
for the benefit of the holders of Preferred Securities are unsecured and rank
subordinate and junior in right of payment to all other liabilities of the
Company and pari passu with the most senior preferred stock, if any, issued from
time to time by the Company and any guarantee now or hereafter entered into by
the Company in respect of any preferred or preference stock of any affiliate of
the Company. The obligations of the Company under the Debentures are subordinate
and junior in right of payment to all present and future Senior Debt (as defined
herein) of the Company. As of December 31, 1997, the Company had indebtedness of
approximately $835.9 million, all of which comprised Senior Debt of the Company.
The ability of the Issuer to pay amounts due on the Preferred Securities is
solely dependent upon the Company making payments on the Debentures as and when
required. Neither the Indenture, the Guarantee nor the Trust Agreement places
any limitation on the amount of secured or unsecured debt, including Senior
Debt, that may be incurred by the Company and its subsidiaries. See "Description
of the Guarantee--Status of the Guarantee" and "Description of the
Debentures--Subordination".
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<PAGE> 8
STRUCTURAL SUBORDINATION
The Debentures are obligations of the Company exclusively. Since
substantially all of the Company's operations are conducted through
subsidiaries, substantially all of the Company's cash flow and, consequently,
its ability to service debt, including the Debentures, is dependent upon the
earnings of its subsidiaries and the transfer of funds by those subsidiaries to
the Company in the form of dividends or other transfers, supplemented with
borrowings.
In addition, creditors of the Company's subsidiaries would be entitled to a
claim on the assets of such subsidiaries prior to any claims by the Company.
Consequently, in the event of a dissolution, liquidation or reorganization of
any subsidiary, creditors of such subsidiary are likely to be paid in full
before any distribution is made to the Company, except to the extent that the
Company itself is recognized as a creditor of such subsidiary, in which case the
claims of the Company would still be subordinate to any security interest in the
assets of such subsidiary and any indebtedness of such subsidiary senior to that
held by the Company. As of December 31, 1997, the aggregate indebtedness
(excluding accounts payable and accrued expenses, deferred income taxes and
other liabilities) of the consolidated subsidiaries of the Company was
approximately $55.9 million. See "Description of the Preferred
Securities--Distributions" and "Description of the Debentures--Option to Extend
Interest Payment Period".
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
The Company has the right under the Indenture (as defined herein) to defer
the payment of interest on the Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarters with respect to each Extension
Period, provided that no Extension Period may extend beyond the stated maturity
of the Debentures. Upon the termination of any Extension Period and the payment
of all amounts then due, the Company may select a new Extension Period and
terminate the payments of all amounts then due, subject to the requirements
described herein. As a consequence of any such deferral, quarterly Distributions
on the Preferred Securities by the Issuer will be deferred (and the amount of
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions) during any such Extension Period.
Should an Extension Period occur, a holder of Preferred Securities will
continue to accrue income (in the form of original issue discount ("OID")) in
respect of its pro rata share of the deferred interest allocable to the
Debentures held by the Issuer for United States Federal income tax purposes. As
a result, a holder of Preferred Securities will include such income in gross
income for United States Federal income tax purposes in advance of the receipt
of cash, and will not receive the cash related to such income from the Issuer if
the holder disposes of the Preferred Securities prior to the record date for the
payment of Distributions. See "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount". Moreover, if a holder of Preferred
Securities converts its Preferred Securities into Company Common Stock during an
Extension Period, the holder will not receive any cash related to the deferred
distribution. Additionally, during the pendency of any Extension Period, the
Company will not be permitted, subject to certain exceptions set forth herein,
to declare or pay any cash distribution with respect to the Company capital
stock or debt securities (including guarantees of indebtedness for money
borrowed) that rank pari passu with or junior to the Debentures. See
"Description of the Preferred Securities--Distributions".
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Debentures.
However, should the Company elect to exercise such right in the future, the
market price of the Preferred Securities is likely to be affected. A holder that
disposes of its Preferred Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that continues
to hold its Preferred Securities. In addition, as a result of the existence of
the Company's right to defer interest payments, the market price of the
Preferred Securities (which represent preferred undivided beneficial interests
in
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the Debentures) may be more volatile than the market prices of other securities
on which original issue discount accrues that are not subject to such deferrals.
SPECIAL EVENT EXCHANGE OR REDEMPTION; DISTRIBUTION OF DEBENTURES
Upon certain circumstances following the occurrence and continuation of a
Special Event (as defined herein), the Preferred Securities are also subject to
(i) exchange in whole or, in the case of a Tax Event (as defined herein) that
has occurred and is continuing, in whole or in part, in the manner described
herein, for the Debentures or (ii) redemption, in whole or in part, on or after
December 1, 2001, at the liquidation preference thereof plus accrued and unpaid
distributions, in the case of a Tax Event. See "Description of the Preferred
Securities--Special Event Exchange or Redemption".
There can be no assurance as to the market prices for Preferred Securities
or Debentures that may be distributed in exchange for Preferred Securities if a
dissolution of the Issuer occurs or if the Preferred Securities are exchanged
for Debentures in connection with a Special Event. Accordingly, the Preferred
Securities that an investor may purchase, whether pursuant to this Prospectus or
in the secondary market, or the Debentures that a holder of Preferred Securities
may receive on dissolution of the Issuer, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities. Because holders of
Preferred Securities may receive Debentures on dissolution of the Issuer or if
the Preferred Securities are exchanged for Debentures in connection with a
Special Event, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Debentures and should carefully review
all the information regarding the Debentures contained herein. See "Description
of the Preferred Securities--Special Event Exchange or Redemption" and
"Description of the Debentures--General".
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities on a
subordinated basis the following payments, to the extent not paid by the Issuer:
(i) any accumulated and unpaid Distributions required to be paid on the
Preferred Securities, to the extent that the Issuer has funds on hand available
therefor at such time, (ii) the redemption price with respect to any Preferred
Securities called for redemption, to the extent that the Issuer has funds on
hand available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution of the Issuer (unless the Debentures are distributed to holders of
the Preferred Securities), the lesser of (a) the aggregate of the liquidation
preference and all accrued and unpaid Distributions to the date of payment to
the extent that the Issuer has funds on hand available therefor at such time and
(b) the amount of assets of the Issuer remaining available for distribution to
holders of the Preferred Securities in dissolution of the Issuer.
As part of the Guarantee, the Company agrees that it will honor all
obligations provided therein relating to the conversion or exchange of the
Preferred Securities into or for Company Common Stock or Debentures.
The holders of not less than a majority in aggregate liquidation preference
of the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
(as defined herein) in respect of the Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Guarantee. Any holder
of Preferred Securities may institute a proceeding directly against the Company
to enforce its rights under the Guarantee without first instituting a proceeding
against the Issuer, the Guarantee Trustee or any other person or entity. If the
Company were to default on its obligation to pay amounts payable under the
Debentures, the Issuer would lack funds for the payment of Distributions or
amounts payable on redemption of the Preferred Securities or otherwise, and, in
such event, holders of the Preferred Securities would not be able to rely upon
the Guarantee for payment of such amounts. Instead, in the event a Debenture
Event of Default shall have occurred and be continuing, a holder of Preferred
Securities would be required to rely on the enforcement by
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<PAGE> 10
the Property Trustee (as defined herein) of its rights as registered holder of
the Debentures against the Company pursuant to the terms of the Debenture. If,
however, such event is attributable to the failure of the Company to pay
interest or premium on or principal of the Debentures on the payment date on
which such payment is due and payable (or, in the case of a redemption, on the
date fixed for redemption), then a holder of Preferred Securities may directly
institute a proceeding against the Company for enforcement of payment to such
holder of the interest or premium on or principal of such Debentures having a
principal amount equal to the aggregate liquidation preference of the Preferred
Securities of such holder (a "Direct Action"). In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Preferred
Securities under the Trust Agreement to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action. Except as
set forth herein, holders of Preferred Securities will not be able to exercise
directly any other remedy available to the holders of Debentures or assert
directly any other rights in respect of the Debentures. See "Newell Financial
Trust I", "Description of the Preferred Securities--Enforcement of Certain
Rights by Holders of Preferred Securities", "Description of the Guarantee" and
"Description of the Debentures--Debenture Events of Default". The Trust
Agreement provides that each holder of Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default occurs and is continuing, the holders of
Preferred Securities will rely on the enforcement by the Property Trustee of its
rights as the holder of the Debentures against the Company. An event of default
under the Indenture (a "Debenture Event of Default") constitutes an event of
default under the Trust Agreement with respect to the Preferred Securities and
the Common Securities (a "Declaration Event of Default"). In addition, the
holders of a majority in aggregate liquidation preference 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 Trust Agreement, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the Debentures. If the
Property Trustee fails to enforce its rights as holder of the Debentures after a
request therefor by a holder of Preferred Securities, such holder may, to the
fullest extent permitted by law, proceed to enforce such rights directly against
the Company. Notwithstanding the foregoing, if a Declaration Event of Default
occurs that results from the failure of the Company to pay principal of or
interest or premium on the Debentures when due (or in the case of a redemption,
on the redemption date), during the continuance of such an event of default a
holder of Preferred Securities may institute a legal proceeding directly against
the Company to obtain payment to such holder of such principal, interest or
premium on Debentures having a principal amount equal to the aggregate
liquidation preference of the Preferred Securities owned of record by such
holder. See "Description of the Preferred Securities--Declaration Events of
Default; Notice" and "--Voting Rights; Amendment of the Trust Agreement".
LIMITED VOTING RIGHTS
Holders of Preferred Securities generally have limited voting rights in
connection with modifying the Preferred Securities and directing the activities
of the Property Trustee as the holder of the Debentures. Holders of Preferred
Securities are not entitled to vote to appoint, remove or replace the Issuer
Trustees (as defined herein), which voting rights are vested exclusively in the
holder of the Common Securities. The Issuer Trustees and the Company may amend
the Trust Agreement without the consent of holders of Preferred Securities to
ensure that the Issuer will be classified for United States Federal income tax
purposes as a grantor trust even if such action adversely affects the interests
of such holders. See "Newell Financial Trust I" and "Description of the
Preferred Securities -- Voting Rights; Amendment of the Trust Agreement".
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<PAGE> 11
POSSIBLE TAX LAW CHANGES
Prospective investors should be aware that legislation has been introduced
in the United States Congress in the past that would, if enacted, deny an
interest deduction to issuers of instruments such as the Debentures. No such
legislation has been enacted. Also, a petition was recently filed in the United
States Tax Court as a result of a challenge by the Internal Revenue Service of
the petitioner's treatment as indebtedness of a security issued in circumstances
with certain similarities to the issuance of the Debentures. There can be no
assurance that similar legislation will not ultimately be enacted into law or
that a judicial decision in that Tax Court case or other developments will not
occur after the date hereof that would adversely affect the tax treatment of the
Debentures and could result in the exchange of the Debentures for Preferred
Securities or, in certain limited circumstances, the redemption of the
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 Exchange or Redemption".
POTENTIAL REDUCTION OF PAYMENTS TO NON-UNITED STATES HOLDERS FOR UNITED STATES
TAX WITHHOLDING REQUIREMENTS
In the event that any United States taxes, duties or other governmental
charges are required to be deducted or withheld from any payments by the Company
to holders of Preferred Securities that are not United States persons, neither
the Company nor the Issuer would be required to pay any additional amounts to
such holders and, therefore, any such taxes, duties or charges would reduce the
amounts received by such holders. See "Certain Federal Income Tax
Consequences -- United States Alien Holders".
ABSENCE OF PUBLIC MARKET FOR THE PREFERRED SECURITIES
There can be no assurance that any market for the Preferred Securities will
develop or, if one does develop, that it will be maintained. If an active market
for the Preferred Securities fails to develop or be sustained, the trading price
of the Preferred Securities could be adversely affected. The Preferred
Securities could trade at prices that may be higher or lower than the price of
any Preferred Securities purchased hereunder depending on many factors,
including prevailing interest rates, the price of the Company Common Stock, the
Company's operating results, any election by the Company to extend interest
payment periods and the market for similar securities. Although the Issuer and
the Company will use their best efforts to maintain the effectiveness of a Shelf
Registration Statement (as defined herein) for resales during the periods
described herein, they will be entitled to restrict resales thereunder for
limited periods upon certain events. See "Description of the Preferred
Securities -- Registration Rights".
TRADING PRICE OF PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Debentures. A holder disposing of Preferred Securities between record dates for
payments of distributions thereon will be required for United States Federal
income tax purposes to include in gross income the OID on the Debentures through
the date of disposition, and to add such amount to the adjusted basis on its pro
rata share of the underlying Debentures deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (so determined), a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
Federal income tax purposes. See "Certain Federal Income Tax
Consequences -- Sales of Preferred Securities".
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<PAGE> 12
NEWELL FINANCIAL TRUST I
Newell Financial Trust I (the "Issuer") is a statutory business trust
created under Delaware law pursuant to (i) a trust agreement executed by the
Company (as Depositor), the Delaware Trustee and one of the Administrative
Trustees (each as defined herein) and (ii) the filing of a certificate of trust
with the Delaware Secretary of State on November 24, 1997. In connection with
the Original Offering such trust agreement was amended and restated in its
entirety (as so amended and restated, the "Trust Agreement"). The Issuer exists
for the sole purposes of (i) issuing and selling the Preferred Securities and
Common Securities, (ii) using the proceeds from the sale of the Preferred
Securities and Common Securities to acquire the Debentures issued by the Company
and (iii) engaging in only those other activities necessary or incidental
thereto. Accordingly, the Debentures are the sole assets of the Issuer, and
payments under the Debentures will be the sole revenue of the Issuer. The Issuer
has a term of 45 years, but may dissolve earlier as provided in the Trust
Agreement.
All of the Common Securities are owned by the Company. The Common
Securities rank pari passu, and payments will be made thereon pro rata, with the
Preferred Securities, except that upon the occurrence and continuance of a
Declaration Event of Default (as defined herein) resulting from an Event of
Default under the Indenture, the rights of the Company as holder of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption or otherwise will be subordinated to the rights of the holders of the
Preferred Securities. See "Description of the Preferred
Securities--Subordination of Common Securities". The Company owns Common
Securities in an aggregate liquidation amount equal to approximately 3% of the
total capitalization of the Issuer.
The Issuer's business and affairs are conducted by its trustees, which were
appointed by the Company as holder of the Common Securities. Pursuant to the
Trust Agreement, the number of trustees initially is five. Three of the trustees
(the "Administrative Trustees") are persons who are employees or officers of, or
affiliated with, the Company. A fourth trustee is a financial institution
unaffiliated with the Company that serves as property trustee (the "Property
Trustee") under the Trust Agreement. The Chase Manhattan Bank is acting as the
Property Trustee until removed or replaced by the holder of the Common
Securities. See "Description of the Preferred Securities". The fifth trustee is
a financial institution or an affiliate thereof which maintains a principal
place of business or residence in the State of Delaware (the "Delaware
Trustee"). Chase Manhattan Bank Delaware is acting as Delaware Trustee until
removed or replaced by the holder of the Common Securities. The Administrative
Trustees, the Property Trustee and the Delaware Trustee are referred to herein
as the "Issuer Trustees". The Chase Manhattan Bank is also acting as indenture
trustee under the Guarantee (the "Guarantee Trustee") and as the indenture
trustee under the indenture relating to the Debentures. See "Description of the
Guarantee" and "Description of the Debentures".
The Property Trustee holds the title to the Debentures for the benefit of
the Issuer and holders of the Preferred Securities and the Common Securities and
has the power to exercise all of the rights, powers and privileges as the holder
of the Debentures. In addition, the Property Trustee maintains exclusive control
of a segregated non-interest bearing bank account (the "Property Account") to
hold all payments made in respect of the Debentures for the benefit of the
Issuer and holders of the Preferred Securities and the Common Securities. The
Property Trustee will make payments of Distributions and payments on
liquidation, redemption and otherwise to the holders of the Preferred Securities
and the Common Securities out of funds from the Property Account. The Guarantee
Trustee holds the Guarantee for the benefit of the holders of the Preferred
Securities. The Company, as the holder of all the Common Securities, has the
right to appoint, remove or replace any Issuer Trustee and to increase or
decrease the number of Issuer Trustees, provided that the number of Issuer
Trustees shall be at least three, a majority of which will be Administrative
Trustees. The duties and obligations of the Issuer Trustees are governed by the
Trust Agreement. The rights of the holders of the Preferred Securities,
including economic rights, right to information
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<PAGE> 13
and voting rights, are as set forth in the Trust Agreement and the Delaware
Business Trust Act, as amended (the "Trust Act").
The Company will pay, directly or indirectly, all ongoing costs and
expenses of the Issuer. See "Description of the Debentures--Expenses of Issuer".
The principal corporate offices of the Issuer are located at the Newell Center,
29 East Stephenson Street, Freeport, Illinois 61032, and its telephone number is
(815) 235-4171.
THE COMPANY
The Company is a manufacturer and full-service marketer of staple consumer
products sold to high-volume purchasers, including discount stores and warehouse
clubs, home centers and hardware stores, and office superstores and contract
stationers. The Company's basic business strategy is to merchandise a
multi-product offering of brand name consumer products, which are concentrated
in product categories with relatively steady demand not dependent on changes in
fashion, technology or season, and to differentiate itself by emphasizing
superior customer service. The Company's multi-product offering consists of
staple consumer products in three major product groups: Hardware and Home
Furnishings, Office Products, and Housewares.
The Company's growth strategy emphasizes acquisitions and internal growth.
The Company has grown both domestically and internationally by acquiring
businesses with brand name product lines and improving the profitability of such
businesses through an integration process called "Newellization". The Company
supplements acquisition growth with internal growth, principally by introducing
new products, entering new domestic and international markets, adding new
customers, cross-selling existing product lines to current customers and
supporting its U.S.-based customers' international expansion.
The Company's principal corporate offices are located at the Newell Center,
29 East Stephenson Street, Freeport, Illinois 61032, and its telephone number is
(815) 235-4171.
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from any sale of the
Offered Securities. Neither the Company nor the Issuer will receive any proceeds
from the sale of the Offered Securities or upon conversion of Preferred
Securities.
ACCOUNTING TREATMENT
The financial statements of the Issuer are consolidated with the
Consolidated Financial Statements of the Company, with the Preferred Securities
shown on such Consolidated Financial Statements as Company-obligated mandatorily
redeemable convertible preferred securities of a subsidiary trust. The sole
assets of the Issuer are the Debentures.
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<PAGE> 14
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
The following table sets forth the Company's ratio of earnings to fixed
charges on a historical basis for each of the five fiscal years in the period
ended December 31, 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to Fixed Charges(1)................... 6.2x 6.8x 6.8x 9.0x 10.8x
</TABLE>
- -------------------------
(1) The ratio of earnings to fixed charges is computed by dividing (i) income
before income taxes, interest expense and the portion of rent determined to
be interest by (ii) total fixed charges, which includes interest expense and
the portion of rent expense determined to be interest. The portion of rent
expense determined to be interest is 33% of gross rent expense.
DESCRIPTION OF THE PREFERRED SECURITIES
This summary of certain provisions of the Preferred Securities and the
Trust Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Trust
Agreement (a copy of which is available for inspection at the corporate trust
office of the Property Trustee in New York, New York) and the Trust Act. The
Preferred Securities were issued in the Original Offering pursuant to the terms
of the Trust Agreement. Wherever particular defined terms of the Trust Agreement
are referred to herein, such defined terms are incorporated herein by reference.
GENERAL
Pursuant to the terms of the Trust Agreement, the Issuer Trustees, on
behalf of the Issuer, issued the Common Securities and the Preferred Securities
in the Original Offering in fully registered form without interest coupons.
Bearer Preferred Securities were not issued. The Preferred Securities represent
preferred, undivided beneficial interests in the assets of the Issuer, and the
Common Securities represent common, undivided beneficial interests in the assets
of the Issuer. All of the Common Securities are owned by the Company. The
Preferred Securities rank pari passu, and payments are made thereon pro rata,
with the Common Securities except as described under "--Subordination of Common
Securities". Legal title to the Debentures is held by the Property Trustee in
trust for the benefit of the holders of the Preferred Securities and Common
Securities. The Trust Agreement does not permit the issuance by the Issuer of
any securities other than the Preferred Securities and the Common Securities or
the incurrence of any indebtedness by the Issuer. The payment of Distributions
out of money held by the Issuer, and payments upon redemption of the Preferred
Securities or dissolution of the Issuer, are guaranteed by the Company to the
extent described under "Description of the Guarantee". The Guarantee is held by
the Guarantee Trustee for the benefit of the holders of the Preferred
Securities. The Guarantee does not cover payment of Distributions when the
Issuer does not have sufficient available funds to pay such Distributions. The
remedy of a holder of Preferred Securities in such an event is as described
herein in "--Enforcement of Certain Rights by Holders of Preferred Securities"
and "--Voting Rights; Amendment of the Trust Agreement".
DISTRIBUTIONS
Distributions on each Preferred Security are payable at the annual rate of
5 1/4% of the liquidation preference of $50 per Preferred Security.
