<PAGE>
FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-34513
PROSPECTUS
NGC CORPORATION CAPITAL TRUST I
OFFER TO EXCHANGE
SERIES B 8.316% SUBORDINATED CAPITAL INCOME SECURITIES (SKISSM)
FOR ANY AND ALL OUTSTANDING
SERIES A 8.316% SUBORDINATED CAPITAL INCOME SECURITIES (SKISSM)
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
NGC CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON OCTOBER 20, 1997, UNLESS EXTENDED.
-----------------
NGC Corporation Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), and NGC Corporation, a
Delaware corporation ("NGC" or the "Company"), hereby offer, upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $200,000,000 aggregate Liquidation Amount (as
defined herein) of the Series B 8.316% Subordinated Capital Income Securities
(the "Exchange Capital Securities") which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined herein) of which this Prospectus
constitutes a part, for a like Liquidation Amount of the outstanding Series A
8.316% Subordinated Capital Income Securities (the "Old Capital Securities"),
of which $200,000,000 aggregate Liquidation Amount is outstanding. Pursuant to
the Exchange Offer, the Company is also exchanging its guarantee of the
payment of Distributions (as defined herein) and payments on liquidation of
the Trust or redemption of the Old Capital Securities (the "Old Guarantee")
for a like guarantee of the Old Capital Securities and the Exchange Capital
Securities (the "Exchange Guarantee"), and the Company is also exchanging all
of its Series A 8.316% Subordinated Deferrable Interest Debentures due June 1,
2027 (the "Old Subordinated Debentures"), of which $206,200,000 aggregate
principal amount is outstanding, for a like aggregate principal amount of its
Series B 8.316% Subordinated Deferrable Interest Debentures due June 1, 2027
(the "Exchange Subordinated Debentures"), which Exchange Guarantee and
Exchange Subordinated Debentures also have been registered under the
Securities Act. The Old Capital Securities, the Old Guarantee and the Old
Subordinated Debentures are collectively referred to herein as the "Old
Securities" and the Exchange Capital Securities, the Exchange Guarantee and
the Exchange Subordinated Debentures are collectively referred to herein as
the "Exchange Securities" and the exchange of the Old Securities for the
Exchange Securities is collectively referred to herein as the "Exchange."
The terms of the Exchange Securities are identical in all material respects
to the respective terms of the Old Securities, except that (i) the Exchange
Securities have been registered under the Securities Act and therefore will
not be subject to certain restrictions on transfer applicable to the Old
Securities, (ii) the Exchange Capital Securities will not provide for any
increase in the Distribution rate thereon and (iii) the Exchange Subordinated
Debentures will not provide for any increase in the interest rate thereon. See
"Description of the Capital Securities" and "Description of the Old
Securities."
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Securities received in exchange
for Old Securities acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Trust and the Company have agreed
that they will make this Prospectus available to any broker-dealer for use in
connection with any such resale until at least the close of business on the
90th day following the Expiration Date (as defined herein). See "Plan of
Distribution".
(Continued on next page)
-----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 16 HEREOF FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PERSONS WHO TENDER OLD CAPITAL SECURITIES
IN THE EXCHANGE OFFER.
-----------------
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
ACT.
The Exchange Capital Securities will be issued, and may be transferred, only
in blocks having a Liquidation Amount of not less than $100,000 (100 Exchange
Capital Securities). Any transfer of Exchange Capital Securities in a block
having a Liquidation Amount of less than $100,000 shall be deemed to be void
and of no legal effect whatsoever. Any such transferee shall be deemed not to
be the holder of such Exchange Capital Securities for any purpose, including
but not limited to the receipt of Distributions on such Exchange Capital
Securities, and such transferee shall be deemed to have no interest whatsoever
in such Exchange Capital Securities. See "Description of the Capital
Securities--Restrictions on Transfer."
The date of this Prospectus is September 12, 1997.
<PAGE>
(Continued from the previous page)
The Exchange Capital Securities, the Exchange Subordinated Debentures and
Exchange Guarantee are being offered for exchange in order to satisfy certain
obligations of the Company and the Trust under the Registration Rights
Agreement dated as of May 28, 1997 (the "Registration Rights Agreement") among
the Company, the Trust and Lehman Brothers Inc., Salomon Brothers Inc and
Smith Barney Inc. (the "Initial Purchasers"). In the event that the Exchange
Offer is consummated, any Old Capital Securities which remain outstanding
after consummation of the Exchange Offer, any private Exchange Securities (as
defined in the Registration Rights Agreement) and the Exchange Capital
Securities issued in the Exchange Offer will vote together as a single class
for purposes of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Trust Agreement (as defined herein).
The Exchange Capital Securities and the Old Capital Securities (together,
the "Capital Securities") represent undivided beneficial interests in the
assets of the Trust. The Company is the owner of all of the common securities
of the Trust (the "Common Securities" and, collectively with the Capital
Securities, the "Trust Securities") representing undivided beneficial
interests in the assets of the Trust. The First National Bank of Chicago and
First Chicago Delaware Inc. are the Property Trustee and the Delaware Trustee,
respectively, of the Trust. The Trust exists for the sole purposes of (i)
issuing and selling the Trust Securities and effecting the Exchange Offer for
the Exchange Capital Securities, (ii) investing the proceeds from the sale of
the Old Capital Securities and the Common Securities in the Old Subordinated
Debentures, (iii) exchanging the Old Subordinated Debentures for the Exchange
Subordinated Debentures and (iv) engaging in other activities necessary,
advisable or incidental thereto.
The Subordinated Debentures (as defined herein) are unsecured obligations of
the Company and are subordinate and junior in right of payment to all Senior
Indebtedness of the Company, as described herein. See "Description of
Subordinated Debentures--Subordination." The Guarantee (as defined herein) is
an unsecured obligation of the Company and is subordinate and junior in right
of payment to all Senior Indebtedness of the Company. See "Description of
Guarantee." The obligations of the Company under the Guarantee, the Common
Guarantee (as defined herein) and the Subordinated Debentures are structurally
subordinated to all liabilities and obligations of the Company's subsidiaries.
As of June 30, 1997, approximately $1.2 billion aggregate principal amount of
Senior Indebtedness was outstanding, and the Company's consolidated
subsidiaries had approximately $2.3 billion of indebtedness and other
liabilities. The Indenture does not limit the amount of additional
indebtedness which the Company and its subsidiaries may incur. See "Risk
Factors--Ranking of Subordinated Obligations under the Guarantee and the
Subordinated Debentures."
Except as provided below, the Capital Securities will be represented by a
global Capital Security in fully registered form, deposited with DTC, and
registered in the name of, DTC or its nominee. Beneficial interests in the
Capital Securities will be shown on, and transfers thereof will be effected
through, records maintained by DTC and its participants. Beneficial interests
in the Capital Securities 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. The Capital Securities will be issued
and may be transferred only in blocks having a Liquidation Amount of not less
than $100,000 (100 Capital Securities). See "Description of Capital
Securities--Restrictions on Transfer" and "Notice to Investors."
Holders of the Trust Securities will be entitled to receive cumulative cash
distributions arising from the payment of interest on the Subordinated
Debentures, accumulating from the date of original issuance and payable semi-
annually in arrears on June 1 and December 1 of each year, commencing December
1, 1997, at the annual rate of 8.316% of the Liquidation Amount of $1,000 per
Trust Security ("Distributions"). The distribution rate and the distribution
payment dates and other payment dates for the Trust Securities will correspond
to the payments and payment dates on the Subordinated Debentures, which will
be the sole assets of the Trust. The ability of the Trust to make timely
payments of Distributions on the Trust Securities is solely dependent on the
2
<PAGE>
Company's making interest payments on the Subordinated Debentures as and when
required. So long as no Debenture Event of Default (as defined herein) has
occurred and is continuing, the Company will have the right to defer payments
of interest on the Subordinated Debentures at any time and from time to time
for a period not exceeding 10 consecutive semi-annual periods with respect to
each deferral period (each, an "Extension Period"), provided that no Extension
Period shall end on a date other than an Interest Payment Date (as defined
herein) or extend beyond the Stated Maturity Date. Upon the termination of any
such Extension Period and the payment of all amounts then due, the Company may
elect to begin a new Extension Period, subject to the requirements set forth
herein. Accordingly, there could be multiple Extension Periods of varying
lengths throughout the term of the Subordinated Debentures. If and for so long
as interest payments on the Subordinated Debentures are so deferred,
Distributions on the Trust Securities will also be deferred and the Company
and its subsidiaries 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 to make any payment with respect to debt securities
of the Company that rank pari passu with or junior to the Subordinated
Debentures. During an Extension Period, interest on the Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Trust Securities are entitled will continue to accumulate) at
the rate of 8.316% per annum, compounded semi-annually, and holders of Trust
Securities will be required to accrue such deferred interest income for United
States federal income tax purposes prior to the receipt of the cash to which
such income is attributable. See "Description of Subordinated Debentures--
Option to Extend Interest Payment Date" and "Certain Federal Income Tax
Considerations--Interest Income and Original Issue Discount." Deferred
installments of interest on the Subordinated Debentures will bear interest,
compounded semi-annually, at a rate per annum equal to 8.316% to the extent
permitted by applicable law.
The Company will, through the Guarantee, the Common Guarantee, the Trust
Agreement, the Subordinated Debentures and the Indenture (each as defined
herein), taken together, fully, irrevocably and unconditionally guarantee all
of the Trust's obligations under the Trust Securities. See "Relationship Among
the Capital Securities, the Subordinated Debentures and the Guarantee--Full
and Unconditional Guarantee." The Guarantee and the Common Guarantee will
guarantee payments of Distributions and payments upon liquidation of the Trust
or redemption of the Trust Securities, but in each case only to the extent
that the Trust holds funds on hand legally available therefor and has failed
to make such payments, as described herein. See "Description of Guarantee." If
the Company fails to make a required payment on the Subordinated Debentures,
the Trust will not have sufficient funds to make the related payments,
including Distributions, on the Trust Securities. The Guarantee and the Common
Guarantee will not cover any such payment when the Trust does not have
sufficient funds on hand legally available therefor. In such event, a holder
of Capital Securities may institute a legal proceeding directly against the
Company to enforce its rights in respect of such payment. See "Description of
Subordinated Debentures--Enforcement of Certain Rights by Holders of Capital
Securities."