Distributions accumulate from the date of original issuance and are payable,
unless deferred, quarterly in arrears on March 1, June 1, September 1 and
December 1 of each year, commencing March 1, 1998, when, as and if available for
payment by the Property Trustee, except as otherwise described below. The amount
of Distributions payable for any period are computed on the basis of a 360-day
year of twelve 30-day months. In the event that
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<PAGE> 15
any date on which Distributions are payable on the Preferred Securities is not a
Business Day (as defined below), then payment of the Distributions payable on
such date will be made on the next succeeding day that is a Business Day and
without any additional Distributions or other payment in respect of any such
delay (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). A "Business Day" shall mean any day other
than a Saturday or a Sunday, or a day on which banking institutions in The City
of New York are authorized or required by law or executive order to remain
closed or a day on which the corporate trust office of the Property Trustee or
the Debenture Trustee is closed for business.
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
(including any Liquidated Damages) on the Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
deferral period (each an "Extension Period"), provided that no Extension Period
may extend beyond the stated maturity of the Debentures. As a consequence of any
such election, quarterly Distributions on the Preferred Securities will be
deferred by the Issuer during any such Extension Period. Distributions to which
holders of the Preferred Securities are entitled will accumulate additional
Distributions thereon at the rate per annum set forth herein, compounded
quarterly from the relevant payment date for such Distributions. The term
"Distributions" as used herein shall include any such additional Distributions.
During any such Extension Period, the Company may not, and may not cause any of
its subsidiaries to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Company's capital stock, or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees of indebtedness for money borrowed) of the Company that
rank pari passu with or junior to the Debentures (other than (a) any dividend,
redemption, liquidation, interest, principal or guarantee payment by the Company
where the payment is made by way of securities (including capital stock) that
rank pari passu with or junior to the securities on which such dividend,
redemption, interest, principal or guarantee payment is being made, (b)
redemptions or purchases of any Rights pursuant to the Company's Rights
Agreement, or any successor to such Rights Agreement, and the declaration of a
dividend of such Rights or the issuance of preferred stock under such plans in
the future, (c) payments under the Guarantee, (d) purchases of Company Common
Stock related to the issuance of Company Common Stock under any of the Company's
benefit plans for its directors, officers or employees, (e) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one series or class of the Company's capital stock for another series or class
of the Company's capital stock, and (f) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged).
Prior to the termination of any such Extension Period, the Company may further
extend the interest payment period, provided that no Extension Period may exceed
20 consecutive quarters or extend beyond the stated maturity of the Debentures.
Upon the termination of any such Extension Period and the payment of all amounts
then due on any Interest Payment Date, the Company may elect to begin a new
Extension Period. See "Description of the Debenture--Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequence--Interest Income and
Original Issue Discount".
The Company has no current intention to exercise its right to defer
payments of interest by extending the interest payment period on the Debentures.
Distributions with respect to the Preferred Securities must be paid on the
dates payable to the extent that the Issuer has funds available for the payment
of such Distributions in the Property Account. The funds of the Issuer available
for distribution to holders of the Preferred Securities are limited to payments
under the Debentures. See "Description of the Debentures". If the Company does
not make interest payments on such Debentures, the Property Trustee will not
have funds available to pay Distributions on the Preferred Securities. The
payment of Distributions (if and to the extent the Issuer has funds on hand
available for the payment of such Distributions and cash
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<PAGE> 16
sufficient to make such payments) is guaranteed by the Company on a limited
basis as set forth herein under "Description Of the Guarantee".
Distributions on the Preferred Securities are payable to the holders
thereof as they appear on the register of the Issuer on the relevant record
dates, which shall be the fifteenth day (whether or not a Business Day) next
preceding the relevant distribution date. As long as the Preferred Securities
remain in book-entry form, subject to any applicable laws and regulations and
the provisions of the Trust Agreement, each such payment will be made as
described under "--Certain Book-Entry Procedures for Global Certificates".
CONVERSION RIGHTS
GENERAL
The Preferred Securities are convertible at any time through the close of
business on the maturity date of the Debentures (or, in the case of Preferred
Securities called for redemption, through the close of business on the
Redemption Date), at the option of the holder thereof and in the manner
described below, into shares of Company Common Stock at an initial conversion
rate of 0.9865 shares of Company Common Stock for each Preferred Security
(equivalent to a purchase price of $50.685 per share of Company Common Stock),
subject to adjustment as described under "--Conversion Price Adjustments" below.
Whenever the Company issues shares of Company Common Stock upon conversion of
Preferred Securities and the Company has in effect at such time a stock purchase
rights agreement under which holders of Company Common Stock are issued rights
entitling the holders under certain circumstances to purchase an additional
share or shares of Company Common Stock or other capital stock of the Company,
the Company will issue, together with each such share of Company Common Stock,
an appropriate number of rights. For a description of the Company's existing
stockholder rights agreement, see "Description of the Company's Capital Stock".
A holder of Preferred Securities wishing to exercise its conversion right
shall surrender such Preferred Securities, together with an irrevocable
conversion notice, to the Property Trustee, as conversion agent or to such other
agent appointed for such purpose (the "Conversion Agent"), which shall, on
behalf of such holder, exchange the Preferred Securities for a portion of the
Debentures and immediately convert such Debentures into Company Common Stock. So
long as a book-entry system for the Preferred Securities is in effect, however,
the procedures for converting the Preferred Stock that are in the form of Global
Certificates into shares of Company Common Stock will be as described under
"--Certain Book-Entry Procedures for Global Certificates". The Company's
delivery upon conversion of the fixed number of shares of Company Common Stock
into which the Debentures are convertible (together with the cash payment, if
any, in lieu of any fractional share) shall be deemed to satisfy the Company's
obligation to pay the principal amount at maturity of the portion of the
Debentures so converted and any unpaid interest accrued on such Debentures at
the time of such conversion. For a discussion of the taxation of such an
exchange to holders, see "Certain Federal Income Tax Consequences--Conversion of
Preferred Securities into Company Common Stock". Holders may obtain copies of
the required form of the conversion notice from the Conversion Agent.
Accrued Distributions will not be paid on Preferred Securities that are
converted, provided that holders of Preferred Securities at the close of
business on a Distribution payment record date will be entitled to receive the
Distribution payable on such Preferred Securities on the corresponding
Distribution Date notwithstanding the conversion of such Preferred Securities on
or subsequent to such Distribution record date but prior to such Distribution
Date. Except as provided in the immediately preceding sentence, the Issuer will
make no payment or allowance for accumulated and unpaid Distributions, whether
or not in arrears, on converted Preferred Securities. The Company will make no
payment or allowance for dividends on the shares of Company Common Stock issued
upon such conversion. Each conversion will be deemed to have been effected
immediately prior to the close of business on the day on which proper notice was
received by the Conversion Agent.
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<PAGE> 17
Shares of Company Common Stock issued upon conversion of Preferred
Securities will be validly issued, fully paid and non-assessable. No fractional
shares of Company Common Stock will be issued as a result of conversion, but in
lieu thereof such fractional interest will be paid in cash.
CONVERSION PRICE ADJUSTMENTS
GENERAL. The conversion price is subject to adjustment in certain events
including, without duplication: (i) the payment of dividends (and other
distributions) payable exclusively in Company Common Stock on Company Common
Stock; (ii) the issuance to all holders of Company Common Stock of rights or
warrants entitling holders of such rights or warrants (for a period not
exceeding 45 days) to subscribe for or purchase Company Common Stock at less
than the then Current Market Price (as defined below); (iii) subdivisions and
combinations of Company Common Stock; (iv) the payment of dividends (and other
distributions) to all holders of Company Common Stock consisting of evidences of
indebtedness of the Company, securities or capital stock, cash, or assets
(including securities, but excluding those rights or warrants referred to above
in clause (ii) and dividends and distributions paid exclusively in cash); (v)
the payment of dividends (and other distributions) on Company Common Stock paid
exclusively in cash, excluding (A) cash dividends that do not exceed the per
share amount of the immediately preceding regular cash dividend (as adjusted to
reflect any of the events referred to in clauses (i) through (vi) of this
sentence), and (B) cash dividends if the annualized per share amount thereof
does not exceed 12.5% of the last sale price of Company Common Stock, as
reported on the NYSE Consolidated Transactions Tape, on the trading day
immediately preceding the date of declaration of such dividend (such adjustment
being limited to the amount in excess of 12.5% of such Current Market Price);
and (vi) payment in respect of a tender or exchange offer (other than an odd-lot
offer) by the Company or any subsidiary of the Company for Company Common Stock
in excess of 110% of the Current Market Price of Company Common Stock on the
trading day next succeeding the last date tenders or exchanges may be made
pursuant to such tender or exchange offer.
If the distribution date for the Rights of the Company provided in the
Rights Agreement, as presently constituted or under any similar plan (see
"Description of the Company's Capital Stock--Stock Purchase Rights"), occurs
prior to the date a Preferred Security is converted and holders of the Preferred
Securities who convert such Preferred Securities after the distribution date are
not entitled to receive the Rights that would otherwise be attached (but for the
date of conversion) to the shares of Company Common Stock received upon such
conversion, an adjustment of the conversion price shall be made under clause
(ii) of the preceding paragraph as if the Rights were being distributed to the
common stockholders of the Company immediately prior to such conversion. If such
an adjustment is made and the Rights are later redeemed, invalidated or
terminated, then a corresponding reversing adjustment shall be made to the
conversion price, on an equitable basis, to take account of such event.
The Company from time to time may reduce the conversion price of the
Debentures (and thus the conversion price of the Preferred Securities) by any
amount selected by the Company for any period of at least 30 days, in which case
the Company shall give at least 15 days' notice of such reduction. The Company
may, at its option, make such reductions in the conversion price, in addition to
those set forth above, as the Board of Directors of the Company deems advisable
to avoid or diminish any income tax to holders of Company Common Stock resulting
from any dividend or distribution of stock (or rights to acquire stock) or from
any event treated as such for income tax purposes. See "Certain Federal Income
Tax Consequences--Adjustment of Conversion Price".
There will be no adjustment of the conversion price in case of the issuance
of any Company Common Stock (or securities convertible into or exchangeable for
Company Common Stock), except as specifically described above. For example, no
adjustment of the conversion price will be made upon the issuance of any shares
of Company Common Stock pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on securities of the Company and
the investment of additional optional amounts in shares of Company Common Stock
under any such plan, or the issuance of any shares of Company Common Stock or
options or rights
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<PAGE> 18
to purchase such shares pursuant to any present or future employee benefit plan
or program of the Company or pursuant to any option, warrant, right, or
exercisable, exchangeable or convertible security which does not constitute an
issuance to all holders of Company Common Stock of rights or warrants entitling
holders of such rights or warrants to subscribe for or purchase Company Common
Stock at less than the Current Market Price. If any action would require
adjustment of the conversion price pursuant to more than one of the
anti-dilution provisions, only one adjustment shall be made and such adjustment
shall be the amount of adjustment that has the highest absolute value to holders
of the Preferred Securities. No adjustment in the conversion price will be
required unless such adjustment would require an increase or decrease of at
least 1% of the conversion price, but any adjustment that would otherwise be
required to be made shall be carried forward and taken into account in a
subsequent adjustment.
The term "Current Market Price" of Company Common Stock for any day means
the last reported sale price, regular way, on such day, or, if no sale takes
place on such day, the average of the reported closing bid and asked prices on
such day, regular way, in either case as reported on the NYSE Consolidated
Transactions Tape, or, if Company Common Stock is not listed or admitted to
trading on the NYSE on such day, on the principal national securities exchange
on which Company Common Stock is listed or admitted to trading, if Company
Common Stock is listed on a national securities exchange, or the Nasdaq National
Market, or, if Company Common Stock is not quoted or admitted to trading on such
quotation system, on the principal quotation system on which Company Common
Stock may be listed or admitted to trading or quoted, or, if not listed or
admitted to trading or quoted on any national securities exchange or quotation
system, the average of the closing bid and asked prices of Company Common Stock
in the over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or, if not so available in such manner, as furnished by any
NYSE member firm selected from time to time by the Board of Directors of the
Company for that purpose or, if not so available in such manner, as otherwise
determined in good faith by the Board of Directors of the Company.
MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE COMPANY. In the event that
the Company is party to any transaction (including, without limitation, a merger
other than a merger that does not result in a reclassification, conversion,
exchange or cancellation of Company Common Stock), consolidation, sale of all or
substantially all of the assets of the Company, recapitalization or
reclassification of Company Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value or as a result
of a subdivision or combination of Company Common Stock) or any compulsory share
exchange (each of the foregoing being referred to as a "Transaction"), in each
case, as a result of which shares of Company Common Stock shall be converted
into the right to receive, or shall be exchanged for, (i) in the case of any
Transaction other than a Transaction involving a Common Stock Fundamental Change
(as defined below) (and subject to funds being legally available for such
purpose under applicable law at the time of such conversion), securities, cash
or other property, each Preferred Security shall thereafter be convertible into
the kind and, in the case of a Transaction which does not involve a Fundamental
Change (as defined below), amount of securities, cash and other property
receivable upon the consummation of such Transaction by a holder of that number
of shares of Company Common Stock into which a Preferred Security was
convertible immediately prior to such Transaction, or (ii) in the case of a
Transaction involving a Common Stock Fundamental Change, common stock, each
Preferred Security shall thereafter be convertible (in the manner described
therein) into common stock of the kind received by holders of Company Common
Stock (but in each case after giving effect to any adjustment discussed below
relating to a Fundamental Change if such Transaction constitutes a Fundamental
Change). The holders of Preferred Securities will have no voting rights with
respect to any Transaction.
If any Fundamental Change occurs, then the conversion price in effect will
be adjusted immediately after such Fundamental Change as described below. In
addition, in the event of a Common Stock Fundamental Change, each Preferred
Security shall be convertible solely into
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<PAGE> 19
common stock of the kind received by holders of Company Common Stock as a result
of such Common Stock Fundamental Change.
The conversion price in the case of any Transaction involving a Fundamental
Change will be adjusted immediately after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined below),
the conversion price of the Preferred Securities will thereupon become the
lower of (A) the conversion price in effect immediately prior to such
Non-Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to the preceding paragraphs, and (B) the
result obtained by multiplying the greater of the Applicable Price (as
defined below) or the then applicable Reference Market Price (as defined
below) by a fraction, the numerator of which is $50 and the denominator of
which is (x) the amount of the redemption price for one Preferred Security
if the redemption date were the date of such Non-Stock Fundamental Change
(or, for the period commencing on the first date of original issuance of
the Preferred Securities and through December 1, 1998, and the twelve-month
periods commencing December 1, 1998, December 1, 1999 and December 1, 2000,
the product of 105.250%, 104.725%, 104.200% and 103.675%, respectively,
multiplied by $50) plus (y) any then-accrued and unpaid distributions on
one Preferred Security; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the Preferred Securities in effect immediately prior to such
Common Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to the preceding paragraphs, will thereupon
be adjusted by multiplying such conversion price by a fraction of which the
numerator will be the Purchaser Stock Price (as defined below) and the
denominator will be the Applicable Price; provided, however, that in the
event of a Common Stock Fundamental Change in which (A) 100% of the value
of the consideration received by a holder of Company Common Stock is common
stock of the successor, acquirer, or other third party (and cash, if any,
is paid only with respect to any fractional interests in such common stock
resulting from such Common Stock Fundamental Change) and (B) all Company
Common Stock will have been exchanged for, converted into, or acquired for
common stock (and cash with respect to fractional interests) of the
successor, acquirer, or other third party, the conversion price of the
Preferred Securities in effect immediately prior to such Common Stock
Fundamental Change will thereupon be adjusted by multiplying such
conversion price by a fraction of which the numerator will be one and the
denominator will be the number of shares of common stock of the successor,
acquirer, or other third party received by a holder of one share of Company
Common Stock as a result of such Common Stock Fundamental Change.
The foregoing conversion price adjustments are designed, in certain
circumstances, to reduce the conversion price that would be applicable in
"Fundamental Change" Transactions where all or substantially all the Company
Common Stock is converted into securities, cash, or property and not more than
50% of the value received by the holders of Company Common Stock consists of
stock listed or admitted for listing subject to notice of issuance on the NYSE
or a national securities exchange or quoted on the Nasdaq National Market (a
Non-Stock Fundamental Change, as defined below). Such reduction would result in
an increase in the amount of the securities, cash, or property into which each
Preferred Security is convertible over that which would have been obtained in
the absence of such conversion price adjustments.
In a Non-Stock Fundamental Change Transaction where the initial value
received per share of Company Common Stock (measured as described in the
definition of Applicable Price below) is lower than the then applicable
conversion price of a Preferred Security but greater than or equal to the
Reference Market Price (as defined below), the conversion price will be adjusted
as described above with the effect that each Preferred Security will be
convertible into securities, cash or property of the same type received by the
holders of Company Common Stock in the Transaction but in an amount per
Preferred Security that would at the time of the Transaction have had a value
equal to the then applicable redemption price per Preferred Security set forth
below under "--Optional Redemption".
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<PAGE> 20
In a Non-Stock Fundamental Change Transaction where the initial value
received per share of Company Common Stock (measured as described in the
definition of Applicable Price) is lower than both the conversion price of a
Preferred Security in effect prior to any adjustment described above and the
Reference Market Price, the conversion price will be adjusted as described above
but calculated as though such initial value had been the Reference Market Price.
In a Fundamental Change Transaction where all or substantially all the
Company Common Stock is converted into securities, cash, or property and more
than 50% of the value received by the holders of Company Common Stock consists
of listed or Nasdaq National Market traded common stock (a Common Stock
Fundamental Change, as defined below), the foregoing adjustments are designed to
provide in effect that (a) where Company Common Stock is converted partly into
such common stock and partly into other securities, cash, or property, each
Preferred Security will be convertible solely into a number of shares of such
common stock determined so that the initial value of such shares (measured as
described in the definition of "Purchaser Stock Price" below) equals the value
of the shares of Company Common Stock into which such Preferred Security was
convertible immediately before the Transaction (measured as aforesaid) and (b)
where Company Common Stock is converted solely into such common stock, each
Preferred Security will be convertible into the same number of shares of such
common stock receivable by a holder of the number of shares of Company Common
Stock into which such Preferred Security was convertible immediately before such
Transaction.
The term "Applicable Price" means (i) in the case of a Non-Stock
Fundamental Change in which the holders of the Company Common Stock receive only
cash, the amount of cash received by the holder of one share of Company Common
Stock and (ii) in the event of any other Non-Stock Fundamental Change or any
Common Stock Fundamental Change, the average of the Closing Prices (as defined
below) for the Company Common Stock during the ten trading days prior to the
record date for the determination of the holders of Company Common Stock
entitled to receive such securities, cash, or other property in connection with
such Non-Stock Fundamental Change or Common Stock Fundamental Change or, if
there is no such record date, the date upon which the holders of the Company
Common Stock shall have the right to receive such securities, cash, or other
property (such record date or distribution date being hereinafter referred to as
the "Entitlement Date"), in each case as adjusted in good faith by the Company
to appropriately reflect any of the events referred to in clauses (i) through
(vi) of the first paragraph under "--Conversion Price Adjustments--General".
The term "Closing Price" means on any day the reported last sale price on
such day or in case no sale takes place on such day, the average of the reported
closing bid and asked prices in each case on the NYSE Consolidated Transactions
Tape or, if the stock is not listed or admitted to trading on the NYSE, on the
principal national securities exchange on which such stock is listed or admitted
to trading or, if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices as furnished by any
NYSE member firm, selected by the Debenture Trustee for that purpose.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Company
Common Stock consists of common stock that for each of the ten consecutive
trading days prior to the Entitlement Date has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the Nasdaq National Market; provided, however, that a
Fundamental Change shall not be a Common Stock Fundamental Change unless either
(i) the Company continues to exist after the occurrence of such Fundamental
Change and the outstanding Preferred Securities continue to exist as outstanding
Preferred Securities or (ii) not later than the occurrence of such Fundamental
Change, the outstanding Preferred Securities are converted into or exchanged for
shares of convertible preferred stock of an entity succeeding to the business of
the Company or a subsidiary thereof, which convertible preferred stock has
powers, preferences, and relative, participating,
19
<PAGE> 21
optional, or other rights, and qualifications, limitations, and restrictions,
substantially similar to those of the Preferred Securities.
The term "Fundamental Change" means the occurrence of any Transaction or
event in connection with a plan pursuant to which all or substantially all of
the Company Common Stock shall be exchanged for, converted into, acquired for,
or constitute solely the right to receive securities, cash, or other property
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization, or
otherwise), provided, that, in the case of a plan involving more than one such
Transaction or event, for purposes of adjustment of the conversion price, such
Fundamental Change shall be deemed to have occurred when substantially all of
the Company Common Stock shall be exchanged for, converted into, or acquired for
or constitute solely the right to receive securities, cash, or other property,
but the adjustment shall be based upon the consideration that a holder of
Company Common Stock received in such Transaction or event as a result of which
more than 50% of the Company Common Stock shall have been exchanged for,
converted into, or acquired for or constitute solely the right to receive
securities, cash, or other property. The term "Non-Stock Fundamental Change"
means any Fundamental Change other than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in such Common Stock Fundamental Change for the ten consecutive trading
days prior to and including the Entitlement Date, as adjusted in good faith by
the Company to appropriately reflect any of the events referred to in clauses
(i) through (vi) of the first paragraph under "--Conversion Price
Adjustments-General".