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein) (i) in whole but not in part, on June 1, 2027 (the
"Stated Maturity Date") upon payment of the Subordinated Debentures at a
redemption price equal to the principal amount of, plus accrued and unpaid
interest on, the Subordinated Debentures (the "Maturity Redemption Price"),
(ii) in whole but not in part, at any time, contemporaneously with the
optional prepayment of the Subordinated Debentures by the Company, upon the
occurrence and continuation of a Special Event (as defined herein) at a
redemption price equal to, for each Capital Security, the Special Event
Prepayment Price (as defined herein) for a corresponding $1,000 principal
amount of Subordinated Debentures (the "Special Event Redemption Price"), and
(iii) in whole at any time or in part from time to time, contemporaneously
with the optional prepayment by the Company of all or part of the Subordinated
Debentures, at a redemption price equal to, for each Capital Security to be
redeemed, the Optional Prepayment Price (as defined herein) for a
corresponding $1,000 principal amount of Subordinated Debentures (the
"Optional Redemption Price"). Any of the Maturity Redemption Price, the
Special Event Redemption Price and the Optional Redemption Price may be
referred to herein as the "Redemption Price." See "Description of Capital
Securities--Redemption."
3
<PAGE>
The Subordinated Debentures will be prepayable prior to the Stated Maturity
Date at the option of the Company (i) in whole at any time or in part from
time to time, at a price (the "Optional Prepayment Price") equal to the
greater of (x) 100% of their principal amount and (y) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the date of prepayment, on a semi-annual basis (assuming a 360-
day year consisting of twelve 30-day months), at the Treasury Rate (as defined
herein) plus 25 basis points, plus, in each case, accrued and unpaid interest
thereon to the date of prepayment, or (ii) at any time, in whole but not in
part, upon the occurrence and continuation of a Special Event, at a prepayment
price (the "Special Event Prepayment Price") equal to the Make-Whole Amount.
The "Make-Whole Amount" is equal to the greater of (a) 100% of the principal
amount of the Subordinated Debentures or (b) the sum, as determined by the
Reference Treasury Dealer (as defined herein), of the present values of the
remaining scheduled payments of principal and interest on the Subordinated
Debentures, discounted to the date of prepayment on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate (as defined herein) plus, in each case, accrued and unpaid
interest thereon to the date of prepayment. Either of the Optional Prepayment
Price or the Special Event Prepayment Price may be referred to herein as the
"Prepayment Price." See "Description of Subordinated Debentures--Optional
Prepayment" and "--Special Event Prepayment."
The Company will have the right at any time to dissolve the Trust and, after
satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause a Like Amount of the Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the
Trust, subject to the Administrative Trustees having received an opinion of
counsel to the effect that such distribution will not be a taxable event to
holders of Capital Securities. Unless the Subordinated Debentures are
distributed to the holders of the Trust Securities, in the event of a
liquidation of the Trust as described herein, after satisfaction of
liabilities to creditors of the Trust as required by applicable law, the
holders of the Trust Securities generally will be entitled to receive a
Liquidation Amount of $1,000 per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment. See "Description of Capital
Securities--Liquidation of the Trust and Distribution of Subordinated
Debentures."
Based on existing interpretations by the staff of the Securities and
Exchange Commission (the "Commission") set forth in several no-action letters
to third parties and subject to the two immediately following sentences, the
Company and the Trust believe that the Exchange Capital Securities, the
Exchange Guarantee and the Exchange Subordinated Debentures issued pursuant to
the Exchange Offer may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a broker-dealer) without
further compliance with the registration and prospectus delivery requirements
of the Securities Act; provided, that, such Exchange Capital Securities are
acquired in the ordinary course of such holder's business and such holder is
not participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
the Exchange Capital Securities. However, any holder of Old Capital Securities
who is an "affiliate" (as defined in Rule 405 under the Securities Act) of the
Trust or the Company or who intends to participate in the Exchange Offer for
the purpose of distributing Exchange Capital Securities, or any broker-dealer
who purchased Old Capital Securities from the Trust to resell pursuant to Rule
144A under the Securities Act ("Rule 144A") or any other available exemption
under the Securities Act, (i) will not be able to rely on the interpretations
of the staff of the Commission set forth in the above-mentioned no-action
letters, (ii) will not be permitted or entitled to tender such Old Capital
Securities in the Exchange Offer and (iii) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any sale or other transfer of such Old Capital Securities (including
compliance with the selling security holder prospectus information
requirements of Item 507 of Regulation S-K under the Securities Act) unless
such sale is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Old Capital
Securities acquired for its own account as a result of market-making or other
trading activities and exchanges such Old Capital Securities for Exchange
Capital Securities, then such broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
Exchange Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for Exchange Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" (as defined in Rule
4
<PAGE>
405 under the Securities Act) of the Trust or the Company, (ii) any Exchange
Capital Securities to be received by it are being acquired in the ordinary
course of its business and (iii) it has no arrangement or understanding with
any person to participate in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. Each broker-dealer that
receives Exchange Capital Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Capital Securities
for its own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Capital Securities. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the staff of the Commission in
the no-action letters referred to above, the Company and the Trust believe
that broker-dealers who acquired Old Capital Securities for their own accounts
as a result of market-making activities or other trading activities may
fulfill their prospectus delivery requirements with respect to the Exchange
Capital Securities received upon exchange of such Old Capital Securities
(other than Old Capital Securities which represent an unsold allotment from
the original sale of the Old Capital Securities) with the prospectus prepared
for the Exchange Offer so long as it contains a description of the plan of
distribution with respect to the resale of such Exchange Capital Securities.
Accordingly, subject to certain provisions set forth in the Registration
Rights Agreement, the Company and the Trust have agreed that this Prospectus,
as may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of such Exchange Capital Securities for a
period commencing on the Expiration Date and ending 90 days after the
Expiration Date (subject to extension in certain limited circumstances set
forth in the Registration Rights Agreement) or, if earlier, when all such
Exchange Capital Securities have been disposed of by such broker-dealer. See
"Plan of Distribution." Any broker-dealer who is an "affiliate" (as defined in
Rule 405 under the Securities Act) of the Trust or the Company may not rely on
such no-action letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of Exchange Capital Securities."
Each broker-dealer who surrenders Old Capital Securities pursuant to the
Exchange Offer will be deemed to have agreed, by execution of the Letter of
Transmittal, that, upon receipt of notice from the Company or the Trust of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any
material respect or which causes this Prospectus to omit to state a material
fact necessary in order to make the statements contained or incorporated by
reference herein, in light of the circumstances under which they were made,
not misleading or of the occurrence of certain other events specified in the
Registration Rights Agreement, such broker-dealer will suspend the sale of
Exchange Capital Securities (or the Exchange Subordinated Debentures, as
applicable) pursuant to this Prospectus until the Company and the Trust have
amended or supplemented this Prospectus to correct such misstatement or
omission and have furnished copies of the amended or supplemented Prospectus
to such broker-dealer or the Company and the Trust have given notice that the
sale of the Exchange Capital Securities (or the Exchange Subordinated Debt
Securities, as applicable) may be resumed.
Neither the Company nor the Trust has sought its own interpretive letter and
there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such no-
action letters to third parties.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Capital Securities. The Exchange Capital
Securities will be a new issue of securities for which there currently is no
market. Although each Initial Purchaser has informed the Company that it
currently intends to make a market in the Exchange Capital Securities, it is
not obligated to do so, and any such market-making may be discontinued at any
time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Exchange Capital Securities.
The Company and the Trust do not currently intend to apply for listing of the
Exchange Capital Securities on the New York Stock Exchange.
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will
be subject to the same limitations applicable to the Old Capital Securities
under the Trust Agreement (except for those rights which terminate upon
consummation of the Exchange
5
<PAGE>
Offer). Following consummation of the Exchange Offer, the holders of Old
Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Company nor the Trust will
have any further obligation to such holders (other than under certain limited
circumstances) to provide for registration under the Securities Act of the Old
Capital Securities held by them. To the extent that Old Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Capital Securities could be adversely affected. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities."
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION.
HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS PROSPECTUS AND THE
LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR OLD
CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange prior to 5:00 p.m., New
York City time, on October 20, 1997 (such time and date being hereinafter
called the "Expiration Date"), unless the Exchange Offer is extended by the
Company and the Trust (in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is extended). Tenders of Old
Capital Securities may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange Offer is not conditioned upon
any minimum Liquidation Amount of Old Capital Securities being tendered for
exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Company or the Trust and to the terms
and provisions of the Registration Rights Agreement. Old Capital Securities
may be tendered in whole or in part having a Liquidation Amount of not less
than $100,000 (100 Old Capital Securities) or any integral multiple of $1,000
Liquidation Amount (one Old Capital Security) in excess thereof. The Company
has agreed to pay all expenses of the Exchange Offer. See "The Exchange
Offer--Fees and Expenses." Each Exchange Capital Security will pay cumulative
Distributions from the most recent Distribution Date (as defined herein) on
the Old Capital Securities surrendered in exchange for such Exchange Capital
Securities or, if no Distribution Date has occurred, from May 28, 1997.
Holders of the Old Capital Securities whose Old Capital Securities are
accepted for exchange will not receive accumulated Distributions on such Old
Capital Securities for any period, and will be deemed to have waived the right
to receive such Distributions. See "Risk Factors--Consequences of a Failure to
Exchange Old Capital Securities." This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders of Old Capital Securities
as of the date of this Prospectus.
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the Exchange Capital Securities offered hereby. No dealer-manager
is being used in connection with this Exchange Offer. See "Use of Proceeds
from Sale of Old Capital Securities" and "Plan of Distribution."
As used herein, (i) the "Indenture" means the Indenture, dated as of May 28,
1997, as amended and supplemented from time to time, between the Company and
The First National Bank of Chicago, as trustee (the "Debenture Trustee"),
relating to the Subordinated Debentures, (ii) the "Trust Agreement" means the
Amended and Restated Declaration of Trust, dated as of May 28, 1997, relating
to the Trust among the Company, as Sponsor, The First National Bank of
Chicago, as Property Trustee (the "Property Trustee"), First Chicago Delaware
Inc. (the "Delaware Trustee"), the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees"), and the holders, from time to time, of undivided beneficial
interests in the assets of the Trust, (iii) the "Old Guarantee" means the
Series A Capital Securities Guarantee Agreement dated as of May 28, 1997,
between the Company and The First National Bank of Chicago, as Guarantee
Trustee (the "Guarantee Trustee"), (iv) the "Common Guarantee" means the
Common Securities Guarantee Agreement dated as of May 28, 1997, executed and
delivered by the Company for the benefit of the holders of the Common
Securities, and (v) "Exchange Guarantee" means the Guarantee to be entered
into between the Company and the Guarantee Trustee in respect of the Capital
Securities. In addition, as the context may require, unless expressly
indicated otherwise, (i) "Capital Securities" includes the Old Capital
Securities, the Exchange Capital Securities and the Private Exchange
Securities, (ii) "Subordinated Debentures" includes the Old Subordinated
Debentures and the Exchange Subordinated Debentures, (iii) "Guarantee"
includes the Old Guarantee and the Exchange Guarantee and (iv) "Guarantees"
includes the Guarantee and the Common Guarantee.
6
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR PRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Offering Memorandum Summary.............................................. 8
Risk Factors............................................................. 16
Use of Proceeds from the Sale of Old Capital Securities.................. 22
Ratios of Earnings to Fixed Charges...................................... 22
Accounting Treatment..................................................... 22
Capitalization........................................................... 23
The Trust................................................................ 24
The Exchange Offer....................................................... 25
Description of Capital Securities........................................ 36
Description of Subordinated Debentures................................... 48
Description of Guarantee................................................. 58
Description of the Old Securities........................................ 60
Relationship Among the Capital Securities, the Subordinated Debt
Securities and the Guarantee............................................ 61
Certain Federal Income Tax Consequences.................................. 62
ERISA Considerations..................................................... 66
Plan of Distribution..................................................... 68
Legal Matters............................................................ 68
Experts.................................................................. 68
Available Information.................................................... 69
Incorporation of Certain Documents by Reference.......................... 69
</TABLE>
7
<PAGE>
SUMMARY
This summary is qualified by the more detailed information and financial
statements appearing elsewhere, or incorporated by reference, in this
Prospectus. Prospective investors are urged to read this Prospectus in its
entirety.
THE COMPANY
GENERAL
NGC is a leading North American marketer of natural gas, natural gas liquids,
crude oil and power and is engaged in electric power generation and natural gas
gathering, processing and transportation through direct and indirect ownership
of cogeneration and other electric power producing facilities and ownership and
operation of natural gas processing plants, fractionators, storage facilities
and pipelines. Acting in the role of a large-scale aggregator, processor,
marketer and reliable supplier of multiple energy products and services, NGC
has evolved into a reliable energy commodity and service provider.
From inception of operations in 1984 until 1990, Natural Gas Clearinghouse
("Clearinghouse") limited its activities primarily to natural gas marketing.
Starting in 1990, Clearinghouse began expanding its core business operations
through acquisitions and strategic alliances with certain of its shareholders
resulting in the formation of a midstream energy asset business and
establishing energy marketing operations in both Canada and the United Kingdom.
Effective March 1, 1995, Clearinghouse and Trident NGL Holding, Inc., a fully
integrated natural gas liquids company, merged and the combined entity was
renamed NGC Corporation ("Trident Combination"). On August 31, 1996, NGC
completed a strategic combination with Chevron U.S.A. Inc. and certain Chevron
affiliates (collectively "Chevron"), whereby substantially all of Chevron's
midstream assets were merged with NGC. Finally, in June 1997, NGC acquired all
of the outstanding shares of Destec Energy, Inc., a leading independent power
producer. By virtue of the growth of NGC's core businesses combined with the
synergies derived from the aforementioned transactions, NGC has established
itself as an industry leader providing quality, competitively priced energy
products and services to customers throughout North America and in the United
Kingdom.
NGC is a holding company that conducts principally all of its business
through its subsidiaries. Currently, the Company has two primary business
segments: the natural gas and power marketing segment and the natural gas
liquids, crude oil and gas transmission segment.
The principal executive office of the Company is located at 1000 Louisiana,
Suite 5800, Houston, Texas 77002, and the telephone number of that office is
(713) 507-6400. NGC and its affiliates maintain marketing and/or regional
offices in Boston, Massachusetts; Phoenix, Arizona; Englewood, Colorado;
Rosemont, Illinois; Tulsa, Oklahoma; Oklahoma City, Oklahoma; Louisville,
Kentucky; Atlanta, Georgia; Tampa, Florida; Kansas City, Kansas; Dallas, Texas;
San Francisco, California; Pleasenton, California; Pittsburgh, Pennsylvania;
Mexico City, Mexico; London, England and Calgary, Canada.
8
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer.............. Up to $200,000,000 aggregate Liquidation
Amount of Exchange Capital Securities are
being offered in exchange for a like
aggregate Liquidation Amount of Old Capital
Securities. Old Capital Securities may be
tendered for exchange in whole or in part in
a Liquidation Amount of $100,000 (100 Old
Capital Securities) or any integral multiple
of $1,000 in excess thereof. The Company and
the Trust are making the Exchange Offer in
order to satisfy their obligations under the
Registration Rights Agreement relating to the
Old Securities. For a description of the
procedures for tendering Old Capital
Securities, see "The Exchange Offer--
Procedures for Tendering Old Capital
Securities.
Expiration Date................. 5:00 p.m., New York City time, on October 20,
1997 unless the Exchange Offer is extended by
the Company and the Trust, in which case the
term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer--Expiration
Date; Extensions; Amendments."
Conditions to the Exchange The Exchange Offer is subject to certain
Offer........................... conditions, which may be waived by the
Company and the Trust in their sole
discretion. The Exchange Offer is not
conditioned upon any minimum Liquidation
Amount of Old Capital Securities being
tendered. See "The Exchange Offer--Conditions
to the Exchange Offer."
The Company and the Trust reserve the right
in their sole and absolute discretion,
subject to applicable law, at any time and
from time to time, (i) to delay the
acceptance of the Old Capital Securities for
exchange, (ii) to terminate the Exchange
Offer if certain specified conditions have
not been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer and to
retain all Old Capital Securities tendered
pursuant to the Exchange Offer, subject,
however, to the right of holders of Old
Capital Securities to withdraw their tendered
Old Capital Securities, or (iv) to waive any
condition or otherwise amend the terms of the
Exchange Offer in any respect. See "The
Exchange Offer--Expiration Date; Extensions;
Amendments."
Withdrawal Rights............... Tenders of Old Capital Securities may be
withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date by
delivering a written notice of such
withdrawal to the Exchange Agent in
conformity with certain procedures set forth
below under "The Exchange Offer--Procedures
for Tendering Old Capital Securities--
Withdrawal of Tenders."
Procedures for Tendering Old
Capital Securities..............
Brokers, dealers, commercial banks, trust
companies and other nominees who hold Old
Capital Securities through The Depository
Trust Company ("DTC") may effect tenders by
9
<PAGE>
book-entry transfer in accordance with DTC's
Automated Tender Offer Program ("ATOP").
Holders of such Old Capital Securities
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee are urged to contact such person
promptly if they wish to tender Old Capital
Securities. In order for Old Capital
Securities to be tendered by a means other
than by book-entry transfer, a Letter of
Transmittal must be completed and signed in
accordance with the instructions contained
therein. The Letter of Transmittal and any
other documents required by the Letter of
Transmittal must be delivered to The First
National Bank of Chicago (the "Exchange
Agent") by mail, facsimile, hand delivery or
overnight carrier and either such Old Capital
Securities must be delivered to the Exchange
Agent or specified procedures for guaranteed
delivery must be complied with. See "The
Exchange Offer--Procedures for Tendering Old
Capital Securities."
Letters of Transmittal and certificates
representing Old Capital Securities should
not be sent to the Company or the Trust. Such
documents should only be sent to the Exchange
Agent. Questions regarding how to tender and
requests for information should be directed
to the Exchange Agent. See "The Exchange
Offer--Exchange Agent."
Resales of Exchange Based on existing interpretations by the
Securities...................... staff of the Commission and subject to the
two immediately following sentences, the
Company and the Trust believe that the
Exchange Capital Securities, the Exchange
Guarantee and, after the distribution thereof
to the holders of the Capital Securities, the
Exchange Subordinated Debentures issued
pursuant to the Exchange Offer may be offered
for resale, resold and transferred by a
holder thereof (other than a holder who is a
broker-dealer) without further compliance
with the registration and prospectus
requirements of the Securities Act, provided
that such Exchange Capital Securities are
acquired in the ordinary course of such
holder's business and such holder is not
participating, and has no arrangement or
understanding with any person to participate,
in a distribution (within the meaning of the
Securities Act) of the Exchange Capital
Securities. However, any holder of Old
Capital Securities who is an "affiliate" (as
defined in Rule 405 under the Securities Act)
of the Trust or the Company or who intends to
participate in the Exchange Offer for the
purpose of distributing the Exchange Capital
Securities, or any broker-dealer who
purchased the Old Capital Securities from the
Trust to resell pursuant to Rule 144A or any
other available exemption under the
Securities Act, (i) will not be able to rely
on the interpretations of the staff of the
Commission set forth in the above-mentioned
no-action letters, (ii) will not be permitted
or entitled to tender such Old Capital
Securities in the Exchange Offer and (iii)
must comply with the registration and
10
<PAGE>
prospectus delivery requirements of the
Securities Act in connection with any sale or
other transfer of such Old Capital Securities
(including compliance with the selling
security holder prospectus information
requirements of Item 507 of Regulation S-K
under the Securities Act) unless such sale is
made pursuant to an exemption from such
requirements. In addition, as described
below, if any broker-dealer holds Old Capital
Securities acquired for its own account as a
result of market-making or other trading
activities and exchanges such Old Capital
Securities for Exchange Capital Securities,
then such broker-dealer must deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resales
of such Exchange Capital Securities.
Each holder of Old Capital Securities who
wishes to exchange Old Capital Securities for
Exchange Securities in the Exchange Offer
will be required to represent that (i) it is
not an "affiliate" of the Trust or the
Company, (ii) any Exchange Capital Securities
to be received by it are being acquired in
the ordinary course of its business and (iii)
it has no arrangement or understanding with
any person to participate in a distribution
(within the meaning of the Securities Act) of
such Exchange Capital Securities. Each
broker-dealer that receives Exchange Capital
Securities for its own account pursuant to
the Exchange Offer must acknowledge that it
acquired the Old Capital Securities for its
own account as the result of market-making
activities or other trading activities and
must agree that it will deliver a prospectus
meeting the requirements of the Securities
Act in connection with any resale of such
Exchange Capital Securities. The Letter of
Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the
Securities Act. Based on the position taken
by the staff of the Commission in the no-
action letters referred to above, the Company
and the Trust believe that broker-dealers who
acquired Old Capital Securities for their own
accounts as a result of market-making
activities or other trading activities may
fulfill their prospectus delivery
requirements with respect to the Exchange
Capital Securities received upon exchange of
such Old Capital Securities (other than Old
Capital Securities which represent an unsold
allotment from the original sale of the Old
Capital Securities) with the prospectus
prepared for the Exchange Offer so long as it
contains a description of the plan of
distribution with respect to the resale of
such Exchange Capital Securities.
Accordingly, subject to certain provisions
set forth in the Registration Rights
Agreement and to the limitations described
below under "The Exchange Offer--Resales of
Exchange Capital Securities," the Company and
the Trust have agreed that this Prospectus,
as it may be amended or supplemented from
time to time, may be used by a broker-dealer
in connection with the resales of such
11
<PAGE>
Exchange Capital Securities for a period
commencing on the Expiration Date and ending
90 days after the Expiration Date (subject to
extension as described in the Registration
Rights Agreement) or if earlier, when all
such Exchange Capital Securities have been
disposed of by such broker-dealer. See "Plan
of Distribution." Any broker-dealer who is an
"affiliate" of the Company or the Trust may
not rely on such no-action letters and must
comply with the registration and prospectus
delivery requirements of the Securities Act
in connection with any resale transaction.