The term "Reference Market Price" shall initially mean $27.25 (which is an
amount equal to 66 2/3% of the reported last sales price for Company Common
Stock on the NYSE Consolidated Transactions Tape on December 8, 1997) and in the
event of any adjustment of the conversion price other than as a result of a
Non-Stock Fundamental Change, the Reference Market Price shall also be adjusted
so that the ratio of the Reference Market Price to the conversion price after
giving effect to any such adjustment shall always be the same as the ratio of
the initial Reference Market Price to the initial conversion price of the
Preferred Securities.
SPECIAL EVENT EXCHANGE OR REDEMPTION
At any time following the occurrence and the continuation of a Tax Event
(as defined below) or an Investment Company Event (as defined below), the
Property Trustee shall direct the Conversion Agent to exchange all outstanding
Preferred Securities for Debentures, provided that, in the case of a Tax Event
that shall occur and be continuing, the Company shall have the right to (a)
direct that less than all, or none, of the Preferred Securities be so exchanged
if and for so long as the Company shall have elected to pay any Additional Sums
(as defined below) such that the net amounts received by the holders of
Preferred Securities not so exchanged in respect of Distributions and other
distributions are not reduced as a result of such Tax Event, and shall not have
revoked any such election or failed to make such payments or (b) redeem the
Preferred Securities in the manner set forth below.
If a Tax Event shall occur or be continuing, the Company shall have the
right, upon not less than 30 nor more than 60 days' notice, to redeem the
Debentures at the principal amount thereof plus accrued and unpaid interest, in
whole or in part, for cash upon the later of (i) 90 days following the
occurrence of such Tax Event or (ii) December 1, 2001. Promptly following such
redemption, Preferred Securities and Common Securities with an aggregate
liquidation preference equal to the aggregate principal amount of the Debentures
so redeemed will be redeemed by the Issuer at the liquidation preference thereof
plus accrued and unpaid Distributions thereon to the redemption date on a pro
rata basis. The Common Securities will be redeemed on a pro rata basis with the
Preferred Securities, except that if a Declaration Event of Default has occurred
and is continuing, the Preferred Securities will have a priority over the Common
Securities with respect to the Redemption Price.
20
<PAGE> 22
A "Special Event" means a Tax Event or an Investment Company Event. A "Tax
Event" means the receipt by the Property Trustee, on behalf of the Issuer, of an
opinion of counsel, rendered by a law firm having a national tax and securities
practice (which opinion shall not have been rescinded by such law firm), to the
effect that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein
affecting taxation, or as a result of any official administrative pronouncement
or judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or decision is announced
on or after the date of issuance of the Preferred Securities under the Trust
Agreement and does not pertain to the use of the proceeds of the issuance of the
Debentures, there is more than an insubstantial risk in each case after the date
hereof that (i) the Issuer is, or will be within 90 days of the date thereof,
subject to United States Federal income tax with respect to income received or
accrued on the Debentures; (ii) interest payable by the Company on such
Debentures is not, or within 90 days of the date thereof will not be, deductible
by the Company, in whole or in part, for United States Federal income tax
purposes; or (iii) the Issuer 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. "Investment Company Event" means the receipt by the
Property Trustee, on behalf of the Issuer, of an opinion of counsel, rendered by
a law firm having a national tax and securities practice (which opinion shall
not have been rescinded by such law firm), to the effect 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 Issuer is or will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Preferred
Securities.
Legislation has been introduced in the United States Congress in the past
that would, if enacted, deny an interest deduction to issuers of instruments
such as the Debentures. No such legislation has been enacted. There can be no
assurance, however, that similar legislation will not ultimately be enacted into
law, or that other developments will not occur after the date hereof that would
adversely affect the tax treatment of the Debentures and constitute a Tax Event,
which would permit the Issuer to exchange the Preferred Securities, in whole or
in part, for the Debentures or redeem, in whole or in part, the Preferred
Securities and corresponding Debentures.
Recently, the Internal Revenue Service asserted that the interest payable
on a security issued in circumstances with certain similarities to the issuance
of the Debentures was not deductible for United States federal income tax
purposes. The taxpayer in that case has filed a petition in the United States
Tax Court challenging the position of the Internal Revenue Service on this
matter. If this matter is in fact litigated and the Tax Court sustains the
position of the Internal Revenue Service on this matter, such judicial decision
could form the basis of a Tax Event which would permit the Issuer to exchange
the Preferred Securities, in whole or in part, for the Debentures or redeem, in
whole or in part, the Preferred Securities and corresponding Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by the Issuer on the
outstanding Preferred Securities and Common Securities of the Issuer shall not
be reduced as a result of any additional taxes, duties and other governmental
charges to which the Issuer has become subject as a result of a Tax Event that
has occurred and is continuing.
Holders of Preferred Securities, by purchasing such Preferred Securities,
will be deemed to have agreed to be bound by these exchange provisions in regard
to the exchange of such Preferred Securities for Debentures on the terms
described above.
DISTRIBUTION OF DEBENTURES
At any time, the Company has the right to dissolve the Issuer and, after
satisfaction of the liabilities of creditors of the Issuer as provided by
applicable law, cause the Debentures to be
21
<PAGE> 23
distributed to the holders of the Preferred Securities in dissolution of the
Issuer. Under current United States Federal income tax law and interpretations
and assuming, as expected, the Issuer is treated as a grantor trust, a
distribution of the Debentures should not be a taxable event to the Issuer and
holders of the Preferred Securities. Should there be a change in law, a change
in legal interpretation, a Special Event or other circumstances, however, the
distribution could be a taxable event to holders of the Preferred Securities.
See "Certain Federal Income Tax Consequences--Redemption of Preferred Securities
for Debentures or Cash upon Dissolution of the Issuer".
After the liquidation date fixed for any distribution of Debentures for
Preferred Securities (i) such Preferred Securities will no longer be deemed to
be outstanding, (ii) DTC (as defined below) or its nominee, as the record holder
of such Preferred Securities, will receive a registered global certificate or
certificates representing the Debentures to be delivered upon such distribution
and (iii) any certificates representing such Preferred Securities not held by
DTC or its nominee will be deemed to represent the Debentures having a principal
amount equal to the liquidation amount of such Preferred Securities, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on such Preferred Securities until such certificates are presented
to the Property Trustee for transfer or reissuance.
OPTIONAL REDEMPTION
Except as provided under "--Mandatory Redemption" below, the Preferred
Securities may not be redeemed by the Issuer prior to December 1, 2001.
On and after such date, upon any redemption by the Company of Debentures,
the Preferred Securities are subject to redemption, in whole or in part, at the
following percentages of the liquidation preference thereof plus accrued and
unpaid Distributions, if any, to the date fixed for redemption if redeemed
during the twelve-month period commencing December 1 in each of the following
years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001............................. 103.150%
2002............................. 102.625%
2003............................. 102.100%
2004............................. 101.575%
</TABLE>
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2005............................. 101.050%
2006............................. 100.525%
2007 and thereafter.............. 100.000%
</TABLE>
The aggregate liquidation preference of the Preferred Securities and Common
Securities so redeemed will equal the aggregate principal amount of Debentures
redeemed by the Company. The Issuer may not redeem the Preferred Securities in
part unless all accrued and unpaid Distributions have been paid in full on all
outstanding Preferred Securities. If fewer than all the outstanding Preferred
Securities are to be redeemed, the Preferred Securities to be so redeemed will
be selected as described under "--Certain Book-Entry Procedures for Global
Certificates".
In the event the Company redeems the Debentures in certain circumstances
upon the occurrence and continuation of a Tax Event as described under
"--Special Event Exchange or Redemption", the appropriate amount of the
Preferred Securities will be redeemed at 100% of the liquidation preference
thereof together with accrued and unpaid Distributions to the redemption date.
MANDATORY REDEMPTION
Upon repayment at maturity or as a result of the acceleration of the
Debentures upon the occurrence of a Debenture Event of Default described under
"Description of the Debentures--Debenture Events of Default", the Debentures
shall be subject to mandatory redemption, in whole but not in part, by the
Company, and the proceeds from such repayment will be applied to redeem
Preferred Securities and Common Securities having an aggregate liquidation
preference equal to the aggregate principal amount of Debentures so repaid or
redeemed at a redemption price equal to the respective liquidation preference of
the Preferred Securities and Common Securities or,
22
<PAGE> 24
in the case of a redemption of the Debentures, at the redemption price paid with
respect to the Debentures, as described below, together with accrued and unpaid
distributions on the Preferred Securities and Common Securities to the date of
redemption. Upon acceleration of the Debentures, the Preferred Securities will
be redeemed only when repayment of the Debentures has actually been received by
the Issuer. In addition, as described above under "--Special Event Exchange or
Redemption", upon the occurrence of a Special Event, Preferred Securities shall
be exchanged for Debentures unless, in the case of a Tax Event that has occurred
and is continuing, the Company shall have elected to (a) pay any Additional Sums
such that the net amounts of Distributions received by the holders of any
Preferred Securities not so exchanged are not reduced as a result of such Tax
Event and shall not have revoked any such election or failed to make such
payments or (b) redeem the Preferred Securities as further set forth in
"--Special Event Exchange or Redemption".
REDEMPTION PROCEDURES
Preferred Securities redeemed on the date fixed for redemption shall be
redeemed at the redemption price with the applicable proceeds from the
contemporaneous redemption of the Debentures. Redemptions of the Preferred
Securities shall be made and the redemption price shall be payable on the
redemption date only to the extent that the Issuer has funds on hand available
for the payment of such redemption price. See also "--Subordination of Common
Securities".
Notice of any redemption (optional or mandatory) of Preferred Securities
(which notice will be irrevocable) will be given by the Property Trustee to each
record holder of Preferred Securities that are being redeemed not fewer than 30
nor more than 60 days prior to the redemption date. If the Property Trustee
gives a notice of redemption in respect of the Preferred Securities, then, by
12:00 noon, New York City time, on the redemption date, to the extent funds are
available, the Property Trustee will deposit irrevocably with DTC or the
Conversion Agent, as the case may be, funds sufficient to pay the applicable
redemption price and will give DTC or the Conversion Agent, as the case may be,
irrevocable instructions and authority to pay the redemption price to the
holders of such Preferred Securities. See "--Certain Book-Entry Procedures for
Global Certificates". If such Preferred Securities are no longer in book-entry
form, the Property Trustee, to the extent funds are available, will irrevocably
deposit with the Paying Agent funds sufficient to pay the applicable redemption
price and will give the Paying Agent irrevocable instructions and authority to
pay the redemption price to the holders thereof upon surrender of their
certificates evidencing such Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the redemption date for any
Preferred Securities called for redemption shall be payable to the holders of
such Preferred Securities as of the relevant record dates for the related
distribution dates. Subject to the preceding sentence, if notice of redemption
shall have been given and funds deposited as required, then upon the date of
such deposit, all rights of the holders of such Preferred Securities so called
for redemption will cease, except (i) the right of the holders of such Preferred
Securities to receive the redemption price, but without interest on such
redemption price, and (ii) the right to convert such Preferred Securities into
Company Common Stock in the manner described herein through the close of
business on the Redemption Date, and such Preferred Securities will cease to be
outstanding. In the event that any date fixed for redemption of Preferred
Securities is not a Business Day, then payment of the redemption price on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
redemption price in respect of Preferred Securities called for redemption is
improperly withheld or refused and not paid either by the Issuer or by the
Company pursuant to the Guarantee as described under "Description of the
Guarantee", Distributions on such Preferred Securities will continue to accrue
at the then applicable rate, from the redemption date originally established by
the Issuer to the date such redemption price is actually paid, in which case the
actual payment date will be the date fixed for redemption for purposes of
calculating the redemption price.
23
<PAGE> 25
Subject to applicable law (including, without limitation, United States
Federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the redemption price on the Preferred Securities and any
distribution or exchange of Debentures to holders of Preferred Securities shall
be made to the applicable record holders thereof as they appear on the register
for such Preferred Securities on the relevant record date, which shall be the
fifteenth day (whether or not a Business Day) prior to the redemption date or
liquidation date, as applicable.
If less than all of the Preferred Securities and Common Securities issued
by the Issuer are to be redeemed on a redemption date, then the aggregate
liquidation preference of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata among the Preferred Securities and the
Common Securities. The particular Preferred Securities to be redeemed shall be
selected not more than 60 days prior to the redemption date by the Property
Trustee from the outstanding Preferred Securities not previously called for
redemption, by lot or by such method as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $50 or an integral multiple of $50 in excess thereof) of the
liquidation preference of the Preferred Securities. The Property Trustee shall
promptly notify the Conversion Agent in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the liquidation preference thereof to be redeemed; it
being understood that, in the case of Preferred Securities held by DTC (or any
successor) or its nominee, the distribution of the proceeds of such redemption
will be made in accordance with the procedures of DTC or its nominee. For all
purposes of the Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part, to
the portion of the aggregate liquidation preference of Preferred Securities
which has been or is to be redeemed.
Notice of any redemption of Debentures will be mailed at least 30 days but
not more than 60 days before the redemption date to each holder of Debentures to
be redeemed at its registered address. Unless the Company defaults in payment of
the redemption price, on and after the redemption date interest shall cease to
accrue on such Debentures or portions thereof called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the redemption price of, the Preferred
Securities and Common Securities, as applicable, shall be made pro rata based on
the liquidation preference of such Preferred Securities and Common Securities;
provided, however, that if on any distribution date or redemption date a
Declaration Event of Default shall have occurred and be continuing, no payment
of any Distribution on, or redemption price of, any of the Common Securities,
and no other payment on account of the redemption, liquidation or other
acquisition of such Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all of the outstanding
Preferred Securities for all Distribution periods terminating on or prior
thereto, or in the case of payment of the redemption price the full amount of
such redemption price on all of the outstanding Preferred Securities then called
for redemption, shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full in cash of
all Distributions on, or redemption price of, the Preferred Securities then due
and payable.
In the case of any Declaration Event of Default, the Company as holder of
the Common Securities will be deemed to have waived any right to act with
respect to any such Declaration Event of Default until all such Declaration
Events of Default with respect to the Preferred Securities have been cured,
waived or otherwise eliminated. Until all such Declaration Events of Default
with respect to the Preferred Securities have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
the Preferred Securities and not on behalf of the
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Company as holder of the Common Securities, and only the holders of the
Preferred Securities will have the right to direct the Property Trustee to act
on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution of the Issuer
(each, a "Liquidation"), the holders of the Preferred Securities at that time
will be entitled to receive out of the assets of the Issuer, after satisfaction
of liabilities to creditors, distributions in an amount equal to the aggregate
of the stated liquidation preference of $50 per Preferred Security plus accrued
and unpaid Distributions thereon to the date of payment (the "Liquidation
Distribution"), unless, in connection with such Liquidation, Debentures in an
aggregate principal amount equal to the aggregate stated liquidation preference
of, with an interest rate identical to the distribution rate of, and accrued and
unpaid interest equal to accrued and unpaid Distributions on, the Preferred
Securities, have been distributed on a pro rata basis to the holders of
Preferred Securities in exchange for such Preferred Securities. See
"--Distribution of Debentures".
If such Liquidation Distribution can be paid only in part because the
Issuer has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Issuer on the
Preferred Securities shall be paid on a pro rata basis. The holder of the Common
Securities will be entitled to receive Liquidation Distributions upon any such
liquidation pro rata with the holders of the Preferred Securities, except that
if a Debenture Event of Default has occurred and is continuing, the Preferred
Securities shall have a priority over the Common Securities.
Pursuant to the Trust Agreement, the Issuer shall automatically dissolve
upon expiration of its term and shall dissolve on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the distribution of Debentures to the holders of the Preferred Securities and
Common Securities, if the Company, as Depositor, has given written direction to
the Property Trustee to dissolve the Issuer (which direction is optional and
wholly within the discretion of the Company, as Depositor); (iii) the
redemption, conversion, or exchange of all of the Preferred Securities and
Common Securities; (iv) the entry by a court of competent jurisdiction of an
order for the dissolution of the Issuer; and (v) the occurrence of a Special
Event, except in the case of a Tax Event that has occurred and is continuing
following which the Company has elected to pay any Additional Sums such that the
net amount received by holders of Preferred Securities in respect of
Distributions is not reduced as a result of such Tax Event and the Company has
not revoked any such election or failed to make such payment.
DECLARATION EVENTS OF DEFAULT; NOTICE
An event of default under the Indenture (a "Debenture Event of Default")
constitutes an event of default under the Trust Agreement with respect to the
Preferred Securities and the Common Securities (a "Declaration Event of
Default"), whatever the reason for such Debenture Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body.
Within ten days after the occurrence of any Declaration Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Declaration Event of Default to the holders of the Preferred
Securities, the Administrative Trustees and the Company, as Depositor, unless
such Declaration Event of Default shall have been cured or waived. The Company,
as Depositor, and the Administrative Trustees, on behalf of the Issuer, are
required to file annually with the Property Trustee a certificate as to whether
or not they are in compliance with all the conditions and covenants applicable
to them under the Trust Agreement.
If a Declaration Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities upon
dissolution of the Issuer as described above.
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See "--Liquidation Distribution upon Dissolution". The existence of a
Declaration Event of Default does not entitle the holders of Preferred
Securities to accelerate the maturity thereof.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default has occurred and is continuing, then the
holders of Preferred Securities will rely on the enforcement by the Property
Trustee of its rights as a holder of the Debentures against the Company. In
addition, the holders of a majority in aggregate liquidation preference 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 Trust Agreement, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the Debentures. If the
Property Trustee fails to enforce its rights as the holder of the Debentures
after a request therefor by a holder of Preferred Securities, such holder may,
to the fullest extent permitted by law, proceed to enforce such rights directly
against the Company. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the 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
directly institute a Direct Action against the Company for enforcement of
payment to such holder of the principal of or interest on the Debentures having
a principal amount equal to the aggregate liquidation preference of the
Preferred Securities of such holder on or after the respective due date
specified in the Debentures. In connection with such Direct Action, the Company
will be subrogated to the rights of such holder of Preferred Securities under
the Trust Agreement 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 against the Company any other
remedy available to the Property Trustee unless the Property Trustee first fails
to do so.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any entity into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such Issuer Trustee shall be a party, or
any entity succeeding to all or substantially all the corporate trust business
of such Issuer Trustee, shall be the successor of such Issuer Trustee under the
Trust Agreement, provided such corporation shall be otherwise qualified and
eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATION OR REPLACEMENTS OF THE ISSUER
The Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person (as defined
below), except as described below or as described in "--Liquidation Distribution
upon Dissolution". The Issuer may, at the request of the Company, with the
consent of the Administrative Trustees and without the consent of the Property
Trustee, the Delaware Trustee or the holders of the Preferred Securities, merge
with or into, consolidate, amalgamate, be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a trust
organized as such under the laws of any State; provided that (i) such successor
entity either (a) expressly assumes all of the obligations of the Issuer with
respect to the Preferred Securities or (b) substitutes for the Preferred
Securities other securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Preferred Securities rank in priority with respect to
Distributions and payments upon liquidation, redemption and otherwise, (ii) the
Company expressly appoints a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Debentures,
(iii) the Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
other organization on which the Preferred Securities are then listed, if any,
(iv) such merger, consolidation, amalgamation,
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replacement, conveyance, transfer or lease does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Issuer, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Company has received an opinion
from independent counsel to the Issuer experienced in such matters to the effect
that (a) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Preferred Securities (including any Successor
Securities) in any material respect (other than with respect to any dilution of
the holders' interest in the new entity) and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Issuer nor such successor entity will be required to register as an
investment company under the Investment Company Act, and (viii) the Company or
any permitted successor or assignee owns all of the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Issuer shall not, except with the consent of
holders of 100% in aggregate liquidation preference of the Preferred Securities,
consolidate, amalgamate, merge with or into, be replaced by or convey, transfer
or lease its properties and assets substantially as an entirety to any other
entity or permit any other entity to consolidate, amalgamate, merge with or
into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Issuer or the successor entity to
be classified as other than a grantor trust for United States Federal income tax
purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of the
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Trust Agreement, the holders of the Preferred Securities have no voting rights.