See "The Exchange Offer--Resales of Exchange
Capital Securities."
Neither the Company nor the Trust has sought
its own interpretive letter and there can be
no assurance that the staff of the Commission
would make a similar determination with
respect to the Exchange Offer as it has in
such no-action letters to third parties.
Exchange Agent.................. The exchange agent with respect to the
Exchange Offer is The First National Bank of
Chicago (the "Exchange Agent"). The
addresses, and telephone and facsimile
numbers, of the Exchange Agent are set forth
in "The Exchange Offer--Exchange Agent" and
in the Letter of Transmittal.
Use of Proceeds................. Neither the Company nor the Trust will
receive any cash proceeds from the issuance
of the Exchange Capital Securities offered
hereby. See "Use of Proceeds from Sale of Old
Capital Securities."
Certain Federal Income Tax Holders of Old Capital Securities should
Consequences.................... review the information set forth under
"Certain Federal Income Tax Consequences"
prior to tendering Old Capital Securities in
the Exchange Offer.
THE EXCHANGE SECURITIES
Securities Offered.............. Up to $200,000,000 aggregate Liquidation
Amount of the Trust's Series B 8.316%
Subordinated Capital Income Securities which
have been registered under the Securities Act
(Liquidation Amount $1,000 per Capital
Security). The Exchange Capital Securities
will be issued, and the Old Capital
Securities were issued, under the Trust
Agreement. The Exchange Capital Securities,
the Private Exchange Securities (if any) and
any Old Capital Securities which remain
outstanding after consummation of the
Exchange Offer will constitute a single class
of Capital Securities under the Trust
Agreement and, accordingly, will vote
together for purposes of determining whether
holders of the requisite percentage in
outstanding Liquidation Amount thereof have
taken certain actions or exercised certain
rights under the Trust Agreement. See
"Description of the Capital Securities--
12
<PAGE>
General." The terms of the Exchange Capital
Securities are identical in all material
respects to the terms of the Old Capital
Securities, except that the Exchange Capital
Securities have been registered under the
Securities Act and therefore are not subject
to certain restrictions on transfer
applicable to the Old Capital Securities and
will not provide for any increase in the
Distribution rate thereon. See "The Exchange
Offer--Purpose and Effect of the Exchange
Offer," "Description of the Capital
Securities" and "Description of the Old
Securities."
Distribution Dates.............. June 1 and December 1 of each year, commenc-
ing December 1, 1997.
Subordinated Debentures......... The Trust invested the proceeds from the is-
suance of the Capital Securities and Common
Securities in an equivalent amount of 8.316%
Subordinated Debentures of the Company. The
Subordinated Debentures will mature on June
1, 2027.
Extension Periods............... So long as no Debenture Event of Default (as
defined herein) has occurred and is continu-
ing, the Company shall have the right to de-
fer the payment of interest on the Subordi-
nated Debentures for any Extension Period
elected by the Company. No Extension Period
will exceed 10 consecutive semi-annual peri-
ods, end on a date other than an Interest
Payment Date or extend beyond the Stated Ma-
turity Date. During any Extension Period,
Distributions on the Capital Securities will
also be deferred. See "Description of Subor-
dinated Debentures--Option to Extend Interest
Payment Date" and "Certain Federal Income Tax
Considerations--Interest Income and Original
Issue Discount."
Ranking......................... The Exchange Capital Securities will rank
pari passu, and payments thereon will be made
pro rata, with the Old Capital Securities and
the Common Securities except as described un-
der "Description of Capital Securities--Sub-
ordination of Common Securities." The Ex-
change Subordinated Debentures will rank pari
passu with the Old Subordinated Debentures
and all other subordinated debentures (if
any) issued by the Company (the "Other Deben-
tures"), which are issued and sold (if at
all) to other trusts established by the Com-
pany (if any), in each case similar to the
Trust ("Other Trusts"), and will constitute
unsecured obligations of the Company and will
rank subordinate and junior in right of pay-
ment to all Senior Indebtedness to the extent
and in the manner set forth in the Indenture.
See "Description of Subordinated Debentures."
The Exchange Guarantee will rank pari passu
with all other guarantees (if any) issued by
the Company with respect to capital securi-
ties (if any) issued by Other Trusts ("Other
Guarantees") and will constitute an unsecured
obligation of the Company and will rank sub-
ordinate and junior in right of payment to
all Senior Indebtedness to the extent and in
the
13
<PAGE>
manner set forth in the Guarantee. See "De-
scription of Guarantee." In addition, because
the Company is a holding company, the Ex-
change Subordinated Debentures and the Guar-
antee will be effectively subordinated to all
existing and future indebtedness and other
liabilities of the Company's subsidiaries.
See "Description of Subordinated Debentures--
Subordination."
Redemption...................... The Trust Securities will be subject to man-
datory redemption in a Like Amount, (i) in
whole but not in part, on June 1, 2027 upon
payment of the Subordinated Debentures at ma-
turity at a redemption price equal to the
principal amount of, plus accrued and unpaid
interest on, the Subordinated Debentures,
(ii) in whole but not in part, at any time,
contemporaneously with the optional prepay-
ment of the Subordinated Debentures by the
Company, upon the occurrence and continuation
of a Special Event at a redemption price
equal to, for each Capital Security, the Spe-
cial Event Prepayment Price for a correspond-
ing $1,000 principal amount of Subordinated
Debentures and (iii) in whole at any time or
in part from time to time, contemporaneously
with the optional prepayment by the Company
of all or part of the Subordinated Deben-
tures, at a redemption price equal to, for
each Capital Security, the Optional Prepay-
ment Price for a corresponding $1,000 princi-
pal amount of Subordinated Debentures. See
"Description of Capital Securities--Redemp-
tion," "Description of Subordinated Deben-
tures--Optional Prepayment" and "--Special
Event Prepayment."
The Subordinated Debentures will be
prepayable prior to the Stated Maturity Date
at the option of the Company (i) in whole at
any time or in part from time to time, at a
price equal to the greater of (x) 100% of
their principal amount and (y) the sum of the
present values of the remaining scheduled
payments of principal and interest thereon
discounted to the date of prepayment, on a
semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months), at the
Treasury Rate plus 25 basis points, plus, in
each case, accrued and unpaid interest
thereon to the date of prepayment, or (ii) at
any time, in whole but not in part, upon the
occurrence and continuation of a Special
Event, at a prepayment price equal to the
Make-Whole Amount. The Make-Whole Amount
shall be equal to the greater of (a) 100% of
the principal amount of the Subordinated De-
bentures or (b) the sum, as determined by the
Reference Treasury Dealer, of the present
values of the remaining scheduled payments of
the principal and interest on the Subordi-
nated Debentures, discounted to the date of
prepayment on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day
months), at the Adjusted Treasury Rate plus,
in each case, accrued and unpaid interest
thereon to the date of prepayment.
14
<PAGE>
The Trust and the Company do not intend to
Absence of Market for the apply for listing of the Exchange Capital Se-
Capital Securities.............. curities on any securities exchange or for
quotation through the Nasdaq National Market.
The Exchange Capital Securities will be a new
issue of securities for which there currently
is no market. Although the Initial Purchasers
of the Old Capital Securities have informed
the Trust and the Company that they currently
intend to make a market in the Exchange Capi-
tal Securities, the Initial Purchasers are
not obligated to do so, and any such market
making may be discontinued at any time with-
out notice. Accordingly, there can be no as-
surance as to the development or liquidity of
any market for the Exchange Capital Securi-
ties. If an active market does not develop,
the market price and liquidity of the Capital
Securities may be adversely affected. See
"Plan of Distribution."
15
<PAGE>
RISK FACTORS
Holders of Old Capital Securities should carefully review the information
contained elsewhere in this Prospectus and should particularly consider the
following matters in evaluating the Exchange Offer.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED
DEBENTURES
The obligations of the Company under the Guarantee issued by the Company for
the benefit of the holders of Capital Securities and under the Subordinated
Debentures are unsecured and rank subordinate and junior in right of payment
to all Senior Indebtedness of the Company. At June 30, 1997, the Company had
outstanding approximately $1.2 billion of Senior Indebtedness on a
consolidated basis. Neither the Indenture, the Guarantee nor the Trust
Agreement place any limitation on the amount of secured or unsecured
Indebtedness that may be incurred by the Company or its subsidiaries. The
ability of the Trust to pay amounts due on the Capital Securities is solely
dependent on the Company making payments on the Subordinated Debentures as and
when required. See "Description of Subordinated Debentures--Subordination" and
"Description of Guarantee--Status of the Guarantee."
STATUS OF COMPANY AS HOLDING COMPANY
The Company is a holding company conducting all of its business through its
subsidiaries. As a holding company, the ability of the Company to make
payments of interest and principal on the Subordinated Debentures will be
dependent primarily upon the receipt of dividends and other distributions from
the Company's subsidiaries. The right of the Company to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the Capital
Securities to benefit indirectly from such distribution), will be subject to
the prior claims of creditors of that subsidiary, except to the extent that
any claims of the Company as a creditor of such subsidiary may be recognized
as such. Accordingly, the Capital Securities will effectively be subordinated
to all existing and future indebtedness and other liabilities of the Company's
subsidiaries. As of June 30, 1997, the Company's consolidated subsidiaries had
total liabilities (excluding liabilities owed to the Company) of approximately
$2.3 billion.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no Debenture Event of Default has occurred and is continuing, the
Company will have the right under the Indenture to defer payments of interest
on the Subordinated Debentures at any time or from time to time for a period
not exceeding 10 consecutive semi-annual periods with respect to each
Extension Period, provided that no Extension Period shall end on a date other
than an Interest Payment Date or extend beyond the Stated Maturity Date. As a
consequence of any such deferral, semi-annual Distributions on the Trust
Securities by the Trust will be deferred (and the amount of Distributions to
which holders of the Trust Securities are entitled will accumulate additional
Distributions thereon at the rate of 8.316% per annum, compounded semi-
annually, to the extent permitted by applicable law, but not exceeding the
interest rate then accruing on the Subordinated Debentures) from the relevant
payment date for such Distributions during any such Extension Period. During
the pendency of any Extension Period, the Company may not, and will not permit
any subsidiary of the Company to, subject to certain exceptions set forth
herein, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, the
Company's capital stock, (ii) make any payment of principal of or premium, if
any, or interest on or repay, repurchase or redeem any debt securities of the
Company (including Other Debentures) that rank pari passu with or junior in
right of payment to the Subordinated Debentures or (iii) make any guarantee
payments (other than payments under the Guarantee) with respect to any
guarantee by the Company of the debt securities of any subsidiary of the
Company (including Other Guarantees) if such guarantee ranks pari passu with
or junior in right of payment to the Subordinated Debentures. See "Description
of Capital Securities--Distributions."