The Trust Agreement may be amended from time to time by the Company and the
Issuer Trustees, without the consent of the holders of the Preferred Securities
(i) to cure any ambiguity, correct or supplement any provisions in the Trust
Agreement that may be inconsistent with any other provision, or to make any
other provisions with respect to matters or questions arising under the Trust
Agreement that shall not be inconsistent with the other provisions of the Trust
Agreement, (ii) to modify, eliminate or add to any provision of the Trust
Agreement to such extent as shall be necessary to ensure that the Issuer will be
classified for United States Federal income tax purposes as a grantor trust at
all times that any Preferred Securities and Common Securities are outstanding or
to ensure that the Issuer will not be required to register as an "investment
company" under the Investment Company Act or be classified as other than a
grantor trust for United States Federal income tax purposes or (iii) to qualify
or maintain the qualification of the Trust Agreement under the Trust Indenture
Act; provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of any holder of
Preferred Securities or Common Securities, and any such amendments of the Trust
Agreement shall become effective when notice thereof is given to the holders of
Preferred Securities and Common Securities. The Trust Agreement may be amended
by the Issuer Trustees and the Company with (i) the consent of holders
representing not less than a majority (based upon liquidation preference) of the
outstanding Preferred Securities and Common Securities, acting as a single
class, and (ii) receipt by the Issuer Trustees of an opinion of counsel to the
effect that such amendment or the exercise of any power granted to the Issuer
Trustees in accordance with such amendment will not affect the Issuer's status
as a grantor trust for United States Federal income tax purposes or the Issuer's
exemption from the status of an "investment company" under the Investment
Company Act; provided further that (a) without the consent of each holder of
Preferred Securities and Common Securities, the
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Trust Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Preferred Securities and Common Securities or otherwise
adversely affect the amount of any Distribution required to be made in respect
of the Preferred Securities and Common Securities as of a specified date or (ii)
restrict the right of a holder of Preferred Securities and Common Securities to
institute suit for the enforcement of any such payment on or after such date.
If any proposed amendment of the Trust Agreement provides for, or the
Issuer Trustees otherwise propose to effect, the dissolution of the Issuer,
other than pursuant to the terms of the Trust Agreement, then the holders of the
then outstanding Preferred 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 the holders of the majority in aggregate liquidation
preference of the Preferred Securities.
During the period commencing on the date of occurrence of a Declaration
Event of Default and ending upon the cure of such Declaration Event of Default,
and in other limited circumstances, the holders of a majority in aggregate
liquidation preference of Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Property Trustee or to direct the exercise of any trust or power conferred
upon the Property Trustee under the Trust Agreement, including the right to
direct the Property Trustee to exercise the remedies available to it as the
holder of the Debentures. So long as any Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee or
executing any trust or power conferred on the Debenture Trustee with respect to
such Debentures, (ii) waive any past default that is waivable under Section 5.13
of the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Debentures shall be due and payable, or (iv)
consent to any amendment, modification or termination of the Indenture or the
Debentures where such consent shall be required, without in each case obtaining
the prior approval of the holders of a majority in aggregate liquidation
preference of all outstanding Preferred Securities (except in the case of clause
(iv), which consent, in the event that no Declaration Event of Default shall
occur and be continuing, shall be of the holders of Preferred Securities and
Common Securities voting together as a single class); provided, however, that
where a consent under the Indenture would require the consent of each holder of
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior written consent of each holder of the Preferred
Securities. The Issuer Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Preferred Securities
except by subsequent vote of the holders of the Preferred Securities. The
Property Trustee shall notify each holder of record of the Preferred Securities
of any notice of default with respect to the Debentures.
A waiver of a Debenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of the Preferred Securities and
the Common Securities or pursuant to written consent. The Property Trustee 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 given to each holder of record of Preferred
Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of Preferred Securities is required for
the Issuer to redeem and cancel the Preferred Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company, the Issuer Trustees or
any affiliate of any Issuer Trustee shall, for purposes of such vote or consent,
be treated as if such Preferred Securities were not outstanding.
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The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Certain Book-Entry Procedures for
Global Certificates".
Holders of the Preferred Securities have no rights to appoint or remove the
Issuer Trustees, who may be appointed, removed or replaced solely by the
Company, as the direct or indirect holder of all the Common Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to The
Depository Trust Company ("DTC"), which shall credit the relevant accounts at
DTC on the applicable distribution dates or, if the Preferred Securities are not
held by DTC, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the Securities Register.
The paying agent (the "Paying Agent") shall initially be the Property Trustee
and any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Company. The Paying Agent is permitted to resign
as Paying Agent upon 30 days' written notice to the Property Trustee and the
Company. In the event that the Property Trustee shall no longer be the Paying
Agent, the Administrative Trustees shall appoint a successor (which shall be a
bank or trust company acceptable to the Administrative Trustees and the Company)
to act as Paying Agent.
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL CERTIFICATES
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of DTC that affect transfers
of interests in the global certificate or certificates issued in connection with
sales of Preferred Securities made pursuant to this Prospectus. The Preferred
Securities were issued as fully registered securities registered in the name of
Cede & Co. (as nominee for DTC). Fully registered global Preferred Securities
certificates (the "Global Certificates") were issued, representing such
Preferred Securities and were deposited with DTC. The Global Certificates
comprise the certificates representing Preferred Securities initially sold to
QIBs in reliance on Rule 144A under the Securities Act ("Restricted Global
Certificates") and the Preferred Securities initially sold in offshore
transactions in reliance on Regulation S (the "Regulation S Global
Certificates"). One or more unrestricted Global Certificates will be issued,
representing, in the aggregate, Preferred Securities sold pursuant to this
Prospectus, and will be deposited with DTC.
The descriptions of the operations and procedures of DTC, Euroclear and
CEDEL that follow are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them from time to time. The
Issuer and the Company take no responsibility for these operations and
procedures and urge investors to contact the system or their participants
directly to discuss these matters.
DTC has advised the Issuer and the Company as follows: DTC is a limited
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participants ("participants") and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
DTC has advised the Issuer and the Company that its current practice is to
credit, on its internal system, the respective liquidation preference or number
of securities of the individual beneficial interests represented by the
Restricted Global Certificates and the Regulation S Global Certificates
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to the accounts with DTC of the participants through which such interests are to
be held. Ownership of beneficial interests in the Global Certificates will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominees (with respect to interests of
participants) and the records of participants and indirect participants (with
respect to interests of persons other than participants).
As long as DTC, or its nominee, is the registered holder of a Global
Certificate, DTC or such nominee, as the case may be, will be considered the
sole owner and holder of the Preferred Securities represented by such Global
Certificate for all purposes under the Trust Agreement and the Preferred
Securities.
Except in the limited circumstances described below under "--Exchanges of
Book-Entry Certificates for Certificated Preferred Securities", owners of
beneficial interests in a Global Certificate will not be entitled to have any
portions of such Global Certificate registered in their names, will not receive
or be entitled to receive physical delivery of Preferred Securities in
definitive form and will not be considered the owners or holders of the Global
Certificate (or any Preferred Securities represented thereby) under the Trust
Agreement or the Preferred Securities.
Investors may hold their interests in the Restricted Global Certificate
directly through DTC, if they are participants in such system, or indirectly
through organizations (including Euroclear and CEDEL) which are participants in
such system. Investors may hold their interests in the Regulation S Global
Certificate through CEDEL or Euroclear, if they are participants in such
systems, or indirectly through organizations which are participants in such
systems. After the expiration of the Restricted Period (but not earlier),
investors may also hold their interests in the Regulation S Global Certificate
through organizations other than CEDEL and Euroclear that are participants in
the DTC system. CEDEL and Euroclear hold interests in the Regulation S Global
Certificate on behalf of their participants through customers' securities
accounts in their respective names on the books of their respective
depositories. The depositories, in turn, hold such interests in the Regulation S
Global Certificate in customers' securities accounts in the depositories' names
on the books of DTC. All interests in a Global Certificate, including those held
through Euroclear or CEDEL, will be subject to the procedures and requirements
of DTC. Those interests held through Euroclear and CEDEL are subject to the
procedures and requirements of such system. Beneficial interests in the
Restricted Global Certificate may be exchanged for beneficial interests in the
Regulation S Global Certificate and vice versa only in connection with a
transfer of such interest and subject to compliance with certain certification
requirements. "Restricted Period" means, with respect to the Preferred
Securities, the one-year period, and with respect to the Debentures, the Company
Common Stock issuable on conversion thereof or of the Preferred Securities, and
the Guarantee, the 40-day period, in each case following the later of the
commencement of the Original Offering and the last original issue date of the
Preferred Securities (including any Preferred Securities issued to cover
over-allotments).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Certificate to such persons may be
limited to that extent. Because DTC can act only on behalf of its participants,
which in turn act on behalf of indirect participants and certain banks, the
ability of a person having beneficial interests in a Global Certificate to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Payments of Distributions on Global Certificates will be made to DTC or its
nominee as the registered owner thereof. Neither the Issuer, the Company, the
Property Trustee nor any of their respective agents has any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Certificates or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Issuer and the Company expect that DTC or its nominee, upon receipt of
any payment of Distributions in respect of a Global Certificate representing any
Preferred Securities held by it or its nominee, will immediately credit
participants' accounts with payments in amounts proportionate to
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their respective beneficial interests in the liquidation preference or number of
securities represented by such Global Certificate for such Preferred Securities
as shown on the records of DTC or its nominee. The Issuer and the Company also
expect that payments by participants to owners of beneficial interests in such
Global Certificate held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name". Such payments will be
the responsibility of such participants.
Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Certificates will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants. Transfers between participants
in DTC will be effected in accordance with DTC's procedures, and will be settled
in same-day funds. Transfers between participants in Euroclear and CEDEL will be
effected in the ordinary way in accordance with their respective rules and
operating procedures.
Subject to compliance with the transfer and exchange restrictions
applicable to the Preferred Securities described elsewhere herein, cross-market
transfers between DTC participants, on the one hand, and Euroclear or CEDEL
participants, on the other hand, will be effected by DTC in accordance with
DTC's rules on behalf of Euroclear or CEDEL, as the case may be, by its
respective depositary; however, such cross-market transactions will require
delivery of instructions to Euroclear or CEDEL, as the case may be, by the
counterparts in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
CEDEL, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Certificate in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Euroclear participants and CEDEL participants may not deliver instructions
directly to the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Certificate from a DTC
participant will be credited, and any such crediting will be reported to the
relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the DTC settlement date. Cash received in Euroclear or
CEDEL as a result of sales of interests in a Global Certificate by or through a
Euroclear or CEDEL participant to a DTC participant will be received with value
on the DTC settlement date but will be available in the relevant Euroclear or
CEDEL cash account of the business day for Euroclear or CEDEL following the DTC
settlement date.
DTC has advised the Issuer and the Company that it will take any action
permitted to be taken by a holder of certificates for Preferred Securities
(including the presentation of Preferred Securities for exchange as described
below and the conversion of Preferred Securities) only at the direction of one
or more participants to whose account with DTC interests in the Global
Certificates are credited and only in respect of such portion of the aggregate
liquidation preference of the Preferred Securities as to which such participant
or participants has or have given such direction. However, if there is a
Declaration Event of Default, DTC reserves the right to exchange the Global
Certificates for legended Preferred Securities in certificated form, and to
distribute such Preferred Securities to its participants.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
in order to facilitate transfers of beneficial ownership interests in the Global
Certificates among participants of DTC, Euroclear and CEDEL, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Issuer, the Company, the
Initial Purchasers, the Property Trustee nor any of their respective agents has
any responsibility for the performance by DTC, Euroclear and CEDEL, their
participants or indirect
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participants of their respective obligations under the rules and procedures
governing their operations, including maintaining, supervising or reviewing the
records relating to, or payments made on account of, beneficial ownership
interests in Global Certificates.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of the Preferred Securities are being
redeemed, DTC will determine the amount of interest of each Participant to be
redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities. Under its usual procedures, DTC would mail an
omnibus proxy (the "Omnibus Proxy") to the Property Trustee 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 such Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants, and by participants and indirect
participants to beneficial owners of the Preferred Securities and the voting
rights of participants, indirect participants and beneficial owners of Preferred
Securities will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Property Trustee and the Company. In the event that a successor securities
depositary is not obtained, definitive Preferred Securities certificates
representing such Preferred Securities are required to be printed and delivered.
The Company, at its option, may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary). After a Debenture
Event of Default, the holders of a majority in liquidation preference of
Preferred Securities may determine to discontinue the system of book-entry
transfers through DTC. In any such event, definitive certificates for the
Preferred Securities will be printed and delivered.
EXCHANGES OF BOOK-ENTRY CERTIFICATES FOR CERTIFICATED PREFERRED SECURITIES
A beneficial interest in a Global Certificate may not be exchanged for
certificated Preferred Securities unless (i) DTC (x) notifies the Issuer and the
Company that it is unwilling or unable to continue as depositary for the Global
Certificate or (y) has ceased to be a clearing agency registered under the
Exchange Act and in either case the Issuer and the Company thereupon fails to
appoint a successor depositary, (ii) the Issuer and the Company, at their
option, notify the Property Trustee in writing that they elect to cause the
issuance of the Preferred Securities in certificated form or (iii) there shall
have occurred and be continuing a Declaration Event of Default or any event
which after notice or lapse of time or both would be a Declaration Event of
Default. In all cases, certificated Preferred Securities delivered in exchange
for any Global Certificate or beneficial interests therein will be registered in
the names, and issued in any approved denominations, requested by or on behalf
of DTC (in accordance with its customary procedures). Any exchange of a
beneficial interest in the Regulation S Global Certificate for a beneficial
interest in the Restricted Global Certificate or vice versa will be effected in
DTC by means of an instruction originated by the Property Trustee through the
DTC Deposit/Withdraw at Custodian ("DWAC") system. Any certificated Preferred
Securities issued in exchange for an interest in a Global Certificate will bear
any legend restricting transfers that is borne by such Global Certificate. Any
such exchange will be effected through the DWAC system and an appropriate
adjustment will be made in the records of the security registrar to reflect a
decrease in the liquidation preference or number of securities of the relevant
Global Certificate.
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TRANSFER AGENT, REGISTRAR AND PAYING, CONVERSION AND EXCHANGE AGENT
The Property Trustee acts as transfer agent, registrar and paying,
conversion and exchange agent for the Preferred Securities.
Registration of transfers or exchanges of Preferred Securities will be
effected without charge by or on behalf of the Issuer, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Issuer will not be required to register or cause to be
registered the transfer of the Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Company and certain of its subsidiaries maintain deposit accounts and
conduct other banking and corporate securities transactions and relationships
with the Property Trustee in the ordinary course of their businesses. The
Property Trustee, other than during the occurrence and continuance of a
Declaration Event of Default, undertakes to perform only such duties as are
specifically set forth in the Trust Agreement and, after such Declaration Event
of Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no
Declaration Event of Default has occurred and is continuing and the Property
Trustee is required to decide between alternative causes of action, construe
ambiguous provisions in the Trust Agreement or is unsure of the application of
any provision of the Trust Agreement, and the matter is not one on which holders
of Preferred Securities are entitled under the Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by the Company and, if
not so directed, shall take such action as it deems advisable and in the best
interests of the holders of the Preferred Securities and the Common Securities
and will have no liability except for its own bad faith, negligence or willful
misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuer in such a way that the Issuer will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States Federal income tax purposes and so that the Debentures will be
treated as indebtedness of the Company for United States Federal income tax
purposes. In this connection, the Company and the Administrative Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Issuer or the Trust Agreement, that the Company and
the Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
The Issuer may not borrow money or issue debt or mortgage or pledge any of
its assets.
GOVERNING LAW
The Trust Agreement and the Preferred Securities are governed by, and
construed in accordance with, the laws of the State of Delaware.
REGISTRATION RIGHTS
In connection with the Original Offering, the Company and the Issuer
entered into a registration rights agreement with the Initial Purchasers, dated
December 12, 1997 (the "Registration Rights Agreement") pursuant to which the
Issuer and the Company agreed, at the expense of the Company, for the benefit of
the holders of the Preferred Securities, the Debentures issuable in
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respect of the Preferred Securities, the Company Common Stock issuable upon
conversion of the Preferred Securities and the Debentures, and the Guarantee
(together, the "Registrable Securities") to file with the Commission on or prior
to the date 90 days after the Original Offering Date a shelf registration
statement (the "Shelf Registration Statement") on such form as the Company deems
appropriate covering resales by holders of the Registrable Securities. The
Company has agreed to use its best efforts (i) to cause the Shelf Registration
Statement to be declared effective as promptly as practicable and in no event
later than 180 days after the Original Offering Date and (ii) to keep effective
the Shelf Registration Statement until two years after the latest date of
original issuance of Preferred Securities (or such earlier date as the holders
(other than "affiliates" of the Company) of Registrable Securities are able to
sell all Registrable Securities immediately without restriction, whether
pursuant to Rule 144(k) under the Securities Act or any successor rule thereto
or otherwise) (such period, the "Effectiveness Period"). The Issuer and the
Company are permitted to suspend the use of the prospectus (which is a part of
the Shelf Registration Statement) in connection with sales of Registrable
Securities by holders during certain periods of time under certain circumstances
relating to pending corporate developments relating to the Company and public
filings with the Commission and similar events. A holder who wishes to sell
Registrable Securities pursuant to the Shelf Registration Statement is required
to provide certain advance notification of such proposed sales to the Company,
and generally is required to be named as a selling holder in the related
prospectus, deliver a prospectus to purchasers and be bound by those provisions
of the Registration Rights Agreement that are applicable to such holder
(including indemnification provisions). Pursuant to the Registration Rights
Agreement, the Issuer and the Company agreed to provide to each registered
holder copies of such prospectus, notify each registered holder when the Shelf
Registration Statement has become effective, and take certain other actions as
are required to permit unrestricted sales of the Registrable Securities.
In the Registration Rights Agreement, the Issuer and the Company agreed to
indemnify the holders of Registrable Securities against certain liabilities,
including liabilities under the Securities Act, subject to certain customary
limitations, and each holder of Registrable Securities included in the Shelf
Registration Statement will be obligated to indemnify the Issuer, its directors,
trustees, agents and officers who sign any Shelf Registration Statement and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, against any liability
with respect to information furnished by such holder in writing to the Issuer or
the Company (including the information in a Selling Security Holder's
Questionnaire) expressly for use in the Shelf Registration Statement.
If (i) on or prior to the date 90 days after the Original Offering Date a
Shelf Registration Statement has not been filed with the Commission or (ii) on
or prior to the date 180 days after the Original Offering Date such Shelf
Registration Statement has not been declared effective (each such event, a
"Registration Default"), additional interest ("Liquidated Damages") will accrue
on the Debentures, and, accordingly, additional distributions will accrue on the
Preferred Securities, from and including the day following such Registration
Default until such date as the Shelf Registration Statement is filed or declared
effective, as the case may be. Liquidated Damages will be paid quarterly in
arrears (subject to the Company's right to defer the payment of Liquidated
Damages during any Extension Period), with the first quarterly payment due on
the first interest or distribution payment date, as applicable, following the
date on which such Liquidated Damages begin to accrue, and will accrue at a rate
per annum equal to an additional one-quarter of one percent (0.25%) of the
principal amount or liquidation preference, as applicable, to and including the
90th day following such Registration Default and one-half of one percent (0.50%)
thereof from and after the 91st day following such Registration Default. In the
event that the Shelf Registration Statement ceases to be effective during the
Effectiveness Period for more than 90 days, whether or not consecutive, during
any 12-month period, then the interest rate borne by the Debentures and the
distribution rate borne by the Preferred Securities will each increase by an
additional one-half of one percent (0.50%) per annum from the 91st day of the
applicable 12-month period such Shelf Registration Statement
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ceases to be effective until such time as the earlier to occur of the Shelf
Registration Statement again becoming effective and the end of the Effectiveness
Period.
This summary of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all the provisions of the Registration Rights Agreement, a copy
of the form of which is incorporated by reference herein as an exhibit to the
Registration Statement.
This Prospectus is part of the Shelf Registration Statement, which was
initially filed by the Company and the Issuer on March 3, 1998, and was declared
effective at the date set forth on the cover page of this Prospectus, in
accordance with the Registration Rights Agreement.
DESCRIPTION OF THE GUARANTEE
The Guarantee was executed and delivered by the Company concurrently with
the issuance by the Issuer of the Preferred Securities for the benefit of the
holders from time to time of such Preferred Securities. The Chase Manhattan Bank
is the Guarantee Trustee under the Guarantee. This summary of certain provisions
of the Guarantee does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of the
Guarantee (a copy of which is available at the corporate trust offices of the
Guarantee Trustee in New York, New York). The Guarantee Trustee holds the
Guarantee for the benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company
irrevocably agreed to pay in full on a subordinated basis, the Guarantee
Payments (as defined below) to the holders of the Preferred Securities, as and
when due, regardless of any defense, right of set off or counterclaim that the
Issuer may have or assert other than the defense of payment. The following
payments with respect to the Preferred Securities, to the extent not paid by or
on behalf of the Issuer (the "Guarantee Payments"), are subject to the
Guarantee: (i) any accumulated and unpaid Distributions required to be paid on
the Preferred Securities, to the extent that the Issuer has funds on hand
available therefor at such time, (ii) the redemption price with respect to any
Preferred Securities called for redemption to the extent that the Issuer has
funds on hand available therefor at such time, or (iii) upon a voluntary or
involuntary dissolution of the Issuer (unless the Debentures are distributed to
holders of the Preferred Securities), the lesser of (a) the Liquidation
Distribution, to the extent that the Issuer has funds on hand available therefor
at such time, and (b) the amount of assets of the Issuer remaining available for
distribution to holders of Preferred Securities. 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 Preferred Securities or by causing
the Issuer to pay such amounts to such holders.
The Guarantee is an irrevocable guarantee on a subordinated basis of the
Issuer's obligations under the Preferred Securities, but it applies only to the
extent that the Issuer has funds sufficient to make such payments, and is not a
guarantee of collection. If the Company does not make interest payments on the
Debentures held by the Issuer, the Issuer will not be able to pay Distributions
on the Preferred Securities and will not have funds legally available therefor.
The Company has, through the Guarantee, the Trust Agreement, the Debentures
and the Indenture, taken together, fully, irrevocably and unconditionally
guaranteed all of the Issuer's obligations under the Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Preferred Securities. See "Relationship Among the Preferred Securities, the
Debentures and the Guarantee".
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Issuer with respect to the Common Securities to
the same extent as the
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Guarantee, except that upon the occurrence and during the continuation of a
Declaration Event of Default, holders of Preferred Securities shall have
priority over holders of Common Securities with respect to distributions and
payments on liquidation, redemption or otherwise.
STATUS OF THE GUARANTEE
The Guarantee constitutes an unsecured obligation of the Company and ranks
subordinate and junior in right of payment to all other liabilities of the
Company and ranks pari passu with the most senior preferred stock, if any, now
or hereafter issued by the Company and with any guarantee now or hereafter
entered into by the Company in respect of any preferred or preference stock of
any affiliate of the Company.
The Guarantee constitutes a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against any other person or entity). The Guarantee is held
for the benefit of the holders of the Preferred Securities. The Guarantee will
not be discharged except by payment of the Guarantee Payments in full to the
extent not paid by the Issuer or upon distribution of the Debentures to the
holders of the Preferred Securities. The Guarantee does not place a limitation
on the amount of additional indebtedness that may be incurred by the Company or
any of its subsidiaries.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority in aggregate liquidation preference of such
outstanding Preferred Securities. The manner of obtaining any such approval will
be as set forth under "Description of the Preferred Securities-Voting Rights;
Amendment of the Trust Agreement". All guarantees and agreements contained in
the Guarantee bind the successors, assigns, receivers, trustees and
representatives of the Company and inure to the benefit of the holders of the
Preferred Securities then outstanding.
CERTAIN COVENANTS OF THE COMPANY
The Company covenanted in the Guarantee that if and so long as (i) the
Issuer is the holder of all the Debentures, (ii) a Tax Event in respect of the
Issuer has occurred and is continuing and (iii) the Company has elected, and has
not revoked such election, to pay Additional Sums in respect of the Preferred
Securities and Common Securities, the Company will pay to the Issuer such
Additional Sums. The Company also covenanted that it will not, and it will not
cause any of its subsidiaries to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock or (ii) make any payment of
principal, interest or premium, if any, on or repay or repurchase or redeem any
debt securities (including guarantees of indebtedness for money borrowed) of the
Company that rank pari passu with or junior to the Debentures (other than (a)
any dividend, redemption, liquidation, interest, principal or guarantee payment
by the Company where the payment is made by way of securities (including capital
stock) that rank pari passu with or junior to the securities on which such
dividend, redemption, interest, principal or guarantee payment is being made,
(b) redemptions or purchases of any Rights pursuant to the Company's Rights
Agreement, or any successor to such Rights Agreement and the declaration of a
dividend of such Rights or the issuance of preferred stock under such plans in
the future, (c) payments under the Guarantee, (d) purchases of Company Common
Stock related to the issuance of Company Common Stock under any of the Company's
benefit plans for its directors, officers or employees, (e) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one series or class of the Company's capital stock for another series or class
of the Company's capital stock and (f) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged)
if at
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such time (i) there shall have occurred any event of which the Company has
actual knowledge that (a) with the giving of notice or the lapse of time, or
both, would constitute a Debenture Event of Default and (b) in respect of which
the Company shall not have taken reasonable steps to cure, (ii) the Company
shall be in default with respect to its payment of any obligations under the
Guarantee or (iii) the Company shall have given notice of its selection of an
Extension Period as provided in the Indenture with respect to the Debentures and
shall not have rescinded such notice, or such Extension Period, or any extension
thereof, shall be continuing. The Company also covenanted (i) for so long as
Preferred Securities are outstanding, not to convert Debentures except pursuant
to a notice of conversion delivered to the Conversion Agent by a holder of
Preferred Securities, (ii) to maintain directly or indirectly 100% ownership of
the Common Securities, provided that certain successors which are permitted
pursuant to the Indenture may succeed to the Company's ownership of the Common
Securities, (iii) not to voluntarily dissolve the Issuer, except (a) in
connection with a distribution of the Debentures to the holders of the Preferred
Securities in dissolution of the Issuer or (b) in connection with certain
mergers, consolidations or amalgamations permitted by the Trust Agreement, (iv)
to maintain the reservation for issuance of the number of shares of Company
Common Stock that would be required from time to time upon the conversion of all
the Debentures then outstanding, (v) to use its reasonable efforts, consistent
with the terms and provisions of the Trust Agreement, to cause the Issuer to
remain classified as a grantor trust and not as an association taxable as a
corporation for United States Federal income tax purposes and (vi) to deliver
shares of Company Common Stock upon an election by the holders of the Preferred
Securities to convert such Preferred Securities into Company Common Stock.
As part of the Guarantee, the Company agreed that it will honor all
obligations described therein relating to the conversion or exchange of the
Preferred Securities into or for Company Common Stock or Debentures.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation preference of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of the
Preferred Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Issuer, the Guarantee Trustee or any other person
or entity. In addition, any record holder of Preferred Securities shall have the
right, which is absolute and unconditional, to proceed directly against the
Company to obtain Guarantee Payments, without first waiting to determine if the
Guarantee Trustee has enforced the Guarantee or instituting a legal proceeding
against the Issuer, the Guarantee Trustee or any other person or entity. The
Company has waived any right or remedy to require that any action be brought
just against the Issuer, or any other person or entity, before proceeding
directly against the Company.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the
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request of any holder of Preferred Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the redemption price of the Preferred Securities, upon full
payment of the amounts payable upon dissolution of the Issuer, upon the
distribution, if any, of Company Common Stock to the holders of Preferred
Securities in respect of the conversion of all such holders' Preferred
Securities into Company Common Stock or upon distribution of Debentures to the
holders of the Preferred Securities in exchange for all of the Preferred
Securities. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of Preferred Securities must
restore payment of any sums paid under such Preferred Securities or the
Guarantee.
GOVERNING LAW
The Guarantee is governed by and construed in accordance with the laws of
the State of New York.
DESCRIPTION OF THE DEBENTURES
Set forth below is a description of the specific terms of the Debentures in
which the Issuer invested the proceeds from the issuance and sale of the Trust
Securities. The Debentures were issued under a Junior Convertible Subordinated
Indenture (the "Indenture") between the Company and The Chase Manhattan Bank, as
trustee (the "Debenture Trustee"), copies of which are available for inspection
at the corporate trust office of the Debenture Trustee in New York, New York.
This summary of certain terms and provisions of the Debentures and the Indenture
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the Indenture. Whenever particular defined terms of
the Indenture are referred to herein, such defined terms are incorporated herein
by reference.
GENERAL
The Debentures are unsecured and rank junior and subordinate in right of
payment to all Senior Debt of the Company. The Debentures are limited in
aggregate principal amount to $515,465,000, such amount being the sum of the
aggregate stated liquidation preference of the Preferred Securities and capital
contributed by the Company in exchange for the Common Securities. The Indenture
does not limit the incurrence or issuance of other secured or unsecured debt of
the Company, whether under the Indenture or any existing or other indenture that
the Company may enter into in the future or otherwise. See "--Subordination".
Concurrently with the issuance of the Preferred Securities, the Issuer
invested the proceeds thereof and the consideration paid by the Company for the
Common Securities in the Debentures. The Debentures are in the principal amount
equal to the aggregate stated liquidation preference of the Preferred Securities
plus the Company's concurrent investment in the Common Securities.
The Debentures are not subject to any sinking fund provision. The entire
principal amount of the Debentures will mature, and become due and payable,
together with any accrued and unpaid interest thereon, on December 1, 2027.
INTEREST
The Debentures bear interest at the annual rate of 5 1/4% per annum,
payable quarterly in arrears on March 1, June 1, September 1 and December 1 of
each year, commencing on March 1, 1998 (each, an "Interest Payment Date"), to
the person in whose name each Debenture is registered at the close of business
on the Business Day next preceding such Interest Payment Date, subject to
certain exceptions. It is anticipated that, until the dissolution, if any, of
the Issuer, each Debenture will be held in the name of the Property Trustee in
trust for the benefit of the holders of the Preferred Securities and the Common
Securities. The amount of interest payable for any period will be
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computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on the 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). Accrued interest that is not paid on the
applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at the stated rate per annum,
compounded quarterly. The term "interest" as used herein shall include quarterly
interest payments, interest on quarterly interest payments not paid on the
applicable Interest Payment Date and Additional Sums, as applicable.
GLOBAL SECURITIES
If distributed to holders of the Preferred Securities in connection with
the involuntary or voluntary dissolution of the Issuer, including a dissolution
following the occurrence of a Special Event, the Debentures will be issued in
the same form as the Preferred Securities which such Debentures replace. Any
Global Certificate will be replaced by one or more global certificates (each a
"Global Security") registered in the name of the depository or its nominee.
Except under the limited circumstances described below, the Debentures
represented by the Global Security will not be exchangeable for, and will not
otherwise be issuable as, Debentures in definitive form. The Global Securities
described above may not be transferred except by the depository to a nominee of
the depository or by a nominee of the depository to the depository or another
nominee of the depository or to a successor depository or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such 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 Debentures in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no Global Security representing Debentures shall be
exchangeable, except for another Global Security of like denomination and tenor
to be registered in the name of the depository or its nominee or to a successor
depository or its nominee. Accordingly, each beneficial owner of Preferred
Securities must rely on the procedures of DTC 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 Debentures are distributed to holders of Preferred Securities in
liquidation of such holders' interests in the Issuer and a Global Security is
issued, DTC will act as securities depository for the Debentures represented by
such Global Security. For a description of DTC and the specific terms of the
depository arrangements, see "Description of the Preferred Securities -- Certain
Book-Entry Procedures for Global Certificates". As of the date of this
Prospectus, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. The
Company may appoint a successor to DTC or any successor depository in the event
DTC or such depository is unable or unwilling to continue as a depository for
the Global Securities.
None of the Company, the Initial Purchasers, the Debenture Trustee, any
Paying Agent or the securities registrar has any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests of the Global Security representing such Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
A Global Security shall be exchangeable for Debentures registered in the
names of persons other than DTC or its nominee only if (i) DTC notifies the
Company that it is unwilling or unable to continue as a depositary for such
Global Debenture and no successor depositary shall have been appointed by the
Company within 90 days, (ii) if at any time DTC ceases to be a clearing agency
registered under the Exchange Act at a time when DTC is required to be so
registered to act as such
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depositary and no successor depository shall have been appointed by the Company
within 90 days, (iii) the Company in its sole discretion determines that such
Global Security shall be so exchangeable, or (iv) there shall have occurred and
be continuing an Event of Default with respect to such Global Security. Any
Global Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants with respect to ownership of beneficial
interests in such Global Security. In the event that Debentures are issued in
definitive form, such Debentures will be in denominations of $50 and integral
multiples thereof and may be transferred or exchanged at the offices described
in "--Payment and Paying Agents" below.
PAYMENT AND PAYING AGENTS
Payments on Debentures represented by a Global Security will be made to
DTC, as the depositary for the Debentures. In the event Debentures are issued in
definitive form, principal of and premium, if any, and any interest on
Debentures will be payable, the transfer of the Debentures will be registrable,
and the Debentures will be exchangeable for Debentures of other denominations of
a like aggregate principal amount at the corporate office of the Debenture
Trustee in the City of New York or at the office of such Paying Agent or Paying
Agents as the Company may designate, except that at the option of the Company
payment of any interest may be made (i) by check mailed to the address of the
Person entitled thereto as such address shall appear in the securities register
or (ii) by wire transfer to an account maintained by the Person entitled thereto
as specified in the securities register, provided that proper transfer
instructions have been received by the Regular Record Date. Payment of any
interest on Debentures will be made to the Person in whose name such Debentures
are registered at the close of business on the Regular Record Date for such
interest, except in the case of Defaulted Interest. The Regular Record Date for
the interest payable on any Interest Payment Date shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date. The
Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent.
Any monies deposited with the Debenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of and
premium, if any, or interest on any Debentures and remaining unclaimed for two
years after such principal and premium, if any, or interest has become due and
payable shall, at the request of the Company, be repaid to the Company and the
holder of such Debentures shall thereafter look, as a general unsecured
creditor, only to the Company for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Indenture has occurred and is
continuing, the Company has the right under the Indenture to defer the payment
of interest (including any Liquidated Damages) on the Debentures at any time or
from time to time for a period not exceeding 20 consecutive quarters with
respect to each Extension Period, provided that no Extension Period may extend
beyond the stated maturity of the Debentures. At the end of such Extension
Period, the Company must pay all interest then accrued and unpaid (together with
interest thereon at the stated annual rate, compounded quarterly, to the extent
permitted by applicable law). During an Extension Period, interest will continue
to accrue and holders of Debentures (or holders of Preferred Securities while
the Preferred Securities are outstanding) will be required to recognize interest
income for United States Federal income tax purposes. See "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount".
During any such Extension Period, the Company may not, and may not cause
any subsidiary to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Company's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees of indebtedness for money borrowed) of the Company that
rank pari passu
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<PAGE> 42
with or junior to the Debentures (other than (a) any dividend, redemption,
liquidation, interest, principal or guarantee payment by the Company where the
payment is made by way of securities (including capital stock) that rank pari
passu with or junior to the securities on which such dividend, redemption,
interest, principal or guarantee payment is being made, (b) redemptions or
purchases of any Rights pursuant to the Company's Rights Agreement, or any
successor to such Rights Agreement, and the declaration of a dividend of such
Rights or the issuance of preferred stock under such plans in the future, (c)
payments under the Guarantee, (d) purchases of Company Common Stock related to
the issuance of Company Common Stock under any of the Company's benefit plans
for its directors, officers or employees, (e) as a result of a reclassification
of the Company's capital stock or the exchange or conversion of one series or
class of the Company's capital stock for another series or class of the
Company's capital stock, and (f) the purchase of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged). Prior to
the termination of any such Extension Period, the Company may further extend the
interest payment period, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the stated maturity of the Debentures.
Upon the termination of any such Extension Period and the payment of all amounts
then due on any Interest Payment Date, the Company may elect to begin a new
Extension Period subject to the above requirements. No interest shall be due and
payable during an Extension Period, except at the end thereof. The Company shall
give the Property Trustee, the Administrative Trustees and the Debenture Trustee
notice of its election to begin any Extension Period at least one Business Day
prior to the earlier of (i) the record date for the date Distributions on the
Preferred Securities (or, if no Preferred Securities are outstanding, for the
date interest on the Debentures) would have been payable except for the election
to begin such Extension Period and (ii) the date the Property Trustee is (or, if
no Preferred Securities are outstanding, the Debenture Trustee is) required to
give notice to the NYSE or other applicable self- regulatory organization or to
holders of such Preferred Securities (or, if no Preferred Securities are
outstanding, to the holders of such Debentures) of such record date. The
Debenture Trustee and the Property Trustee shall give notice of the Company's
election to begin an Extension Period to the holders of the Debentures and the
Preferred Securities, respectively.
MANDATORY REDEMPTION
Upon repayment at maturity or as a result of acceleration upon the
occurrence of a Debenture Event of Default, the Company will redeem the
Debentures, in whole but not in part, at a redemption price equal to 100% of the
principal amount thereof, together with any accrued and unpaid interest thereon.
Any payment pursuant to this provision shall be made prior to 12:00 noon, New
York City time, on the date of such repayment or acceleration or at such other
time on such earlier date as the parties thereto shall agree. The Debentures are
not entitled to the benefit of any sinking fund or, except as set forth above or
as a result of acceleration, any other provision for mandatory prepayment.
OPTIONAL REDEMPTION
On and after December 1, 2001, and subject to the next succeeding sentence,
the Company will have the right, at any time and from time to time, to redeem
the Debentures, in whole or in part, upon notice given as provided below, during
the twelve month periods beginning on December 1 in each of the following years
and at the indicated redemption prices (expressed as a percentage of the
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<PAGE> 43
principal amount of the Debentures being redeemed), together with any accrued
but unpaid interest on the portion being redeemed.
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001............................ 103.150%
2002............................ 102.625%
2003............................ 102.100%
2004............................ 101.575%
</TABLE>
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2005............................ 101.050%
2006............................ 100.525%
2007 and thereafter............. 100.000%
</TABLE>
For so long as the Issuer is the holder of all the outstanding Debentures,
the proceeds of any such redemption will be used by the Issuer to redeem
Preferred Securities and Common Securities in accordance with their terms. The
Company may not redeem the Debentures in part unless all accrued and unpaid
interest has been paid in full on all outstanding Debentures. See "Description
of the Preferred Securities--Optional Redemption".
The Company also shall have the right to redeem the Debentures, at the
principal amount thereof plus accrued and unpaid interest, at any time after
December 1, 2001 if a Tax Event shall occur and be continuing as described in
"Description of the Preferred Securities--Special Event Exchange or Redemption".
REDEMPTION PROCEDURES
Notices of any redemption of the Debentures and the procedures for such
redemption shall be as provided with respect to the Preferred Securities under
"Description of the Preferred Securities--Redemption Procedures". Notice of any
redemption will be mailed at least 30 days but not more than 60 days before the
redemption date to each holder of Debentures to be redeemed at its registered
address. Unless the Company defaults in payment of the redemption price, on and
after the redemption date interest shall cease to accrue on such Debentures or
portions thereof called for redemption.
DISTRIBUTION OF DEBENTURES
At any time, the Company has the right to dissolve the Issuer and, after
satisfaction of the liabilities of creditors of the Issuer as provided by
applicable law, cause the Debentures to be distributed to the holders of the
Preferred Securities in dissolution of the Issuer. If distributed to holders of
Preferred Securities in liquidation, the Debentures will initially be issued in
the form of one or more global securities and DTC, or any successor depositary
for the Preferred Securities, will act as depositary for the Debentures. It is
anticipated that the depositary arrangements for the Debentures would be
substantially identical to those in effect for the Preferred Securities. There
can be no assurance as to the market price of any Debentures that may be
distributed to the holders of Preferred Securities. For a description of DTC and
the terms of the depositary matters, see "--Global Securities".
CONVERSION OF THE DEBENTURES
The Debentures are convertible at the option of the holders of the
Debentures into Company Common Stock, at any time prior to redemption or
maturity, initially at the rate of 0.9865 shares of Company Common Stock for
each $50 in principal amount of Debentures (equivalent to a conversion price of
$50.685 per share of Company Common Stock), subject to the conversion price
adjustments described under "Description of the Preferred Securities--Conversion
Rights". The Issuer has covenanted for so long as the Preferred Securities are
outstanding not to convert Debentures, except pursuant to a notice of conversion
delivered to the Conversion Agent by a holder of Preferred Securities. Upon
surrender of such Preferred Securities to the Conversion Agent for conversion,
the Issuer will distribute the commensurate principal amount of the Debentures
to the Conversion Agent on behalf of the holder of every Preferred Security so
converted, whereupon the Conversion Agent will convert such Debentures into
Company Common Stock on behalf of such holder. The Company's delivery to the
holders of the Debentures (through the Conversion Agent) of
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<PAGE> 44
the fixed number of shares of Company Common Stock into which the Debentures are
convertible (together with the cash payment, if any, in lieu of fractional
shares) will be deemed to satisfy the Company's obligation to pay the principal
amount of the Debentures, and the accrued and unpaid interest attributable to
the period from the last date to which interest has been paid or duly provided
for.