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual
16
<PAGE>
periods, end on a date other than an Interest Payment Date or to extend beyond
the Stated Maturity Date. Upon the termination of any Extension Period and the
payment of all interest then accrued and unpaid on the Subordinated Debentures
(together with interest thereon at the annual rate of 8.316%, compounded semi-
annually, to the extent permitted by applicable law), the Company may elect to
begin a new Extension Period, subject to the above requirements. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of Capital Securities--Distributions" and
"Description of Subordinated Debentures--Option to Extend Interest Payment
Date."
If the Company exercises its option, under the terms of the Subordinated
Debentures, to defer the payment of interest for up to 10 consecutive semi-
annual periods on various occasions, the Subordinated Debentures will
thereafter be treated as issued with original issue discount ("OID") for
United States federal income tax purposes. As a result, holders of Trust
Securities will be required to include their pro rata share of OID in gross
income as it accrues for United States federal income tax purposes in advance
of the receipt of the cash to which such income is attributable and will not
receive the cash related to such income from the Trust if the holder disposes
of the Trust Securities prior to the record date for the payment of
Distributions. Following the Company's election to defer the payment of
interest, all of a holder's taxable income with respect to the Subordinated
Debentures will be accounted for as OID and actual distributions of stated
interest will not be separately reported as taxable income. See "Certain
Federal Income Tax Considerations--Interest Income and Original Issue
Discount" and "--Sales or Redemption of Capital Securities." INVESTORS SHOULD
CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF AN
INVESTMENT IN THE CAPITAL SECURITIES.
The Company has no current intention of exercising its right to defer
payments of interest on the Subordinated Debentures. However, should the
Company elect to exercise such right in the future, the market price of the
Capital Securities is likely to be affected. A holder that disposes of its
Capital Securities during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its
Capital Securities. In addition, as a result of the existence of the Company's
right to defer interest payments, the market price of the Capital Securities
(which represent preferred undivided beneficial interests in the Subordinated
Debentures) may be more volatile than the market prices of other similar
securities where the issuer does not have such right to defer interest
payments.
SPECIAL EVENT REDEMPTION
Upon the occurrence and continuation of a Special Event (as defined under
"Description of Subordinated Debentures--Special Event Prepayment"), the
Company will have the right to prepay the Subordinated Debentures in whole
(but not in part) at the Special Event Prepayment Price within 90 days
following the occurrence of such Special Event and thereby cause a mandatory
redemption of the Trust Securities at the Special Event Redemption Price. See
"Description of Capital Securities--Redemption" and "Description of
Subordinated Debentures--Special Event Prepayment."
DISTRIBUTION OF SUBORDINATED DEBENTURES FOR CAPITAL SECURITIES
The Company will have the right at any time to dissolve the Trust and, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Capital Securities and the Common Securities in liquidation of
the Trust, subject to the Company having received an opinion of counsel to the
effect that such distribution will not be a taxable event to holders of
Capital Securities. See "Description of Capital Securities--Liquidation of the
Trust and Distribution of Subordinated Debentures."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
the Subordinated Debentures that may be distributed in exchange for Capital
Securities if a termination of the Trust were to occur. Accordingly, the
Capital Securities or the Subordinated Debentures may trade at a discount from
the price that
17
<PAGE>
the investor paid to purchase the Capital Securities offered hereby. Because
holders of Capital Securities may receive Subordinated Debentures in
liquidation of the Trust and because Distributions are otherwise limited to
payments on the Subordinated Debentures, such holders should carefully review
all the information regarding the Subordinated Debentures contained herein.
See "Description of Subordinated Debentures."
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
The Guarantee will guarantee to the holders of the Capital Securities the
following payments, to the extent not paid by or on behalf of the Trust: (i)
any accumulated and unpaid Distributions required to be paid on the Capital
Securities, to the extent that the Trust has funds on hand legally available
therefor at such time, (ii) the applicable Redemption Price with respect to
the Capital Securities called for redemption, to the extent that the Trust has
funds on hand legally available therefor at such time and (iii) upon a
voluntary or involuntary dissolution and liquidation of the Trust (other than
in connection with the distribution of the Subordinated Debentures to holders
of the Capital Securities), the lesser of (a) the aggregate of the Liquidation
Amount and all accumulated and unpaid Distributions to the date of payment, to
the extent that the Trust has funds on hand legally available therefor at such
time, and (b) the amount of assets of the Trust remaining available for
distribution to holders of the Capital Securities at such time after the
satisfaction of liabilities to creditors of the Trust as provided by
applicable law.
The holders of not less than a majority in Liquidation Amount of the Capital
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee. Any holder of the
Capital Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Trust, the Guarantee Trustee or any other person
or entity. If the Company defaults on its obligation to pay amounts payable
under the Subordinated Debentures, the Trust will not have sufficient funds
for the payment of Distributions or amounts payable on redemption of the
Capital Securities or otherwise, and, in such event, holders of the Capital
Securities will 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 and such event is attributable to the failure of
the Company to pay the principal of (or premium, if any) or interest
(including Additional Sums (as defined below) and Compounded Interest (as
defined below), if any) or Liquidated Damages, if any, on the Subordinated
Debentures on the payment date on which such payment is due and payable, then
a holder of Capital Securities may institute a legal proceeding directly
against the Company for enforcement of payment to such holder of the principal
of (or premium, if any) or interest (including Additional Sums and Compounded
Interest, if any) or Liquidated Damages, if any, on such Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Capital Securities of such holder (a "Direct Action"). Notwithstanding any
payments made to a holder of Capital Securities by the Company in connection
with a Direct Action, the Company shall remain obligated to pay the principal
of (and premium, if any) and interest (including Additional Sums and
Compounded Interest, if any) or Liquidated Damages, if any, on the
Subordinated Debentures, and the Company shall be subrogated to the rights of
the holder of such Capital Securities with respect to payments on the Capital
Securities to the extent of any payments made by the Company to such holder in
any Direct Action. In addition, if the Property Trustee fails to take legal
action for a Debenture Event of Default of which the Property Trustee has
knowledge, the holders of the Capital Securities may, to the fullest extent
permitted by law, take such legal action, to the same extent as if such
holders of Capital Securities held a Like Amount of Debentures, without first
proceeding against the Property Trustee or the Trust. See "Description of
Subordinated Debentures--Debenture Events of Default" and "--Enforcement of
Certain Rights by Holders of Capital Securities," and "Description of
Guarantee." The Trust Agreement will provide that each holder of Capital
Securities by acceptance thereof agrees to the provisions of the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities and the exercise
of the Trust's rights as holder of Subordinated Debentures. Holders of
18
<PAGE>
Capital Securities will not be entitled to vote to appoint, remove or replace
or to increase or decrease the number of the Issuer Trustees, which voting
rights are vested exclusively in the holder of the Common Securities except
upon the occurrence of certain events described herein. The Property Trustee,
the Administrative Trustees and the Company may amend the Trust Agreement
without the consent of holders of Capital Securities to ensure (i) that the
Trust will be classified for United States federal income tax purposes as a
grantor trust or (ii) that the Trust will not be required to register under
the Investment Company Act (as defined herein), even if such action adversely
affects the interests of such holders. Holders of Capital Securities will have
no voting rights with respect to any matters submitted to a vote of the
Company's shareholders. See "Description of Capital Securities--Removal of
Issuer Trustees" and "--Voting Rights; Amendment of the Trust Agreement."
TRADING CHARACTERISTICS OF THE CAPITAL SECURITIES
The Capital Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder who disposes of its Capital Securities
between record dates for payments of Distributions thereon will be required to
include accrued but unpaid interest on the Subordinated Debentures through the
date of disposition in income as ordinary income, and to add such amount to
its adjusted tax basis in its share of the underlying Subordinated Debentures
deemed disposed of. To the extent the selling price is less than the holder's
adjusted tax basis (which will include, in the form of OID, all accrued but
unpaid interest), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Certain Federal Income Tax
Considerations--Interest Income and Original Issue Discount" and "--Sales or
Redemption of Capital Securities."
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities Act
or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws, or pursuant to
an exemption therefrom or in a transaction not subject thereto, and in each
case in compliance with certain other conditions and restrictions. Old Capital
Securities which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions). The Company and the Trust do not intend to register under
the Securities Act any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable).
The Registration Rights Agreement provides, under certain circumstances, for
additional interest to become payable in respect of the Old Subordinated
Debentures as liquidated damages, and for corresponding additional
Distributions to become payable in respect of the Old Capital Securities.
Following consummation of the Exchange Offer, any outstanding Old Capital
Securities will not be entitled to any increase in the Distribution rate
thereon.
To the extent that Old Capital Securities are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Capital Securities
could be adversely affected. In addition, any trading market for Old Capital
Securities which remain outstanding after the Exchange Offer could be
adversely affected.
The Exchange Capital Securities, the Private Exchange Securities (if any)
and any Old Capital Securities which remain outstanding after consummation of
the Exchange Offer will constitute a single class of Capital Securities under
the Trust Agreement and, accordingly, will vote together for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Trust Agreement. See "Description of the Capital Securities--
General."
19
<PAGE>
ABSENCE OF PUBLIC MARKET
The Old Capital Securities were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. The Old
Capital Securities have not been registered under the Securities Act and will
remain subject to restrictions on transferability to the extent that they are
not exchanged for the Exchange Capital Securities. Although the Exchange
Capital Securities will generally be permitted to be resold or otherwise
transferred by the holders thereof without compliance with the registration
requirements under the Securities Act, they will constitute a new issue of
securities with no established trading market. Capital Securities may be
transferred by the holders thereof only in blocks having a Liquidation Amount
of not less than $100,000 (100 Capital Securities). The Company has been
advised by the Initial Purchasers that they currently intend to make a market
in the Exchange Capital Securities and the Old Capital Securities. However,
the Initial Purchasers are not obligated to do so and any market-making
activity with respect to the Exchange Capital Securities or the Old Capital
Securities may be discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act. Accordingly, no assurance can be given that an
active public or other market will develop for the Exchange Capital Securities
or the Old Capital Securities or as to the liquidity of or the trading market
for the Exchange Capital Securities or the Old Capital Securities. If an
active public market does not exist for the Exchange Capital Securities or the
Old Capital Securities, as the case may be, the market price and liquidity of
such Capital Securities may be adversely affected.
Future trading prices of the Capital Securities will depend on many factors,
including, among other things, prevailing interest rates, results of
operations of the Company and the market for similar securities. Under certain
circumstances, the Capital Securities may trade at a discount.
Notwithstanding the registration of the Exchange Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Company or the Trust may publicly offer for sale or
resell the Exchange Securities only in compliance with the provisions of Rule
144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Old Capital Securities, where such Old Capital
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Capital
Securities. See "Plan of Distribution."
EXCHANGE OFFER PROCEDURES
Subject to the conditions set forth under "The Exchange Offer--Conditions to
the Exchange Offer." delivery of Exchange Capital Securities in exchange for
Old Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer, will be made only after timely receipt by the Exchange Agent
of (i) certificates for Old Capital Securities or a book-entry confirmation of
a book-entry transfer of Old Capital Securities into the Exchange Agents
account at DTC, including an Agent's Message (as defined under "The Exchange
Offer--Acceptance for Exchange and Issuance of Exchange Capital Securities")
if the tendering holder does not deliver a Letter of Transmittal (ii) a
completed and signed Letter of Transmittal (or facsimile thereof) with any
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal, and (iii) any other
documents required by the Letter of Transmittal. Therefore, holders of Old
Capital Securities desiring to tender such Old Capital Securities in exchange
for Exchange Capital Securities should allow sufficient time to ensure timely
delivery. Neither the Company nor the Trust is under a duty to give
notification of defects or irregularities with respect to the tenders of Old
Capital Securities for exchange.
FORWARD LOOKING STATEMENTS
Certain of the statements contained in this Offering Memorandum and in
documents incorporated herein may be considered forward-looking statements
within the meaning of Section 27A of the Securities Act and
20
<PAGE>
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), that are based on management's beliefs, as well as assumptions made by,
and information currently available to, management. When used in these
documents, words such as "anticipate," "estimate," "project" and "expect" are
intended to identify forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, projected or expected. Among the
key factors that may have a direct bearing on the Company's results of
operations and financial condition are: (i) competitive practices in the
industries in which the Company competes, (ii) fluctuations in energy
commodity prices, which have not been fully hedged or which are inconsistent
with the Company's open position in its energy marketing activities, (iii)
environmental liabilities to which the Company may become subject in the
future which are not covered by indemnity or insurance, and (iv) the impact of
current and future laws and governmental regulations (particularly
environmental regulations) affecting the energy industry in general and NGC's
operations in particular.
21
<PAGE>
USE OF PROCEEDS FROM THE SALE OF OLD CAPITAL SECURITIES
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the Exchange Capital Securities offered hereby. In consideration
for issuing the Exchange Capital Securities in exchange for Old Capital
Securities as described in this Prospectus, the Trust will receive Old Capital
Securities in like Liquidation Amount. The Old Capital Securities surrendered
in exchange for the Exchange Capital Securities will be retired and canceled.
The net proceeds to the Trust from the offering of the Old Capital
Securities was approximately $197.8 million. All of the proceeds from the sale
of the Common Securities and the Old Capital Securities were invested by the
Trust in the Old Subordinated Debentures. The Company applied the net proceeds
from the sale of the Old Subordinated Debentures to pay a portion of the
consideration in connection with the acquisition of Destec Energy, Inc.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for each of the periods shown. The computation for each of
the years ended December 31, 1992 through 1994 includes only the consolidated
results of Clearinghouse and its subsidiaries. The computation for 1995
includes the consolidated results of Clearinghouse and its subsidiaries for
the full year, and of Trident NGL Holding, Inc. ("Holding") and its
subsidiaries from March 1, 1995, the effective date of the Trident
Combination. The computation for 1996 includes the consolidated results of
NGC, inclusive of Holding and its subsidiaries for the year, and the earnings
and fixed charges relating to the assets and operations acquired from Chevron
Corporation effective September 1, 1996. The computation for the interim
period ended June 30, 1997, does not include the operations acquired in the
Destec Energy, Inc. acquisition, which was effective July 1, 1997.
<TABLE>
<CAPTION>
NGC CORPORATION NATURAL GAS CLEARINGHOUSE
--------------------------------- ------------------------------------
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
-------------- ------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- -------- -------- --------
<S> <C> <C> <C> <C> <C>
2.25 4.07 2.48 13.08 19.18 11.84
</TABLE>
For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income before income taxes and fixed charges (excluding capitalized
interest, depreciation of interest previously capitalized and the pre-tax
equivalent value of dividend requirements on the Company's Series A
Participating Preferred Stock) less undistributed income from equity
investees. Fixed charges consist of (i) the Company's interest expense, (ii)
amortization of deferred financing costs, (iii) interest capitalized during
the year, (iv) pre-tax equivalent value of dividend requirements on the
Company's Series A Participating Preferred Stock, (v) dividend obligations of
the Company Obligated Preferred Securities of a Subsidiary Trust and (vi) the
portion of the Company's lease rental expense representative of the interest
factor attributable to such leases.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included in
the consolidated financial statements of the Company. The Capital Securities
will be presented in the consolidated balance sheet of the Company as a
separate line item directly above stockholders' equity under the caption
"Company--Obligated Preferred Securities of Subsidiary Trust" and appropriate
disclosures about the Capital Securities, the Guarantee and the Subordinated
Debentures will be included in the notes to the consolidated financial
statements. For financial reporting purposes, the Company will record
Distributions payable on the Capital Securities as an expense in the
consolidated statements of income.
22
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company as of June 30, 1997, on a historical basis, which reflects the issuance
of the Capital Securities on May 28, 1997.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-------------------
(IN THOUSANDS)
<S> <C>
Short-term debt (including current maturities)............. $ 275
==========
Long-term debt:
Revolving credit facility................................ 680,000
6 3/4% Senior Notes due December 15, 2005................ 150,000
7 5/8% Senior Notes due October 15, 2026................. 175,000
Chevron Note............................................. 155,373
Unamortized debt premium--Chevron Note................... 2,775
Warren NGL, Inc. Senior Subordinated Notes(1)............ 65,000
Warren NGL, Inc. Subordinated Notes(1)................... 105,000
Unamortized debt premium--Warren NGL, Inc. Notes(1)...... 12,566
Other.................................................... 550
----------
Total long-term debt................................... 1,346,264
----------
Company-obligated Trust Preferred Securities............... 200,000
Stockholders equity:
Preferred Stock, $0.01 par value, 50,000,000 shares
authorized; 8,000,000 shares designated as Series A
Participating Preferred Stock, 7,815,363 shares issued
and outstanding at June 30, 1997........................ 75,418
Common Stock, $0.01 par value, 400,000,000 shares
authorized, 151,257,423 shares issued and outstanding at
June 30, 1997........................................... 1,512
Additional paid-in capital............................... 906,998
Retained earnings........................................ 176,172
----------
1,160,100
Less: treasury stock, at cost; 59,900 shares at June 30,
1997.................................................... (935)
----------
Total Stockholders' Equity............................. 1,159,165
----------
Total capitalization................................. $2,705,429
==========
</TABLE>
- --------
(1) Consists of indebtedness issued by the Company's wholly-owned subsidiary
Warren NGL, Inc.
23
<PAGE>
THE TRUST
The Trust is a statutory business trust created under Delaware law pursuant
to (i) the Trust Agreement executed by the Company, as Sponsor, The First
National Bank of Chicago, as Property Trustee, First Chicago Delaware Inc., as
Delaware Trustee, and the Administrative Trustees named therein, and (ii) the
filing of a certificate of trust with the Delaware Secretary of State on May
20, 1997. The Trust exists for the exclusive purposes of (i) issuing and
selling the Trust Securities and effecting the Exchange Offer for the Exchange
Capital Securities, (ii) using the proceeds from the sale of the Old Capital
Securities and the Common Securities to acquire the Old Subordinated
Debentures, (iii) exchanging the Old Subordinated Debentures for Exchangeable
Subordinated Debentures and (iv) engaging in only those other activities
necessary, advisable or incidental thereto. The Subordinated Debentures are
the sole assets of the Trust, and, accordingly, payments under the
Subordinated Debentures are the sole revenues of the Trust. The Trust has a
term of 31 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 Capital
Securities, except that upon the occurrence and continuance of a Debenture
Event of Default, the rights of the Company as holder of the Common Securities
to payments in respect of Distributions and payments upon liquidation,
redemption or otherwise will be subordinated to the rights of the holders of
the Capital Securities. See "Description of Capital Securities--Subordination
of Common Securities." On the issue date, the Company acquired Common
Securities in a Liquidation Amount equal to 3% of the total capital of the
Trust.
The Trust's business and affairs are conducted by its trustees, each
appointed by the Company as holder of the Common Securities. The trustees for
the Trust are The First National Bank of Chicago, as the Property Trustee (the
"Property Trustee"), First Chicago Delaware Inc., as the Delaware Trustee (the
"Delaware Trustee"), and three individual trustees (the "Administrative
Trustees") who are officers of the Company (collectively, the "Issuer
Trustees"). The First National Bank of Chicago, as Property Trustee, acts as
sole indenture trustee under the Trust Agreement. The First National Bank of
Chicago also acts as indenture trustee under the Guarantee and the Indenture.
See "Description of Guarantee" and "Description of Subordinated Debentures."
The holder of the Common Securities of the Trust or, if an Event of Default
under the Trust Agreement ("Trust Indenture Event of Default") has occurred
and is continuing, the holders of not less than a majority in Liquidation
Amount of the Capital Securities, will be entitled to appoint, remove or
replace the Property Trustee and/or the Delaware Trustee. In no event will the
holders of the Capital Securities have the right to vote to appoint, remove or
replace the Administrative Trustees; such voting rights will be vested
exclusively in the holder of the Common Securities. The duties and obligations
of each Issuer Trustee are governed by the Trust Agreement.
For so long as the Capital Securities remain outstanding, the Company
covenants (i) to maintain directly or indirectly 100% ownership of the Common
Securities, (ii) to use its reasonable efforts to cause the Trust to remain a
statutory business trust and not to voluntarily dissolve, wind-up, liquidate
or be terminated, except as permitted by the Trust Agreement, (iii) to use its
reasonable efforts to ensure that the Trust will not be an "investment
company" for purposes of the Investment Company Act, (iv) to use its
reasonable efforts to cause the Trust to continue to be treated as a grantor
trust and not an association taxable as a corporation for United States
federal income tax purposes and (v) use its reasonable efforts to cause each
holder of Trust Securities to be treated as owning an undivided beneficial
interest in the Subordinated Debentures.
Pursuant to the expense provisions under the Indentures, the Company will
pay all fees, expenses, debts and obligations (other than the payment of
principal, interest and premium, if any, on the Trust Securities) related to
the Trust and the offering of the Capital Securities, including all fees and
expenses in connection with the Exchange Offer and all ongoing costs, expenses
and liabilities of the Trust.
The location of the principal executive office of the Trust is c/o NGC
Corporation, 1000 Louisiana, Suite 5800, Houston, Texas 77002, and its
telephone number is 713-507-6400.