MODIFICATION OF INDENTURE
From time to time, the Company and the Debenture Trustee may, without the
consent of the holders of Debentures, amend, waive or supplement the Indenture
for specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies (provided that any such action does not materially
adversely affect the interest of the holders of the Debentures, or the holders
of the Preferred Securities so long as they remain outstanding) and qualifying,
or maintaining the qualification of, the Indenture under the Trust Indenture
Act. The Indenture contains provisions permitting the Company and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the outstanding Debentures, to modify the Indenture in a
manner affecting the rights of the holders of the Debentures; provided that no
such modification may, without the consent of the holder of each outstanding
Debenture so affected, (i) change the stated maturity of the Debentures, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon (other than deferrals of the payments of interest as
described under "--Option to Extend Interest Payment Period") or reduce the
premium payable upon the redemption thereof, or impair any right to institute
suit for the enforcement of any such payment, or adversely affect the
subordination provisions of the Indenture or any right to convert any Debentures
or (ii) reduce the percentage of principal amount of Debentures, the holders of
which are required to consent to any such modification of the Indenture,
provided that, so long as any of the Preferred Securities remain outstanding,
(a) no such modification may be made that adversely affects the holders of such
Preferred Securities in any material respect, and no termination of the
Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective, without the
prior consent of the holders of at least a majority in aggregate liquidation
preference of the Preferred Securities then outstanding unless and until the
principal of and any premium on the Debentures and all accrued and unpaid
interest thereon has been paid in full and (b) where a consent under the
Indenture would require the consent of each holder of Debentures, no such
consent will be given by the Property Trustee without the prior consent of each
holder of the Preferred Securities.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events that has occurred and is continuing constitutes a "Debenture Event of
Default" with respect to such Debentures:
(i) failure for 30 days to pay any interest on the Debentures, when
due (subject to the deferral of any due date in the case of an Extension
Period);
(ii) failure to pay any principal or premium, if any, on the
Debentures when due whether at maturity, upon redemption by declaration or
otherwise;
(iii) failure by the Company to deliver shares of Company Common Stock
upon an appropriate election by holders of Debentures to convert such
Debentures;
(iv) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to the Company from the Debenture Trustee or to the Debenture Trustee and
the Company from the holders of at least 25% in aggregate outstanding
principal amount of such Debentures; or
(v) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Debentures have the right to direct the time, method and place of conducting any
proceeding for any remedy available to
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<PAGE> 45
the Debenture Trustee or exercising any trust or power conferred on the
Debenture Trustee consistent with the Indenture. The Debenture Trustee or the
holders of not less than 25% in aggregate principal amount of the Debentures
then outstanding may declare the principal due and payable immediately upon a
Debenture Event of Default, and, should the Debenture Trustee or the holders of
the Debentures fail to make such declaration, the holders of at least 25% in
aggregate liquidation preference of the Preferred Securities then outstanding
shall have such right. The holders of a majority in aggregate outstanding
principal amount of the Debentures may annul and rescind such declaration if the
default (other than the non-payment of the principal of the Debentures which has
become due solely by such acceleration) has been cured or waived and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee
and, should the holders of the Debentures fail to annul and rescind such
declaration, the holders of a majority in aggregate liquidation preference of
the Preferred Securities then outstanding shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
Debentures affected thereby may, on behalf of the holders of all the Debentures,
waive any past default, except a default in the payment of principal or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee) or a default in respect of a covenant
or provision which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding Debenture and, should the holders of
the Debentures fail to annul such declaration and waive such default, the
holders of a majority in aggregate liquidation preference of the Preferred
Securities shall have such right. The Company is required to file annually with
the Debenture Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Indenture.
In case a Debenture Event of Default shall occur and be continuing as to
the Debentures, the Property Trustee will have the right to declare the
principal of and the interest on the Debentures and any other amounts payable
under the Indenture to be forthwith due and payable and to enforce its other
rights as a creditor with respect to the Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture 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 Debentures on the date such interest or principal is otherwise payable, a
holder of Preferred Securities may institute a Direct Action for payment after
the respective due date specified in the Debentures. The Company may not amend
the Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Preferred Securities.
Notwithstanding any payment made to such holder of Preferred Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of or interest on the Debentures held by the Issuer or the
Property Trustee, and the Company shall be subrogated to the rights of the
holder of such Preferred Securities with respect to payments on the Preferred
Securities to the extent of any payments made by the Company to such holder in
any Direct Action.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless (i) in case the Company
consolidates with or merges into another Person or conveys, transfers or leases
its properties and assets substantially as an entirety to any Person, the
successor Person is organized under the laws of the United States or any state
or the District of Columbia, and such successor Person expressly assumes the
Company's obligations on the Debentures and under the Indenture; (ii)
immediately after giving effect thereto, no Debenture Event of Default, and no
event which, after
44
<PAGE> 46
notice or lapse of time or both, would become a Debenture Event of Default,
shall have happened and be continuing; (iii) such transaction is permitted under
the Trust Agreement and the Guarantee and does not give rise to any breach or
violation of the Trust Agreement or the Guarantee; and (iv) certain other
conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Debentures protection in the event of a highly leveraged or other transaction
involving the Company that may adversely affect holders of the Debentures.
EXPENSES OF ISSUER
Pursuant to the Indenture, the Company will pay all of the costs, expenses
or liabilities of the Issuer, other than obligations of the Issuer to pay to the
holders of any Preferred Securities or Common Securities the amounts due such
holders pursuant to the terms of the Preferred Securities or Common Securities.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Debentures not
previously delivered to the Debenture Trustee for cancellation (i) have become
due and payable or (ii) will become due and payable at their stated maturity
within one year or are to be properly called for redemption within one year, and
the Company deposits or causes to be deposited with the Debenture Trustee trust
funds, in trust, for the purpose and in an amount in the currency or currencies
in which the Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Debentures not previously delivered to the Debenture Trustee
for cancellation, for the principal and premium, if any, and interest to the
date of the deposit or to the stated maturity, as the case may be, then the
Indenture will cease to be of further effect (except as to the Company's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and the
Company will be deemed to have satisfied and discharged the Indenture.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any Debentures
issued thereunder will be subordinate and junior in right of payment to all
Senior Debt (as defined below) of the Company whether now existing or
hereinafter incurred. Upon any payment or distribution of assets of the Company
to creditors upon any liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any bankruptcy,
insolvency, debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding of the Company, the holders of Senior Debt
will first be entitled to receive payment in full of principal of and premium,
if any, and interest, if any, on such Senior Debt before the Property Trustee,
on behalf of the holders of the Debentures, will be entitled to receive or
retain any payment in respect of the principal of and premium, if any, or
interest, if any, on the Debentures.
In the event of the acceleration of the maturity of any Debentures, the
holders of all Senior Debt outstanding at the time of such acceleration will
first be entitled to receive payment in full of all amounts due thereon
(including any amounts due upon acceleration) before the holders of Debentures
will be entitled to receive or retain any payment in respect of the principal of
or premium, if any, or interest, if any, on the Debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Debentures may be made if there shall have occurred and
be continuing a default in any payment with respect to Senior Debt, or an event
of default with respect to any Senior Debt resulting in the acceleration of the
maturity thereof, or if any judicial proceeding shall be pending with respect to
any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money
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<PAGE> 47
borrowed; (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses; (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person; (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (v) every
capital lease obligation of such Person; and (vi) every obligation of the type
referred to in clauses (i) through (v) of another Person and all dividends of
another person the payment of which, in either case, such Person has guaranteed
or for which such Person is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt of the
Company, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or be deemed to include:
(i) any Debt of the Company which, when incurred and without respect
to any election under Section 1111 (b) of the Bankruptcy Code, was without
recourse to the Company,
(ii) any Debt of the Company to any of its subsidiaries,
(iii) Debt to any employee of the Company,
(iv) any liability for taxes,
(v) Debt or other monetary obligations to trade creditors or assumed
by the Company or any of its subsidiaries in the ordinary course of
business in connection with the obtaining of goods, materials or services,
and
(vi) the Debentures.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by the Company.
GOVERNING LAW
The Indenture and the Debentures are governed by and construed in
accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee is under no obligation to exercise any of the powers
vested in it by the Indenture at the request of any holder of Debentures, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debenture 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 Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE DEBENTURES
AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of the Guarantee". Taken together, the Company's
obligations under the Debentures, the Indenture, the Trust Agreement and the
Guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of
46
<PAGE> 48
Distributions and other amounts due on the Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer's obligations under the Preferred
Securities. If and to the extent that the Company does not make payments on the
Debentures, the Issuer will not pay Distributions or other amounts due on the
Preferred Securities. The Guarantee does not cover payment of Distributions when
the Issuer does not have sufficient funds to pay such Distributions. In such
event, a holder of Preferred Securities may institute a Direct Action directly
against the Company to enforce payment of such Distributions to such holder
after the respective due dates. The obligations of the Company under the
Guarantee are subordinate and junior in right of payment to all other
liabilities of the Company and rank pari passu with the most senior preferred
stock, if any, now or hereafter issued by the Company and with any guarantee now
or hereafter entered into by the Company in respect of any preferred or
preference stock of any affiliate of the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
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 the Debentures is equal to the sum of the aggregate stated
liquidation preference of the Preferred Securities and Common Securities; (ii)
the interest rate and interest and other payment dates on the Debentures match
the Distribution rate and Distribution and other payment dates for the Preferred
Securities; (iii) the Company pays for all and any costs, expenses and
liabilities of the Issuer except the Issuer's obligations to holders of the
Preferred Securities under such Preferred Securities; and (iv) the Trust
Agreement further provides that the Issuer will not engage in any activity that
is not consistent with the limited purposes of the Issuer.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Issuer
or any other person or entity.
A default or event of default under any Senior Debt of the Company will not
constitute a default under the Indenture or a Debenture Event of Default.
However, in the event of payment defaults under, or acceleration of, Senior Debt
of the Company, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Debentures until such Senior Debt has
been paid in full or any payment default thereunder has been cured or waived.
Failure to make required payments on the Debentures would constitute a Debenture
Event of Default.
LIMITED PURPOSE OF ISSUER
The Preferred Securities evidence a beneficial interest in the Issuer, and
the Issuer exists for the sole purpose of issuing the Preferred Securities and
Common Securities and investing the proceeds thereof in the Debentures. A
principal difference between the rights of a holder of Preferred Securities and
a holder of Debentures is that a holder of Debentures is entitled to receive
from the Company the principal amount of and interest accrued on Debentures
held, while a holder of Preferred Securities is entitled to receive
Distributions from the Issuer (or from the Company under the applicable
Guarantee) if and to the extent the Issuer has funds available for the payment
of such Distributions.
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<PAGE> 49
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution of the Issuer involving the
liquidation of the Debentures, after satisfaction of the liabilities of
creditors of the Issuer as provided by applicable law, the holders of the
Preferred Securities will be entitled to receive, out of assets held by the
Issuer, the Liquidation Distribution in cash. See "Description of the Preferred
Securities--Liquidation Distribution upon Dissolution". Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Debentures, would be a subordinated creditor of the Company,
subordinated in right of payment to all Senior Debt, but entitled to receive
payment in full of principal and interest before any stockholders of the Company
receive payments or distributions. Since the Company is the guarantor under the
Guarantee and has agreed to pay for all costs, expenses and liabilities of the
Issuer (other than the Issuer's obligations to the holders of the Preferred
Securities), the positions of a holder of such Preferred Securities and a holder
of such Debentures relative to other creditors and to stockholders of the
Company in the event of liquidation or bankruptcy of the Company would be
substantially the same.
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
Under the Company's Restated Certificate of Incorporation, as amended (the
"Restated Certificate of Incorporation"), the Company is authorized to issue
400,000,000 shares of Company Common Stock, par value $1.00 per share, and
10,000,000 shares of preferred stock which is issuable in one or more series and
of which 9,990,000 shares have a par value of $1.00 per share and 10,000 shares
have no par value (collectively, "Company Preferred Stock"). As of December 31,
1997, 159,232,827 shares of Company Common Stock (excluding treasury shares)
were issued and outstanding and there were no shares of Company Preferred Stock
issued and outstanding. In addition, as of December 31, 1997, the Company had
9,865,000 shares of Company Common Stock reserved for issuance upon conversion
of the Preferred Securities and the Debentures and 8,485,115 shares of Company
Common Stock reserved for issuance under the Company's stock option plans,
leaving 222,417,058 authorized shares of Company Common Stock (including 21,907
shares of Company Common Stock held in the Company's treasury) available for
issuance. The number of authorized shares of Company Preferred Stock includes
500,000 authorized shares of Junior Participating Company Preferred Stock,
Series B (the "Series B Preferred Stock") issuable pursuant to the Rights
Agreement dated as of October 20, 1988 between the Company and First Chicago
Trust Company of New York (formerly known as Morgan Shareholders Services Trust
Company) (the "Rights Agreement"), none of which were outstanding as of December
31, 1997, leaving 9,500,000 authorized shares of Company Preferred Stock
available for issuance as of December 31, 1997. See "-- Stock Purchase Rights".
COMPANY COMMON STOCK
The holders of the Company Common Stock have one vote for each share held.
Subject to the prior rights of holders of any issued and outstanding Company
Preferred Stock that may be issued in the future, holders of the Company Common
Stock are entitled to receive such dividends as may be declared from time to
time by the Company's board of directors (the "Board of Directors") out of funds
legally available therefor. In the event of a liquidation (whether voluntary or
involuntary) or reduction in the Company's capital resulting in any distribution
of assets to stockholders, the holders of the Company Common Stock are entitled
to receive, pro rata according to the number of shares held by each, all of the
assets of the Company remaining for distribution after payment to creditors and
the holders of any issued and outstanding Company Preferred Stock of the full
preferential amounts to which they are entitled.
Holders of the Company Common Stock do not have preemptive rights to
subscribe for and purchase any new or additional issue of Company Common Stock
or securities convertible into Company Common Stock. Shares of the Company
Common Stock are not subject to redemption.
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<PAGE> 50
The outstanding shares of Company Common Stock are listed on the NYSE and
the CSE. The transfer agent and registrar of the shares of Company Common Stock
is First Chicago Trust Company of New York.
STOCK PURCHASE RIGHTS
Each outstanding share of Company Common Stock includes one purchase right
(individually a "Right" and collectively the "Rights") provided under the Rights
Agreement. Each Right entitles the holder, until the earlier of October 31, 1998
or the redemption of the Rights, to buy one four-hundredth of a share of Series
B Preferred Stock at a price of $25 per one four-hundredth of a share (as
adjusted to reflect stock splits since the issuance of the Rights). The Series B
Preferred Stock is nonredeemable and will have 100 votes per share. The Company
has reserved 500,000 shares of Series B Preferred Stock for issuance upon
exercise of such Rights. The Rights will be exercisable only if a person or
group acquires 20% or more of voting power of the Company or announces a tender
offer following which it would hold 30% or more of the Company's voting power.
In the event that any person becomes the beneficial owner of 30% or more of
the Company's voting power, the Rights (other than Rights held by the 30%
stockholder) would become exercisable for that number of shares of the Company
Common Stock having a market value of two times the exercise price of the Right.
Furthermore, if, following the acquisition by a person or group of 20% or more
of the Company's voting power, the Company were acquired in a merger or other
business combination or 50% or more of its assets were sold, or in the event of
certain types of self-dealing transactions by a 20% stockholder, each Right
(other than Rights held by the 20% stockholder) would become exercisable for
that number of shares of Company Common Stock (or securities of the surviving
company in a business combination) having a market value of two times the
exercise price of the Right.
The Company may redeem the Rights at one cent per Right prior to the
occurrence of an event that causes the Rights to become exercisable for Company
Common Stock. The Board of Directors may terminate the Company's right to redeem
the Rights under certain circumstances at any time after a group or person
acquires 20% or more of the Company's voting power.
One Right will be issued in respect of each share of Company Common Stock
issued before the earlier of October 31, 1998 or the redemption of the Rights.
As of the date of this Prospectus, the Rights are not exercisable, certificates
representing the Rights have not been issued and the Rights automatically trade
with the shares of Company Common Stock. The Rights will expire on October 31,
1998 unless earlier redeemed.
COMPANY PREFERRED STOCK
Under the Restated Certificate of Incorporation, shares of Company
Preferred Stock may be issued in the future in such series as may be designated
by the Board of Directors. In creating any such series, the Board of Directors
has the authority, without any further vote or action by the Company's
stockholders, to fix the dividend rights and rates, voting and conversion
rights, redemption provisions, liquidation preferences and other relative,
participating, optional or other special rights, qualifications, limitations or
restrictions of such series.
The only series of Company Preferred Stock currently authorized by the
Board of Directors for issuance is the Series B Preferred Stock issuable under
the Rights Agreement. See "--Stock Purchase Rights".
PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
As discussed above, the Company has adopted a Rights Agreement which has
the effect of providing stockholders with rights to purchase shares of Company
Common Stock (or securities of an acquiring company) at half of the market price
under certain circumstances involving a potential change in control of the
Company that has not been approved by the Board of Directors. In addition, the
Delaware General Corporate Law provides, among other things, that any beneficial
owner of more than 15% of the Company's voting stock is prohibited, without the
prior approval of the Board
49
<PAGE> 51
of Directors, from entering into any business combination with a company for
three years from the date such 15% ownership interest is acquired. Additionally,
the "fair price provisions" of the Restated Certificate of Incorporation require
that certain proposed business combinations between the Company and an
"interested party" (a beneficial owner of 5% or more of the voting shares of the
Company) must be approved by the holders of 75% of the voting shares, unless
certain fair price and procedural requirements are met or the business
combination is approved by the directors of the Company who are not affiliated
with the interested party. A vote of the holders of 75% of the Company's
outstanding voting stock is required to amend the fair price provisions of the
Restated Certificate of Incorporation.
The Restated Certificate of Incorporation and the Company's by-laws (the
"By-Laws") contain certain other provisions which may be viewed as having an
anti-takeover effect. The Restated Certificate of Incorporation classifies the
Board of Directors into three classes and provides that vacancies on the Board
of Directors are to be filled by a majority vote of directors and that directors
so chosen shall hold office until the end of the full term of the class in which
the vacancy occurred. A vote of the holders of 75% of the Company's outstanding
voting stock is required to amend these provisions. Under the Delaware General
Corporation Law, directors of the Company may only be removed for cause.
The Company is not required to seek stockholder approval prior to
designating any future series of Company Preferred Stock. Such Company Preferred
Stock could be issued by the Board of Directors in one or more transactions with
terms which might make the acquisition of a controlling interest in the Company
more difficult or costly. However, the Board of Directors has a policy of
seeking stockholder approval prior to designating any future series of Company
Preferred Stock with a vote or convertible into stock having a vote in excess of
13% of the vote represented by all voting stock immediately subsequent to such
issuance, except for the purpose of (i) raising capital in the ordinary course
of business or (ii) making acquisitions, the primary purpose of which is not to
effect a change of voting power.
The Restated Certificate of Incorporation and the By-Laws also contain
provisions that may reduce surprise and disruptive tactics at stockholders'
meetings. The Restated Certificate of Incorporation provides that no action may
be taken by stockholders except at an annual meeting or special meeting, and the
By-Laws do not permit stockholders to directly call a special meeting of
stockholders. A stockholder must give written notice to the Company of an
intention to nominate a director for election at an annual meeting 90 days prior
to the anniversary date of the immediately preceding annual meeting. Each of
these provisions tends to make a change of control of the Board of Directors
more difficult and time consuming.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Following is a summary of certain of the material United States Federal
income tax consequences of the purchase, ownership, disposition and conversion
of the Preferred Securities. Unless otherwise stated, this summary deals only
with Preferred Securities held as capital assets. This summary does not deal
with special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, foreign taxpayers (except to the
extent discussed under the heading "-- United States Alien Holders") or persons
that hold the Preferred Securities as a position in a "straddle", as part of a
"synthetic security" or "hedge", as part of a "conversion transaction" or other
integrated investment or as other than a capital asset. This summary also does
not address the tax consequences to persons that have a functional currency
other than the United States Dollar. Further, it does not include any
description of any alternative minimum tax consequences or the tax laws of any
state or local government or of any foreign government that may be applicable to
the Preferred Securities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change, possibly on a retroactive basis.
50
<PAGE> 52
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, FOREIGN OR OTHER TAX LAWS AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
CLASSIFICATION OF THE DEBENTURES
The Company has taken the position that the Debentures will be classified
for United States Federal income tax purposes as indebtedness of the Company
under current law and, by acceptance of Preferred Securities, each holder
covenants to treat the Debentures as indebtedness and the Preferred Securities
as evidence of an indirect beneficial ownership interest in the Debentures. No
assurance can be given, however, that such position of the Company will not be
challenged by the Internal Revenue Service or, if challenged, that such a
challenge will not be successful. The remainder of this discussion assumes that
the Debentures will be classified as indebtedness of the Company for United
States Federal income tax purposes.
CLASSIFICATION OF THE ISSUER
In the opinion of Schiff Hardin & Waite, special United States tax counsel
to the Issuer and the Company, the Issuer will not be classified as an
association taxable as a corporation for United States Federal income tax
purposes. Accordingly, for United States Federal income tax purposes, each
holder of Preferred Securities generally will be considered the owner of an
undivided interest in the Debentures, and each holder will be required to
include in its gross income any interest with respect to its allocable share of
those Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the Indenture, the Company has the option to defer the payment of
interest on the Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each Extension Period,
provided that no Extension Period may extend beyond the stated maturity of the
Debentures. The Company's option to extend the interest period will cause the
Debentures to be subject to the OID rules for United States Federal income tax
purposes. Accordingly, regardless of a holder's regular method of accounting, a
holder will recognize interest income (in the form of OID) on a daily basis
under a constant yield method over the term of the Debentures (including during
any Extension Period), regardless of the receipt of cash with respect to the
period to which such income is attributable and regardless of whether the
Company exercises its option to extend any interest payment period. The amount
of OID that will be recognized in any quarter will approximately equal the
amount of income that accrues on the Debentures in that quarter at the stated
interest rate.
As a result, holders will include interest (in the form of OID) in gross
income in advance of the receipt of cash, and any holders who dispose of
Preferred Securities or convert Preferred Securities into Company Common Stock
prior to the record date for the payment of distributions will include interest
in gross income but will not receive any cash related thereto from the Issuer.
Because income on the Debentures will constitute interest, corporate
holders will not be entitled to a dividends-received deduction with respect to
any income recognized with respect to the Debentures.
REDEMPTION OF PREFERRED SECURITIES FOR DEBENTURES OR CASH UPON DISSOLUTION OF
THE ISSUER
Under certain circumstances, the Debentures may be distributed to holders
in exchange for the Preferred Securities. Under current law, such a distribution
to holders, for United States Federal income tax purposes, would be treated as a
nontaxable event to each holder, and each holder would receive an aggregate tax
basis in the Debentures distributed equal to such holder's aggregate tax basis
in its Preferred Securities exchanged therefor. A holder's holding period in the
Debentures so received would include the period during which the Preferred
Securities were held by such holder. If, however, the exchange is caused by a
Tax Event that has occurred and is continuing, which results
51
<PAGE> 53
in the Issuer being treated as an association taxable as a corporation, the
distribution would likely constitute a taxable event to the Issuer and holders
of the Preferred Securities.
Under certain circumstances described herein (see "Description of the
Preferred Securities--Special Event Exchange or Redemption"), the Debentures may
be redeemed for cash and the proceeds of such redemption distributed to holders
in redemption of their Preferred Securities. Under current law, such a
redemption would, for United States Federal income tax purposes, constitute a
taxable disposition of the redeemed Preferred Securities, and a holder would
recognize gain or loss in the same manner as if it sold such redeemed Preferred
Securities for cash. See "--Sales of Preferred Securities".
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the Preferred
Securities and the holder's adjusted tax basis in such Preferred Securities. The
tax basis of a Preferred Security will be increased by the amount of any
interest (in the form of OID) that is included in income, and will be decreased
by the amount of any payment made by the Company on the Debentures. In general,
such gain or loss will be a capital gain or loss and will be a long-term capital
gain or loss if the Preferred Securities have been held for more than one year
at the time of sale. Long-term capital gain of an individual U.S. holder is
subject to a maximum United States Federal income tax rate of 28% in respect of
capital assets held for more than one year. The maximum tax rate is reduced to
20% for capital assets held for more than 18 months. Capital gain on the
disposition of assets held for not more than one year is taxed at the rates
applicable for ordinary income (i.e., up to 39.6%).
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Debentures. A holder who disposes of its Preferred Securities between record
dates for payments of distributions thereon will be required to include in
income as ordinary income any accrued but unpaid interest (in the form of OID)
on the Debentures to the date of disposition and to add such amount to its
adjusted tax basis in its pro rata share of the underlying Debentures deemed
disposed of. To the extent the selling price is less than the holder's adjusted
tax basis, such holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States Federal income tax purposes.
CONVERSION OF PREFERRED SECURITIES INTO COMPANY COMMON STOCK
A holder of Preferred Securities generally will not recognize income, gain
or loss upon the conversion of the Preferred Securities into Company Common
Stock through the Conversion Agent. A holder of Preferred Securities will,
however, recognize gain upon the receipt of cash in lieu of a fractional share
of Company Common Stock generally equal to the amount of cash received less such
holder's tax basis in such fractional share. Such holder's tax basis in Company
Common Stock received upon conversion should generally be equal to such holder's
tax basis in the Preferred Securities delivered to the Conversion Agent for
exchange (which will include any accrued but unpaid OID) less the basis
allocated to any fractional share for which cash is received, and such holder's
holding period in the Company Common Stock received upon conversion should
generally begin on the date such holder acquired the Preferred Securities that
are subsequently delivered to the Conversion Agent for exchange.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Preferred Securities as having received a constructive distribution
from the Company in the event the conversion ratio of the Debentures were
adjusted if (i) as a result of such adjustment, the proportionate interest
(measured by the quantum of Company Common Stock into or for which the
Debentures are convertible or exchangeable) of the holders of the Preferred
Securities in the assets or earnings and profits of the Company were increased
and (ii) the adjustment was not made
52
<PAGE> 54
pursuant to a bona fide, reasonable antidilution formula. An adjustment in the
conversion ratio would not be considered made pursuant to such a formula if the
adjustment was made to compensate for certain taxable distributions with respect
to the Company Common Stock. Thus, under certain circumstances, a reduction in
the conversion price for the holders may result in deemed dividend income to
holders to the extent of the current or accumulated earnings and profits of the
Company. Holders of the Preferred Securities would be required to include their
allocable share of such deemed dividend income in gross income but would not
receive any cash related thereto.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership, or a foreign estate or trust.
Under present United States Federal income tax law:
(a) payments by the Issuer 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 withholding tax; provided, that (i)
the beneficial owner of the Preferred Security does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (ii) the beneficial owner
of the Preferred Security is not a controlled foreign corporation that is
related to the Company through stock ownership, and (iii) either (A) the
beneficial owner of the Preferred Security certifies its status as a United
States Alien Holder to the Issuer or its agent, under penalties of perjury,
and provides its name and address or (B) (x) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Preferred Security in such capacity, certifies
to the Issuer or its agent, under penalties of perjury, that such statement
has been received from the beneficial owner by it or by a Financial
Institution holding such security for the beneficial owner and furnishes
the Issuer or its agent with a copy thereof; or (y) with respect to
payments after December 31, 1998, a "qualified intermediary" (which
includes certain foreign financial institutions, foreign clearing
organizations or foreign branches of United States financial institutions
or clearing organizations which have entered into withholding agreements
with the Internal Revenue Service and have received appropriate
certification from the beneficial owner) provides the Issuer or any of its
paying agents with an intermediary withholding certificate;
(b) dividends paid with respect to Company Common Stock to a United
States Alien Holder generally will be subject to withholding of United
States Federal income tax at a 30% rate (or such lower rate as may be
specified by an applicable income tax treaty), unless the dividend (i) is
effectively connected with the conduct of a trade or business of the United
States Alien Holder within the United States and certain certification
requirements are satisfied, or (ii) if an income tax treaty applies, is
attributable to a United States permanent establishment of the United
States Alien Holder;
(c) except to the extent that an applicable treaty otherwise provides,
a United States Alien Holder generally will be taxed in the same manner as
other holders with respect to interest (in the form of OID) or dividends if
the income is effectively connected with a United States trade or business
of the United States Alien Holder (effectively connected interest (in the
form of OID) or dividends received by a corporate United States Alien
Holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty);
(d) a United States Alien Holder of a Preferred Security or Company
Common Stock generally will not be subject to United States Federal income
or withholding tax on any gain (other than that attributable to accrued but
unpaid interest (in the form of OID), which is taxable in the manner
described above) realized upon the sale or other disposition of a Preferred
Security or Company Common Stock (including the receipt of cash in lieu of
53
<PAGE> 55
fractional shares upon conversion of Preferred Securities into shares of
Company Common Stock), unless (i)(A) the gain is effectively connected with
the conduct of a trade or business of the United States Alien Holder in the
United States or (B) if a tax treaty applies, the gain is attributable to a
United States permanent establishment of the United States Alien Holder;
(ii) in the case of a United States Alien Holder who is an individual and
holds the Preferred Securities or Company Common Stock as a capital asset,
such holder is present in the United States for 183 or more days in the
taxable year of the disposition and certain other conditions are met; (iii)
the United States Alien Holder is subject to tax pursuant to the provisions
of United States Federal income tax laws applicable to certain United
States expatriates; or (iv)(A) the Company is or has been a "U.S. real
property holding corporation" for United States Federal income tax purposes
at any time during the five-year period ending on the date of disposition,
or, if shorter, the period during which the United States Alien Holder held
the Preferred Securities or Company Common Stock and (B) if the interest
sold is considered stock that is "regularly traded on an established
securities market" at any time during the year of disposition, the United
States Alien Holder meets certain minimum ownership requirements; and
(e) except to the extent that an applicable treaty otherwise provides,
a United States Alien Holder generally will be taxed in the same manner as
other holders with respect to gain on the sale or disposition of Preferred
Securities or Company Common Stock if the gain is effectively connected
with a United States trade or business of the United States Alien Holder
(effectively connected gain realized by a corporate United States Alien
holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty).
A United States Alien Holder who sells or otherwise disposes of Preferred
Securities or Company Common Stock generally will recognize gain or loss that is
subject to United States Federal income tax if (i) the Company is or has been a
"U.S. real property holding corporation" during the period described in
(d)(iv)(A) above, and (ii) if the interest sold is considered stock that is
"regularly traded on an established securities market" at any time during the
calendar year of disposition, the United States Alien Holder meets certain
minimum ownership requirements. The Company does not believe that it is a U.S.
real property holding corporation as of the date hereof, although it has not
determined or established whether it will be a U.S. real property holding
corporation in the future.
Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and, under the current interpretation of such
regulations, for purposes of determining the applicability of an income tax
treaty rate. Recently published final Treasury Regulations (the "1997
Withholding Regulations"), generally effective for payments after December 31,
1998, provide certain presumptions which differ from the presumption described
above. Under the 1997 Withholding Regulations, a United States Alien Holder of
Company Common Stock that wishes to claim the benefit of a treaty rate is
required to satisfy applicable certification requirements. In addition, the 1997
Withholding Regulations provide that dividend payments are generally subject to
information reporting and backup withholding unless applicable certification
requirements are satisfied. The 1997 Withholding Regulations also require, in
the case of interest or dividends with respect to Preferred Securities or
Company Common Stock held by a foreign partnership, that (x) the certification
requirements described above be provided by the partners rather than by the
foreign partnership and (y) the partnership provide certain information, which
in certain circumstances may include a United States taxpayer identification
number. A look-through rule would apply in the case of tiered partnerships.
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<PAGE> 56
INFORMATION REPORTING TO HOLDERS
Generally, income on the Preferred Securities will be reported to
noncorporate holders on Forms 1099, which forms will be mailed 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 holder complies with
certain identification requirements. Any withheld amounts will generally be
allowed as a credit against the holder's United States Federal income tax,
provided the required information is timely filed with the Internal Revenue
Service.
POSSIBLE TAX LAW CHANGES
Prospective investors should be aware that legislation has been introduced
in the United States Congress in the past that would, if enacted, deny an
interest deduction to issuers of instruments such as the Debentures. No such
legislation has been enacted. Also, a petition was recently filed in the United
States Tax Court as a result of a challenge by the Internal Revenue Service of
the petitioner's treatment as indebtedness of a security issued in circumstances
with certain similarities to the issuance of the Debentures. There can be no
assurance that similar legislation will not ultimately be enacted into law or
that a judicial decision in that Tax Court case or other developments will not
occur after the date hereof that would adversely affect the tax treatment of the
Debentures and could result in the exchange of the Debentures for Preferred
Securities or, in certain limited circumstances, the redemption of the
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 Exchange or Redemption".
SELLING HOLDERS
The Preferred Securities were originally issued by the Issuer and sold by
Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Robert W. Baird & Co.
Incorporated, Bear, Stearns & Co. Inc. and Merrill Lynch & Co., or their
international affiliates, as the case may be (the "Initial Purchasers"), in
transactions exempt from the registration requirements of the Securities Act
either (i) to persons reasonably believed by the Initial Purchasers to be
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) or (ii) upon terms and conditions set forth in Regulation S under the
Securities Act. The Selling Holders may from time to time offer and sell
pursuant to this Prospectus any or all of the Offered Securities. The term
Selling Holder includes the holders listed below and the beneficial owners of
the Preferred Securities and their transferees, pledgees, donees or their
successors.
The Company will from time to time supplement or amend this Prospectus to
reflect the required information concerning any new or additional Selling
Holders.
The following table shows the names of the Selling Holders, the number of
Preferred Securities owned by each of them as of various dates during March,
April and May 1998, which (except as noted) is also the number of Preferred
Securities that may be offered by each of them pursuant to this Prospectus, and
the number of shares of Common Stock issuable upon conversion of Preferred
Securities that may be offered by each of them pursuant to this Prospectus.
Assuming all of the Preferred Securities offered hereby are sold, then, except
as otherwise noted, no Preferred
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<PAGE> 57
Securities would be owned by any of the Selling Holders after completion of the
offering pursuant to this Prospectus.
<TABLE>
<CAPTION>
SHARES OF
NUMBER OF COMMON STOCK
PREFERRED SECURITIES ISSUABLE UPON
OWNED AND CONVERSION OF
NAME OF SELLING HOLDER OFFERED HEREBY PREFERRED SECURITIES
---------------------- -------------------- --------------------
<C> <S> <C> <C>
1. Allegheny Teledyne Inc. Pension Plan.............. 23,400 23,084
2. Allstate Insurance Company........................ 100,000 98,650
3. Allstate Life Insurance Company................... 145,000 143,042
4. Alscott Investments, LLC.......................... 34,800 34,330
5. American Pioneer Life Insurance Co. of New York... 400 394
6. American Progressive Life & Health Insurance Co.
of New York....................................... 500 493
7. American Republic Insurance Company............... 2,700 2,663
8. Anthracite Mutual Fire Insurance Company.......... 300 295
9. Arkansas PERS..................................... 33,000 32,554
10. Atlas Balanced Fund............................... 25,000 24,662
11. Baltimore Life Insurance Company.................. 500 493
12. Bancroft Convertible Fund, Inc.................... 17,500 17,263
13. Bank One Trust Co., NA............................ 508(1) 500
14. Bankers Trust, Trustee for Chrysler Corp. Emp #1
Pension Plan dated 4/1/89......................... 35,000 34,527
15. Bay State Health Systems, Inc..................... 5,000 4,932
16. BNY Hamilton Equity Income Fund................... 120,000 118,380
17. Bond Fund Series -- Oppenheimer Bond Fund for
Growth............................................ 175,000 172,637
18. Boston College Endowment Fund..................... 66 65
19. Brown & Williamson Tobacco Corp. Master Retirement
Trust............................................. 4,500 4,439
20. Capital Market Transactions, Inc.................. 355,000 350,207
21. Carrigaholt Capital (Bermuda) L.P................. 23,000 22,689
22. Chase Manhattan NA, Trustee for IBM Retirement
Plan dated 12/18/45............................... 59,000 58,203
23. Charitable Sec. Fd................................ 15,630 15,419
24. The Class 1C Company, Ltd......................... 31,000 30,581
25. Combined Insurance Company of America............. 15,000 14,797
26. Common Fund....................................... 26,200 25,846
27. Condor Insurance Co. ............................. 1,400 1,381
28. Delaware Group Dividend and Income Fund, Inc. .... 15,200 14,994
29. Delaware Group Global Dividend and Income Fund,
Inc. ............................................. 7,600 7,497
30. Delaware Group Premium Fund, Inc., Convertible
Securities Series................................. 2,200 2,170
31. EB Convertible Sec. Fd. .......................... 18,500 18,250
32. Ellsworth Convertible Growth and Income Fund,
Inc. ............................................. 17,500 17,263
33. Employers' Reinsurance Corporation................ 600 591
34. Equi-Select Total Return Fund..................... 19,200 18,940
35. Equity Portfolio.................................. 250,000 246,625
36. Evergreen Balanced Fund........................... 150,000 147,975
37. Evergreen Blue Chip Fund.......................... 70,000 69,055
38. Evergreen Fund For Total Return................... 30,000 29,595
39. Field Fdn. of Illinois............................ 900 887
</TABLE>
56
<PAGE> 58
<TABLE>
<CAPTION>
SHARES OF
NUMBER OF COMMON STOCK
PREFERRED SECURITIES ISSUABLE UPON
OWNED AND CONVERSION OF
NAME OF SELLING HOLDER OFFERED HEREBY PREFERRED SECURITIES
---------------------- -------------------- --------------------
<C> <S> <C> <C>
40. Finance Factors Limited........................... 5,000 4,932
41. First Mercury Insurance Company................... 7,000 6,905
42. Forest Fulcrum Fund LP............................ 12,500 12,331
43. Forest Global Convertible Fund Series A-5......... 12,500 12,331
44. Franklin & Marshall College....................... 3,000 2,959
45. Franklin Asset Allocation Fund.................... 15,000 14,797
46. Franklin Investors Securities Trust -- Convertible
Securities Fund................................... 44,100 43,504
47. FSA, Inc. ........................................ 9,800 9,667
48. Fundamental Investors, Inc. ...................... 254,000 250,571
49. GenCorp Fdn....................................... 1,600 1,578
50. Goldman, Sachs & Co............................... 74,470 73,464
51. The Guardian Life Insurance Company of America.... 167,000 164,745
52. Guardian Master Pension Trust..................... 8,000 7,892
53. Hamilton Family Trust............................. 11,600 11,443
54. Health Foundation of Greater Cincinnati (formerly
known as The ChoiceCare Foundation)............... 14,000 13,811
55. Highbridge Capital Corporation.................... 15,000 14,797
56. Highbridge International LLC...................... 170,000 167,705
57. Hypo America Fund................................. 1,100 1,085
58. ICI American Holdings Trust....................... 7,700 7,596
59. Illinois Healthcare Insurance Company............. 1,600 1,578
60. The Income Fund of America, Inc. ................. 546,000 538,629
61. Indiana Lumbermens Mutual Insurance Company....... 6,800 6,708
62. Investors Fund Series Blue Chip Portfolio......... 3,000 2,959
63. Island Insurance Convertible Account.............. 4,000 3,946
64. JCPenney Life Ins. Co............................. 10,000 9,865
65. KA Management Ltd. ............................... 19,058 18,800
66. KA Trading LP..................................... 11,192 11,040
67. Kapiolani Medical Center.......................... 3,000 2,959
68. Kemper Blue Chip Fund............................. 62,000 61,163
69. Key Tr. Convertible Sec. Fd....................... 4,570 4,508
70. LB Series Fund Inc., Income Portfolio............. 35,000 34,527
71. Laterman & Co. ................................... 2,900 2,860
72. Laterman Strategies: 90's LLC..................... 5,100 5,031
73. Lincoln Mutual Life Insurance Company............. 900 887
74. Lone Star Life Insurance Company.................. 25,000 24,662
75. Lutheran Brotherhood.............................. 120,000 118,380
76. Lutheran Brotherhood Income Fund.................. 30,000 29,595
77. The Lutheran Church -- Missouri Synod............. 40,000 39,460
78. MainStay Convertible Fund......................... 363,500 358,592
79. MainStay VP Convertible Portfolio................. 9,000 8,878
80. Maril & Co. ...................................... 2,500 2,466
81. Mark IV Industries, Inc. and Subsidiaries Master
Trust............................................. 11,100 10,950
82. Mary Ann Hamilton Trust for Self.................. 9,100 8,977
83. Massachusetts Investors Trust..................... 256,700 253,234
84. Massachusetts Mutual Life Insurance Company....... 81,500 80,399
</TABLE>
57
<PAGE> 59
<TABLE>
<CAPTION>
SHARES OF
NUMBER OF COMMON STOCK
PREFERRED SECURITIES ISSUABLE UPON
OWNED AND CONVERSION OF
NAME OF SELLING HOLDER OFFERED HEREBY PREFERRED SECURITIES
---------------------- -------------------- --------------------
<C> <S> <C> <C>
85. MassMutual Corporate Investors.................... 20,250 19,976
86. MassMutual Corporate Value Partners Limited....... 43,250 42,666
87. MassMutual Participation Investors................ 10,000 9,865
88. McMahan Securities Company, L.P. ................. 5,000 4,932
89. Mellon Bank NA, Trustee for General Motors
Employees Domestic Group Pension Trust............ 25,000 24,662
90. Merrill Lynch Insurance Group..................... 5,000 4,932
91. Merrill Lynch Pierce Fenner & Smith Inc. ......... 57,441 56,665
92. MFS International Fund -- U.S. Equity Fund........ 12,600 12,429
93. MFS Series Trust I -- MFS Convertible Securities
Fund.............................................. 200 197
94. MFS Series Trust I -- MFS Equity Income Fund...... 2,599 2,563
95. MFS Series Trust V -- MFS Total Return Fund....... 408,100 402,590
96. MFS Series Trust X -- Strategic Value Fund........ 100 98
97. MFS/Sunlife Series Trust -- Conservative Growth
Series............................................ 56,700 55,934
98. MFS/Sunlife Series Trust -- Total Return Series... 139,200 137,320
99. MFS Total Return Portfolio........................ 31,500 31,074
100. MFS Total Return Portfolio LPT Variable Insurance
Series Trust...................................... 630 621
101. MFS Variable Insurance Trust -- MFS Growth with
Income Series..................................... 4,000 3,946
102. MFS Variable Insurance Trust -- MFS Total Return
Series............................................ 9,000 8,878
103. Michigan Mutual Ins. Co. ......................... 8,000 7,892
104. Mid America Life Insurance Company................ 1,600 1,578
105. Millers Casualty Insurance Company of Texas....... 4,100 4,044
106. Millers Mutual Fire Insurance Company of Texas.... 30,000 29,595
107. Millville Mutual Insurance Company................ 1,800 1,775
108. Mount Sinai School of Medicine.................... 11,200 11,048
109. Museum of Fine Arts, Boston....................... 38 37
110. NAC Reinsurance Corporation....................... 30,000 29,595
111. Nalco Chemical Company............................ 3,500 3,452
112. New Hampshire State Retirement System............. 192 189
113. New York Life Insurance Annuity Corporation....... 50,000 49,325
114. New York Life Insurance Co. ...................... 275,000 271,287
115. New York Life Separate Account #7................. 42,000 41,433
116. The Northwestern Mutual Life Insurance Company.... 145,000(2) 143,042
117. Occidental Petroleum.............................. 1,000 986
118. OCM Convertible Limited Partnership............... 1,600 1,578
119. Offshore Strategies Ltd........................... 12,000 11,838
120. Olin Foundation................................... 39,900 39,361
121. Oppenheimer Equity Income Fund.................... 244,000 240,706
122. Oppenheimer Total Return Fund, Inc. .............. 163,000 160,799
123. Pacific Life Insurance Company.................... 20,000 19,730
124. Paloma Securities L.L.C. ......................... 140,000 138,110
125. PHL Convertible Fund.............................. 520 512
126. Phoenix Convertible Fund.......................... 2,598 2,562
</TABLE>
58
<PAGE> 60
<TABLE>
<CAPTION>
SHARES OF
NUMBER OF COMMON STOCK
PREFERRED SECURITIES ISSUABLE UPON
OWNED AND CONVERSION OF
NAME OF SELLING HOLDER OFFERED HEREBY PREFERRED SECURITIES
---------------------- -------------------- --------------------
<C> <S> <C> <C>
127. Pillar Equity Income Fund......................... 30,000 29,595
128. Pitney Bowes Retirement Fund...................... 9,300 9,174
129. Potlatch-First Trust Co. of St. Paul.............. 7,500 7,398
130. PRIM Board........................................ 44,000 43,406
131. Promutual......................................... 160 157
132. Provident Life and Accident Insurance Company..... 150,000 147,975
133. Public Service Mutual Insurance Company........... 17,000 16,770
134. Putnam Balanced Retirement Fund................... 94 92
135. Putnam Convertible Income -- Growth Trust......... 2,600 2,564
136. Putnam Convertible Opportunities and Income
Trust............................................. 134 132
137. Reassurance Company of Hannover................... 5,000 4,932
138. Rhone-Poulenc Rorer Inc. Pension Plan............. 210 207
139. SBC Warburg Dillon Read Inc. ..................... 480 473
140. South Dakota Retirement System.................... 15,000 14,797
141. Southern Farm Bureau Life Insurance -- FRIC....... 14,500 14,304
142. Starvest Diversified Fund -- Managed.............. 3,500 3,452
143. Starvest -- Investment Grade...................... 9,800 9,667
144. State of Delaware PERS............................ 18,000 17,757
145. State of Oregon -- Equity......................... 81,000 79,906
146. State of Oregon/SAIF Corporation.................. 70,000 69,055
147. State Street Bank Custodian for GE Pension
Trust............................................. 18,000 17,757
148. Sun Life Bermuda US Equity Fund................... 74 73
149. Sun Life Diversified Fund......................... 900 887
150. Sun Life U.S. Equity Fund......................... 3,200 3,156
151. Sunset Life Ins. Co. of America................... 30,000 29,595
152. Swiss Bank Corporation -- London Branch........... 6,000 5,919
153. Teachers Insurance and Annuity Association........ 65,000 64,122
154. Tennessee Consolidated Retirement System.......... 70,000 69,055
155. Toronto Dominion (New York), Inc. ................ 100,000 98,650
156. TQA Arbitrage Fund, L.P. ......................... 25,000 24,662
157. TQA Leverage Fund, L.P. .......................... 10,000 9,865
158. TQA Vantage Fund, Ltd. ........................... 25,000 24,662
159. TQA Vantage Plus, Ltd. ........................... 8,000 7,892
160. The Travelers Indemnity Company................... 142,000 140,083
161. The Travelers Insurance Company................... 92,000 90,758
162. The Travelers Life & Annuity Company.............. 10,000 9,865
163. Travelers Series Managed Assets................... 6,000 5,919
164. Tribeca Investments, L.L.C. ...................... 115,000 113,447
165. United National Insurance Company................. 18,000 17,757
166. University of Rochester........................... 38 37
167. University of South Florida....................... 182 179
168. University of South Florida Fdn. ................. 2,800 2,762
169. University of Virginia Health Services
Foundation........................................ 1,000 986
170. Van Kampen American Capital Equity Income Fund.... 185,000 182,502
171. Van Kampen American Capital Harbor Fund........... 55,000 54,257
172. Victory Convertible Sec. Fd....................... 15,000 14,797
173. Western Home Insurance Company.................... 400 394
174. Westward Life Insurance Company................... 400 394
</TABLE>
59
<PAGE> 61
<TABLE>
<CAPTION>
SHARES OF
NUMBER OF COMMON STOCK
PREFERRED SECURITIES ISSUABLE UPON
OWNED AND CONVERSION OF
NAME OF SELLING HOLDER OFFERED HEREBY PREFERRED SECURITIES
---------------------- -------------------- --------------------
<C> <S> <C> <C>
175. Zeneca Holdings Trust............................. 7,700 7,596
--------- ---------
Total............................................. 7,875,584 7,769,197
========= =========
</TABLE>
- ---------------
(1) Only 508 of the 650 Preferred Securities owned by this Selling Holder are
being offered hereby. If this Selling Holder sells all Preferred Securities
offered hereby, it will beneficially own 142 Preferred Securities.