24
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Old Capital Securities, the Company and
the Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Company and the Trust agreed, among other
things, to use their best efforts to file and to cause to become effective
with the Commission a registration statement with respect to the exchange of
the Old Capital Securities for capital securities with terms identical in all
material respects to the terms of the Old Capital Securities. A copy of the
Registration Rights Agreement has been filed as an Exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Company and the Trust under the Registration Rights Agreement. The form
and terms of the Exchange Capital Securities are the same as the form and
terms of the Old Capital Securities except that the Exchange Capital
Securities have been registered under the Securities Act and therefore will
not be subject to certain restrictions on transfer applicable to the Old
Capital Securities and will not provide for any increase in the Distribution
rate thereon. In that regard, the Old Capital Securities provide, among other
things, that, if the Exchange Offer is not consummated within a specified
period after the date the Old Capital Securities were issued, then both the
Distribution rate borne by the Old Capital Securities and the interest rate
borne by the Old Subordinated Debentures will increase by 0.25% per annum
until the Exchange Offer is consummated. Upon consummation of the Exchange
Offer, holders of Old Capital Securities will not be entitled to any increase
in the Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors-- Consequences of a Failure to Exchange Old Capital Securities" and
"Description of the Old Securities."
The Exchange Offer is not being made to, nor will the Company or the Trust
accept tenders for exchange from, holders of Old Capital Securities in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not
be in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Old Capital Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Capital Securities are held of record by the nominee of DTC who desires to
deliver such Old Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange, as soon as
practicable after the draft hereof, the Old Guarantee for the Exchange
Guarantee and all of the Old Subordinated Debentures, of which $206,200,000
aggregate principal amount is outstanding, for a like aggregate principal
amount of the Exchange Subordinated Debentures. The Exchange Subordinated
Debentures and the Exchange Guarantee have been registered under the
Securities Act.
TERMS OF THE EXCHANGE
The Company and the Trust hereby offer, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, to exchange up to $200,000,000 aggregate Liquidation Amount of
Exchange Capital Securities for a like aggregate Liquidation Amount of Old
Capital Securities properly tendered prior to 5:00 p.m., New York City time,
on the Expiration Date and not properly withdrawn, in accordance with the
procedures described below. The Trust will issue, promptly after the
Expiration Date, an aggregate Liquidation Amount of up to $200,000,000 of
Exchange Capital Securities in exchange for a like Liquidation Amount of
outstanding Old Capital Securities tendered and accepted in connection with
the Exchange Offer. Holders may tender their Old Capital Securities in whole
or in part in a Liquidation Amount of not less than $100,000 (100 Capital
Securities) or any integral multiple of $1,000 in excess thereof, provided
that if any Old Capital Securities are tendered for exchange in part, the
untendered Liquidation Amount thereof must be $100,000 (100 Capital
Securities) or any integral multiple of $1,000 in excess thereof.
25
<PAGE>
The Exchange Offer is not conditioned upon any minimum Liquidation Amount of
Old Capital Securities being tendered. As of the date of this Prospectus,
$200,000,000 aggregate Liquidation Amount of the Old Capital Securities is
outstanding.
Holders of Old Capital Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Capital Securities which are
not tendered or are tendered but not accepted in connection with the Exchange
Offer will remain outstanding and be entitled to the benefits of the Trust
Agreement, but will not be entitled to any increase in the Distribution rate
thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Risk Factors--
Consideration of a Failure to Exchange Old Capital Securities" and
"Description of the Old Securities."
If any tendered Old Capital Securities are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth herein
or otherwise, certificates for any such unaccepted Old Capital Securities will
be returned, without expense, to the tendering holder thereof promptly after
the Expiration Date.
Holders who tender Old Capital Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Capital Securities in connection with the Exchange Offer.
The Company will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "--Fees and
Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE ISSUER TRUSTEES MAKE
ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL SECURITIES AS TO WHETHER TO
TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD CAPITAL
SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES
MUST MAKE THEIR OWN DECISION BASED ON THEIR OWN FINANCIAL POSITION AND
REQUIREMENTS WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE
AGGREGATE LIQUIDATION AMOUNT OF OLD CAPITAL SECURITIES TO TENDER AFTER READING
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR
ADVISORS, IF ANY.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on October
20, 1997 unless the Exchange Offer is extended by the Company and the Trust
(in which case the term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended).
The Company and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Old Capital Securities for exchange,
(ii) to terminate the Exchange Offer (whether or not any Old Capital
Securities have theretofore been accepted for exchange) if the Company and the
Trust determine, in their sole and absolute discretion, that any of the events
or conditions referred to under "--Conditions to the Exchange Offer" has
occurred or exists or has not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Old Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Old Capital Securities to withdraw their tendered Old Capital Securities as
described under "--Procedures for Tendering Old Capital Securities--Withdrawal
of Tenders," and (iv) to waive any condition or otherwise amend the terms of
the Exchange Offer in any respect. If the Exchange Offer is amended in a
manner determined by the Company and the Trust to constitute a material
change, or if the Company and the Trust waive a material condition of the
Exchange Offer, the Company or the Trust will promptly disclose such amendment
or waiver by means of a prospectus supplement that will be distributed to the
registered holders of the Old Capital Securities, and the Company and the
Trust will extend the Exchange Offer to the extent required by applicable law.
26
<PAGE>
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of
an extension will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company or the Trust may choose to make any
public announcement and subject to applicable law, neither the Company nor the
Trust shall have any obligation to publish, advertise or otherwise communicate
any such public announcement other than by issuing a release to an appropriate
news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange Exchange Capital Securities for Old Capital Securities
validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "--Procedures for Tendering Old Capital Securities--Withdrawal
of Tenders") promptly after the Expiration Date.
Subject to the conditions set forth under "--Conditions to the Exchange
Offer" delivery of Exchange Capital Securities in exchange for Old Capital
Securities tendered and accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of (i)
certificates for Old Capital Securities or a book-entry confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's
account at DTC, including an Agent's Message if the tendering holder does not
deliver a Letter of Transmittal, (ii) a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message in lieu of the
Letter of Transmittal, and (iii) any other documents required by the Letter of
Transmittal. Accordingly, the delivery of Exchange Capital Securities might
not be made to all tendering holders at the same time, and will depend upon
when certificates for Old Capital Securities, book-entry confirmations with
respect to Old Capital Securities and other required documents are received by
the Exchange Agent.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Old Capital Securities with the Exchange Agent's account at
DTC. See "--Procedures for Tendering Old Capital Securities--Book-Entry
Transfer." The term "Agent's Message" means a message transmitted by DTC to
and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgement
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by the Letter of Transmittal
and that the Trust and the Company may enforce such Letter of Transmittal
against such participant.
Subject to the terms and conditions of the Exchange Offer, the Company and
the Trust will be deemed to have accepted for exchange, and thereby exchanged
Old Capital Securities validly tendered and not withdrawn as, if and when the
Trust gives oral or written notice to the Exchange Agent of the Company's and
the Trust's acceptance of such Old Capital Securities for exchange pursuant to
the Exchange Offer. The Exchange Agent will act as agent for the Company and
the Trust for the purposes of receiving tenders of Old Capital Securities,
Letters of Transmittal and related documents, and as agent for tendering
holders for the purpose of receiving Old Capital Securities, Letters of
Transmittal and related documents and transmitting Exchange Capital Securities
which will not be held in global form by DTC or a nominee of DTC to validly
tendering holders. Such exchange will be made promptly after the Expiration
Date. If for any reason whatsoever, acceptance for exchange or the exchange of
any Old Capital Securities tendered pursuant to the Exchange Offer is delayed
(whether before or after the Company's and the Trust's acceptance for exchange
of Old Capital Securities) or the Company and the Trust extend the Exchange
Offer or are unable to accept for exchange or exchange Old Capital Securities
tendered pursuant to the Exchange Offer, then, without prejudice to the
Company's and the Trust's right set forth herein, the Exchange Agent may,
nevertheless, on behalf of the Company and the Trust and subject to Rule 14e-
1(c) under the Exchange Act, retain tendered Old Capital Securities and such
Old Capital Securities may not be withdrawn except to the extent tendering
holders are entitled to withdrawal rights as described under "--Procedures for
Tendering Old Capital Securities--Withdrawal of Tenders."
27
<PAGE>
Pursuant to an Agent's Message or a Letter of Transmittal, a holder of Old
Capital Securities will represent, warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Old Capital Securities, that the Trust will acquire good,
marketable and unencumbered title to the tendered Old Capital Securities, free
and clear of all liens, restrictions, charges and encumbrances, and the Old
Capital Securities tendered for exchange are not subject to any adverse claims
or proxies. The holder also will warrant and agree that it will, upon request
execute, and deliver any additional documents deemed by the Trust or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment and transfer of the Old Capital Securities tendered pursuant to the
Exchange Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
Valid Tender. Except as set forth below, in order for Old Capital Securities
to be validly tendered pursuant to the Exchange Offer, a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must be
received by the Exchange Agent at one of its addresses set forth under "--
Exchange Agent". In addition, either (i) certificates for such Old Capital
Securities must be received by the Exchange Agent or (ii) a timely
confirmation of a book-entry transfer ("Book-Entry Confirmation") of such Old
Capital Securities, if that procedure is available, into the Exchange Agent's
account at DTC pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent, in each case prior to 5:00
p.m., New York City time, on the Expiration Date or (iii) the holder must
comply with the guaranteed delivery procedures set forth below.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The tender by a holder of Old Capital Securities that is not withdrawn
before 5:00 p.m., New York City time, on the Expiration Date will constitute
an agreement between such holder and the Company and the Trust in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal.
Any beneficial owner whose Old Capital Securities are registered in the name
of a broker, dealer, commercial bank, trust company, or other nominee and who
wishes to tender should contact the registered holder promptly and instruct
such registered holder to tender on the beneficial owner's behalf. If the
beneficial owner wishes to tender on its own behalf, the owner must, prior to
completing and executing the Letter of Transmittal and delivering Old Capital
Securities certificates, either make appropriate arrangements to register
ownership of the Old Capital Securities in such beneficial owner's name or
obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
If fewer than all of the Old Capital Securities held by a holder are
tendered, such tendering holder should fill in the amount of Old Capital
Securities being tendered in the appropriate box on the Letter of Transmittal.