(2) Includes 5,000 shares held in The Northwestern Mutual Life Insurance Company
Group Annuity Separate Account.
Selling Holders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Preferred Securities after the date on
which they provided the information regarding their ownership of Preferred
Securities, in transactions exempt from the registration requirements of the
Securities Act.
Certain of the Selling Holders were Initial Purchasers or are affiliated
with an Initial Purchaser. Goldman, Sachs & Co. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated were Initial Purchasers. The distributor and
investment advisor of Van Kampen American Capital Equity Income Fund and Van
Kampen American Capital Harbor Fund is an affiliate of Morgan Stanley & Co.
Incorporated, which was an Initial Purchaser. The Northwestern Mutual Life
Insurance Company is an affiliate of Robert W. Baird & Co. Incorporated, which
was an Initial Purchaser. The Initial Purchasers have performed investment
banking services for the Company in the past for which they have received
customary compensation.
PLAN OF DISTRIBUTION
The Offered Securities are outstanding securities and are being offered for
sale from time to time pursuant to this Prospectus by the Selling Holders. The
Offered Securities also may be sold pursuant to Rule 144 or Rule 144A under the
Securities Act.
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to time
offer the Offered Securities to or through underwriters, broker-dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders and any
underwriters, broker-dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such underwriter,
broker-dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act. The Offered Securities may be sold from
time to time in one or more transactions at fixed prices, at prevailing market
prices at the time of sale, at varying prices determined at the time of sale or
at negotiated prices. The sale of the Offered Securities may be effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Offered
Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or in the over-the-counter market or (iv) through the writing of options. In
connection with sales of the Offered Securities or otherwise, the Selling
Holders may enter into hedging transactions with broker-dealers, which may in
turn engage in short sales of the Offered Securities in the course of hedging
positions they assume. The Selling Holders may also sell the Offered Securities
short and deliver Offered Securities to close out such short positions, or loan
or pledge Offered Securities to broker-dealers that in turn may sell such
securities.
60
<PAGE> 62
At the time a particular offering of the Offered Securities is made, a
Prospectus Supplement, if required, will be distributed which will set forth the
aggregate amount and type of Offered Securities being offered and the terms of
the offering, including the name or names of any underwriters, broker-dealers or
agents, any discounts, commissions and other terms constituting compensation
from the Selling Holders and any discounts, commissions or concessions allowed
or reallowed or paid to broker- dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they have
been registered or qualified for sale in such jurisdictions or any exemption
from registration or qualification is available and is complied with.
The Selling Holders are subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, which provisions may limit the
timing of purchases and sales of any of the Offered Securities by the Selling
Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, the Company and the Issuer
shall each bear all reasonable fees and expenses customarily borne by issuers in
a non-underwritten secondary offering by selling security holders or in an
underwritten offering, as the case may be, incurred in connection with the
performance of its obligations under the Registration Rights Agreement;
provided, however, that the Selling Holders will pay all underwriting discounts
and selling commissions, if any. The Selling Holders will be indemnified by the
Company and the Issuer, jointly and severally, against certain liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith. The Company and the Issuer will be
indemnified by the Selling Holders severally against certain liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
INDEPENDENT PUBLIC ACCOUNTANTS
The Consolidated Financial Statements of the Company incorporated by
reference herein from the Company's Annual Report on Form 10-K and Form 10-K/A
have been incorporated by reference herein in reliance upon the reports of
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL OPINIONS
Certain matters of Delaware law relating to the validity of the Preferred
Securities have been passed upon by Richards, Layton & Finger, P.A., Wilmington,
Delaware, special Delaware counsel to the Issuer and the Company. Certain legal
matters have been passed upon for the Company and the Issuer by Schiff Hardin &
Waite, Chicago, Illinois. Schiff Hardin & Waite has advised the Company that a
member of the firm participating in the representation of the Company in this
Offering owns approximately 3,800 shares of Company Common Stock.
61
<PAGE> 63
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR THE COMPANY SINCE
THE DATE HEREOF AND THEREOF, RESPECTIVELY, OR THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE
DATES.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Documents Incorporated by Reference....... 4
Available Information..................... 4
Forward-Looking Statements................ 5
Risk Factors.............................. 6
Newell Financial Trust I.................. 11
The Company............................... 12
Use of Proceeds........................... 12
Accounting Treatment...................... 12
Ratio of Earnings to Fixed Charges........ 13
Description of the Preferred Securities... 13
Description of the Guarantee.............. 35
Description of the Debentures............. 38
Relationship among the Preferred
Securities, the Debentures and the
Guarantee............................... 46
Description of the Company's Capital
Stock................................... 48
Certain Federal Income Tax Consequences... 50
Selling Holders........................... 55
Plan of Distribution...................... 60
Independent Public Accountants............ 61
Legal Opinions............................ 61
</TABLE>
======================================================
- ------------------------------------------------------
------------------------------------------------------
10,000,000
PREFERRED SECURITIES
NEWELL FINANCIAL TRUST I
5 1/4% CONVERTIBLE QUARTERLY
INCOME PREFERRED SECURITIES
("CONVERTIBLE QUIPS")
(LIQUIDATION PREFERENCE $50 PER SHARE)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY,
AND CONVERTIBLE INTO COMMON STOCK OF,
NEWELL CO.
---------------------------
[NEWELL LOGO]
---------------------------
- ------------------------------------------------------
------------------------------------------------------
<PAGE> 64
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of all expenses in connection with
the issuance and distribution of the securities registered hereby. Except for
the SEC registration fee, all amounts provided are estimated. None of these
expenses will be borne by the Selling Holders.
<TABLE>
<S> <C>
SEC registration fee........................................ $147,500
Printing and engraving expenses............................. 70,000
Legal fees and expenses..................................... 60,000
Accounting fees and expenses................................ 5,000
Miscellaneous............................................... 27,500
--------
Total.................................................. $310,000
========
</TABLE>
- ---------------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Restated Certificate of Incorporation and By-Laws of the Company
provide for indemnification by the Company of each of its directors and officers
to the fullest extent permitted by law for liability (including liability
arising under the Securities Act of 1933 (the "Act")) of such director or
officer arising by reason of his or her status as a director or officer of the
Company, provided that he or she met the standards established in the Restated
Certificate of Incorporation, which include requirements that he or she acted in
good faith and in a manner he or she reasonably believed to be in the Company's
best interest. The Company will also advance expenses prior to final disposition
of an action, suit or proceeding upon receipt of an undertaking by the director
or officer to repay such amount if the director or officer is not entitled to
indemnification. All rights to indemnification and advancement of expenses are
deemed to be a contract between the Company and its directors and officers. The
determination that a director or officer has met the standards established in
the Restated Certificate of Incorporation and By-Laws may be made by majority
vote of a quorum consisting of disinterested directors, an opinion of counsel
(regardless of whether such quorum is available), a majority vote of
stockholders, or a court (which may also overturn any of the preceding
determinations). The Company has purchased insurance against liabilities of
directors or officers, as permitted by the Restated Certificate of Incorporation
and By-Laws. The Company also has entered into indemnification agreements with
each of its directors and officers which provide that the directors and officers
will be entitled to their indemnification rights as they existed at the time
they entered into the agreement, regardless of subsequent changes in the
Company's indemnification policy.
Under the Trust Agreement, the Company agreed to indemnify and hold
harmless, to the fullest extent permitted by applicable law, each Trustee, any
affiliate of any Trustee, any officer, director, shareholder, employee,
representative or agent of any Trustee, and any employee or agent of the Issuer
or its affiliates (each an "Indemnified Person") from and against any loss,
damage, liability, tax, penalty, expense or claim incurred by such Indemnified
Person by reason of the creation, operation, dissolution or termination of the
Issuer or in connection with the administration of the Issuer or any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Issuer and in a manner such Indemnified Person reasonably believed to be
within the scope of authority conferred on such Indemnified Person by the Trust
Agreement, except that no Indemnified Person is entitled to be indemnified in
respect of any loss, damage or claim incurred by such Indemnified Person by
reason of negligence or willful misconduct with respect to such acts or
omissions.
<PAGE> 65
Pursuant to the registration rights agreement among the Company, the Issuer
and the Initial Purchasers, dated December 12, 1997 (the "Registration Rights
Agreement"), the Company has agreed to indemnify the holders of Registrable
Securities against certain liabilities. Also pursuant to the Registration Rights
Agreement, under certain circumstances, the Company and certain broker-dealers,
including certain persons associated with such broker-dealers, have agreed to
indemnify each other against certain liabilities.
<PAGE> 66
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<C> <S>
*4.1 Certificate of Trust of Newell Financial Trust I.
*4.2 Amended and Restated Trust Agreement of Newell Financial
Trust I, dated as of December 12, 1997, among Newell Co., as
Depositor, The Chase Manhattan Bank, as Property Trustee,
Chase Manhattan Bank Delaware, as Delaware Trustee and C.R.
Davenport, Brett E. Gries and Ronn L. Claussen, as
Administrative Trustees.
*4.3 Junior Convertible Subordinated Indenture for the 5 1/4%
Convertible Subordinated Debentures, dated as of December
12, 1997, between Newell Co. and The Chase Manhattan Bank,
as Indenture Trustee.
4.4 Form of 5 1/4% Preferred Securities (Included in Exhibit D
to Exhibit 4.2 above).
4.5 Form of 5 1/4% Junior Convertible Subordinated Debentures
(Included in Article 2 to Exhibit 4.3 above).
*4.6 Preferred Securities Guarantee Agreement, dated as of
December 12, 1997, between Newell Co., as Guarantor, and The
Chase Manhattan Bank, as Guarantee Trustee.
*5.1 Opinion of Schiff Hardin & Waite, counsel to Newell Co., as
to the validity of the Convertible Subordinated Debentures,
Guarantee and the Common Stock of Newell Co. issuable upon
conversion of the Preferred Securities being registered
hereby.
*5.2 Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel to Newell Financial Trust I, as to the validity of
the Preferred Securities.
*8.1 Opinion of Schiff Hardin & Waite, special United States tax
counsel to Newell Co. and Newell Financial Trust I, as to
certain tax matters.
*10.1 Registration Rights Agreement, dated December 12, 1997,
among Newell Financial Trust I and Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated, Robert W. Baird & Co.
Incorporated, Bear, Stearns & Co. Inc. and Merrill Lynch &
Co. as Initial Purchasers.
12.1 Computation of Ratio of Earnings to Fixed Charges of Newell
Co. (Incorporated by reference to Exhibit 12 to Newell Co.'s
Annual Report on Form 10-K for the year ended December 31,
1997).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Schiff Hardin & Waite (Included in Exhibits 5.1
and 8.1).
23.3 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2).
*24.1 Power of Attorney.
*25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, as
Trustee under the 5 1/4% Junior Convertible Subordinated
Indenture.
*25.2 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, as
Property Trustee under the Amended and Restated Declaration
of Trust.
*25.3 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, as
Guarantee Trustee under the Guarantee.
</TABLE>
- ---------------
* Previously filed.
<PAGE> 67
ITEM 17. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrants pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities which remain unsold at the termination of the
offering.
(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of a
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by
them is against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of the issue.
<PAGE> 68
(d) The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained
in a form of Prospectus filed by the Registrants pursuant to Rule
424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective; and
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Newell Co.
hereby certifies that it has duly caused this amendment to registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Freeport, State of Illinois, on the 11th day of May,
1998.
NEWELL CO.
By: /s/ WILLIAM T. ALLDREDGE
------------------------------------
William T. Alldredge
Vice President -- Finance
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN J. MCDONOUGH* Vice Chairman and Chief Executive May 11, 1998
- --------------------------------------------- Officer (Principal Executive Officer)
John J. McDonough and Director
/s/ WILLIAM T. ALLDREDGE Vice-President -- Finance (Principal May 11, 1998
- --------------------------------------------- Financial Officer)
William T. Alldredge
/s/ THOMAS A. FERGUSON, JR.* President and Chief Operating Officer May 11, 1998
- --------------------------------------------- and Director
Thomas A. Ferguson, Jr.
/s/ DONALD L. KRAUSE* Senior Vice President -- Corporate May 11, 1998
- --------------------------------------------- Controller (Principal Accounting
Donald L. Krause Officer)
/s/ WILLIAM P. SOVEY* Chairman of the Board of Directors May 11, 1998
- ---------------------------------------------
William P. Sovey
/s/ ALTON F. DOODY* Director May 11, 1998
- ---------------------------------------------
Alton F. Doody
/s/ GARY H. DRIGGS* Director May 11, 1998
- ---------------------------------------------
Gary H. Driggs
/s/ DANIEL C. FERGUSON* Director May 11, 1998
- ---------------------------------------------
Daniel C. Ferguson
/s/ ROBERT L. KATZ* Director May 11, 1998
- ---------------------------------------------
Robert L. Katz
/s/ ELIZABETH CUTHBERT MILLET* Director May 11, 1998
- ---------------------------------------------
Elizabeth Cuthbert Millet
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director
- ---------------------------------------------
Cynthia A. Montgomery
/s/ ALLAN P. NEWELL* Director May 11, 1998
- ---------------------------------------------
Allan P. Newell
Director
- ---------------------------------------------
Henry B. Pearsall
*By: /s/ WILLIAM T. ALLDREDGE
- ---------------------------------------------
William T. Alldredge,
attorney-in-fact
</TABLE>
<PAGE> 71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Newell
Financial Trust I hereby certifies that it has duly caused this amendment to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Freeport, State of Illinois, on the 11th day of
May, 1998.
NEWELL FINANCIAL TRUST I
By: NEWELL CO.
/s/ WILLIAM T. ALLDREDGE
--------------------------------------
William T. Alldredge
Vice President -- Finance
<PAGE> 72
EXHIBIT INDEX
<TABLE>
<C> <S> <C>
*4.1 Certificate of Trust of Newell Financial Trust I............
*4.2 Amended and Restated Trust Agreement of Newell Financial
Trust I, dated as of December 12, 1997, among Newell Co., as
Depositor, The Chase Manhattan Bank, as Property Trustee,
Chase Manhattan Bank Delaware, as Delaware Trustee and C.R.
Davenport, Brett E. Gries and Ronn L. Claussen, as
Administrative Trustees.....................................
*4.3 Junior Convertible Subordinated Indenture for the 5 1/4%
Convertible Subordinated Debentures, dated as of December
12, 1997, between Newell Co. and The Chase Manhattan Bank,
as Indenture Trustee........................................
4.4 Form of 5 1/4% Preferred Securities (Included in Exhibit D
to Exhibit 4.2 above).......................................
4.5 Form of 5 1/4% Junior Convertible Subordinated Debentures
(Included in Article 2 to Exhibit 4.3 above)................
*4.6 Preferred Securities Guarantee Agreement, dated as of
December 12, 1997, between Newell Co., as Guarantor, and The
Chase Manhattan Bank, as Guarantee Trustee..................
*5.1 Opinion of Schiff Hardin & Waite, counsel to Newell Co., as
to the validity of the Convertible Subordinated Debentures,
Guarantee and the Common Stock of Newell Co. issuable upon
conversion of the Preferred Securities being registered
hereby......................................................
*5.2 Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel to Newell Financial Trust I, as to the validity of
the Preferred Securities....................................
*8.1 Opinion of Schiff Hardin & Waite, special United States tax
counsel to Newell Co. and Newell Financial Trust I, as to
certain tax matters.........................................
*10.1 Registration Rights Agreement, dated December 12, 1997,
among Newell Financial Trust I and Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated, Robert W. Baird & Co.
Incorporated, Bear, Stearns & Co. Inc. and Merrill Lynch &
Co. as Initial Purchasers...................................
12.1 Computation of Ratio of Earnings to Fixed Charges of Newell
Co. (Incorporated by reference to Exhibit 12 to Newell Co.'s
Annual Report on Form 10-K for the year ended December 31,
1997).......................................................
23.1 Consent of Arthur Andersen LLP..............................
23.2 Consent of Schiff Hardin & Waite (Included in Exhibits 5.1
and 8.1)....................................................
23.3 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2)................................................
*24.1 Power of Attorney...........................................
*25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, as
Trustee under the 5 1/4% Junior Convertible Subordinated
Indenture...................................................
*25.2 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, as
Property Trustee under the Amended and Restated Declaration
of Trust....................................................
*25.3 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, as
Guarantee Trustee under the Guarantee.......................
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
January 27, 1998 included and incorporated by reference in Newell Co.'s Form
10-K and Form 10-K/A for the year ended December 31, 1997 and to all references
to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Milwaukee, WI
May 8, 1998