The entire amount of Old Capital Securities delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
Book-Entry Transfer The Exchange Agent and DTC have confirmed that any
Participant (as defined in "Description of the Capital Securities--Depositary
Procedures") in DTC's book-entry transfer facility system may utilize DTC's
ATOP procedures to tender Old Capital Securities. The Exchange Agent will
establish an account with respect to the Old Capital Securities at DTC for
purposes of the Exchange Offer within two business days after the date of this
Prospectus. Any Participant may make a book-entry delivery of the Old Capital
Securities by causing DTC to transfer such Old Capital Securities into the
Exchange Agent's account at DTC in accordance with DTC's ATOP procedures for
transfer. However, although delivery of Old Capital Securities may be effected
through book-entry transfer into the Exchange Agent's account at DTC, an
Agent's Message or a
28
<PAGE>
completed and signed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other documents required by the Letter
of Transmittal, must in any case be delivered to and received by the Exchange
Agent at one of its addresses set forth under "--Exchange Agent" on or prior
to the Expiration Date, or the guaranteed delivery procedure set forth below
must be complied with. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signatures. Certificates for the Old Capital Securities need not be endorsed
and signature guarantees on the Letter of Transmittal, or a notice of
withdrawal, as the case may be, are unnecessary unless (i) a certificate for
the Old Capital Securities is registered in a name other than that of the
person surrendering the certificate or (ii) such registered holder completes
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the Letter of Transmittal. In the case of (i) or (ii) above,
such certificates for Old Capital Securities must be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined
therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association or clearing
agency; or (v) a savings association that is a participant in a Securities
Transfer Association (each, an "Eligible Institution"), unless surrendered on
behalf of such Eligible Institution. See Instruction 1 to the Letter of
Transmittal.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a
trustee, attorney-in-fact, officer of a corporation or other person acting in
a fiduciary or representative capacity, such person should indicate when
signing, and unless waived by the Company or the Trust, proper evidence
satisfactory to the Company or the Trust, in its sole discretion, of such
person's authority to so act must be submitted.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Old Capital Securities will be determined by the Company and
the Trust, in their sole discretion, whose determination shall be final and
binding on all parties. The Company and the Trust reserve the absolute right,
in their sole and absolute discretion, to reject any and all tenders
determined by them not to be in proper form or the acceptance of which, or
exchange for, may, in the view of counsel to the Company and the Trust, be
unlawful. The Company and the Trust also reserve the absolute right, subject
to applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "--Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Old Capital Securities of any particular holder,
whether or not similar conditions or irregularities are waived in the case of
other holders.
The Company's and the Trust's interpretation of the terms and conditions of
the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Old Capital Securities shall
be deemed to have been validly made until all irregularities with respect to
such tender have been cured or waived. Neither the Company, the Trust, any
affiliates or assigns of the Company, the Exchange Agent nor any other person
shall be under any duty to give any notification of any irregularities in
tenders or incur any liability for failure to give any such notification.
Acceptance of Old Capital Securities for Exchange; Delivery of Exchange
Capital Securities. Upon the terms and subject to the conditions of the
Exchange Offer, the Company and the Trust will exchange, and will issue to the
Exchange Agent, Exchange Capital Securities for Old Capital Securities validly
tendered and not withdrawn (pursuant to the withdrawal rights described under
"--Withdrawal of Tenders") promptly after the Expiration Date.
In all cases, delivery of Exchange Capital Securities in exchange for Old
Capital Securities tendered and accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of (i) Old
Capital Securities or a Book-Entry Confirmation (as defined below), (ii) the
Letter of Transmittal
29
<PAGE>
(or facsimile thereof), properly completed and duly executed, with any
required signature guarantees, and (iii) any other documents required by the
Letter of Transmittal.
Subject to the terms and conditions of the Exchange Offer, the Company and
the Trust will be deemed to have accepted for exchange, and thereby exchanged,
Old Capital Securities validly tendered and not withdrawn as, if and when the
Company or the Trust gives oral or written notice to the Exchange Agent of the
Company's and the Trust's acceptance of such Old Capital Securities for
exchange pursuant to the Exchange Offer. The Exchange Agent will act as agent
for the Company and the Trust for the purpose of receiving tenders of Old
Capital Securities, Letters of Transmittal and related documents, and as agent
for tendering holders for the purpose of receiving Old Capital Securities,
Letters of Transmittal and related documents and transmitting Exchange Capital
Securities to validly tendering holders. Such exchange will be made promptly
after the Expiration Date. If, for any reason whatsoever, acceptance for
exchange or the exchange of any Old Capital Securities tendered pursuant to
the Exchange Offer is delayed (whether before or after the Company's and the
Trust's acceptance for exchange of Old Capital Securities) or the Company or
the Trust extends the Exchange Offer or is unable to accept for exchange or
exchange Old Capital Securities tendered pursuant to the Exchange Offer, then,
without prejudice to the Company's or the Trust's rights set forth herein, the
Exchange Agent may, nevertheless, on behalf of the Company and the Trust (and
subject to applicable law), retain tendered Old Capital Securities and such
Old Capital Securities may not be withdrawn except to the extent tendering
holders are entitled to withdrawal rights as described under "--Withdrawal of
Tenders."
Pursuant to the Letter of Transmittal, a holder of Old Capital Securities
will warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Old Capital
Securities, that the Trust will acquire good, marketable and unencumbered
title to the tendered Old Capital Securities, free and clear of all liens,
restrictions, charges and encumbrances, and that the Old Capital Securities
tendered for exchange are not subject to any adverse claims or proxies. The
holder also will warrant and agree that it will, upon request, execute and
deliver any additional documents deemed by the Company, the Trust or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment and transfer of the Old Capital Securities tendered pursuant to the
Exchange Offer.
Notwithstanding any other provision hereof, the delivery of Exchange Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities and a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
together with any required signature guarantees and any other documents
required by the Letter of Transmittal, or of a Book-Entry Confirmation with
respect to such Old Capital Securities. Accordingly, the delivery of Exchange
Capital Securities might not be made to all tendering holders at the same
time, and will depend upon when Old Capital Securities, Book-Entry
Confirmations with respect to Old Capital Securities and other required
documents are received by the Exchange Agent.
Book-Entry Transfer. The Exchange Agent will make a request to establish an
account with respect to the Old Capital Securities at DTC for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in DTC's book-entry transfer
facility system may make a book-entry delivery of the Old Capital Securities
by causing DTC to transfer such Old Capital Securities into the Exchange
Agent's account at DTC in accordance with DTC's procedures for transfers.
However, although delivery of Old Capital Securities may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other required documents, must, in
any case other than as set forth in the following paragraph, be transmitted to
and received by the Exchange Agent at its address set forth under "--Exchange
Agent" prior to 5:00 p.m., New York City time, on the Expiration Date, or the
guaranteed delivery procedure set forth below must be complied with in order
for such Old Capital Securities to be properly tendered.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through
DTC's communication system in place of sending a signed, hard copy of the
Letter
30
<PAGE>
of Transmittal. DTC is obligated to communicate those electronic instructions
to the Exchange Agent. To tender Old Capital Securities through ATOP, the
electronic instructions sent to DTC and transmitted by DTC to the Exchange
Agent must contain the character by which the participant acknowledges its
receipt of and agrees to be bound by the Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Old Capital Securities
pursuant to the Exchange Offer and the certificates for such Old Capital
Securities are not immediately available or time will not permit all required
documents to reach the Exchange Agent before 5:00 p.m., New York City time, on
the Expiration Date, or the procedures for book-entry transfer cannot be
completed on a timely basis, such Old Capital Securities may nevertheless be
tendered, provided that all of the following guaranteed delivery procedures
are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent prior to 5:00 p.m., New York City time,
on the Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing all
tendered Old Capital Securities, in proper form for transfer, together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within five New York Stock Exchange trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail, to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Withdrawal of Tenders. Tenders of Old Capital Securities may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For withdrawal to be effective, a written electronic ATOP transmission
notice of withdrawal (for DTC participants) must be received by the Exchange
Agent at one of its addresses set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having tendered the Old Capital Securities to
be withdrawn, (ii) identify the Old Capital Securities to be withdrawn
(including the certificate number or numbers and Liquidation Amount of such
Old Capital Securities) and (iii) where physical certificates for Old Capital
Securities have been transmitted, specify the name in which any such Old
Capital Securities are registered, if different from that of the withdrawing
holder. If physical certificates for Old Capital Securities have been
delivered or otherwise identified to the Exchange Agent, then, prior to the
release of such certificates, the withdrawing holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed, as necessary. If Old Capital
Securities have been tendered pursuant to the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn Old Capital
Securities and otherwise comply with DTC's procedures. All questions as to
validity, form, and eligibility (including time of receipt) of such notices
will be determined by the Company or the Trust, whose determination shall be
final and binding on all parties. Any Old Capital Securities so withdrawn will
be deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Capital Securities which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Old Capital
Securities tendered by book-entry transfer into the Exchange Agent's Account
at DTC pursuant to the book-entry transfer procedures described above, such
Old Capital Securities will be credited to an account maintained with DTC for
the Old Capital Securities) as soon as practicable after withdrawal, rejection
of tender, or termination of the Exchange Offer. Properly withdrawn Old
Capital Securities may be retendered by following one of the procedures
described above at a time prior to 5:00 p.m., New York City time, on the
Expiration Date.
31
<PAGE>
RESALES OF EXCHANGE CAPITAL SECURITIES
Based on existing interpretations by the staff of the Commission and subject
to the two immediately following sentences, the Company and the Trust believe
that the Exchange Capital Securities, the Exchange Guarantee and, after
distribution thereof to the holders of Capital Securities, the Exchange
Subordinated Debentures issued pursuant to this Exchange Offer may be offered
for resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the
registration and prospectus delivery requirements of the Securities Act;
provided, that, such Exchange Capital Securities are acquired in the ordinary
course of such holder's business and such holder is not participating, and has
no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of the Exchange
Capital Securities. However, any holder of Old Capital Securities who is an
"affiliate" of the Trust or the Company (within the meaning of Rule 405 under
the Securities Act) or who intends to participate in the Exchange Offer for
the purpose of distributing the Exchange Capital Securities, or any broker-
dealer who purchased the Old Capital Securities from the Trust to resell
pursuant to Rule 144A or any other available exemption under the Securities
Act, (i) will not be able to rely on the interpretations of the staff of the
Commission set forth in the above-mentioned no-action letters, (ii) will not
be permitted or entitled to tender such Old Capital Securities in the Exchange
Offer and (iii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other
transfer of such Old Capital Securities unless such sale is made pursuant to
an exemption from such requirements. In addition, as described below, if any
broker-dealer holds Old Capital Securities acquired for its own account as a
result of market-making or other trading activities and exchanges such Old
Capital Securities for Exchange Capital Securities, then such broker-dealer
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for Exchange Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Trust or the
Company, (ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business and (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Capital
Securities. Each broker-dealer that receives Exchange Capital Securities for
its own account pursuant to the Exchange Offer must acknowledge that it
acquired the Old Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based on the position taken by the staff of
the Commission in the no-action letters referred to above, the Company and the
Trust believe that broker-dealers who acquired Old Capital Securities for
their own accounts as a result of market-making activities or other trading
activities may fulfill their prospectus delivery requirements with respect to
the Exchange Capital Securities received upon exchange of such Old Capital
Securities (other than Old Capital Securities which represent an unsold
allotment from the original sale of the Old Capital Securities) with the
prospectus prepared for the Exchange Offer so long as it contains a
description of the plan of distribution with respect to the resale of such
Exchange Capital Securities. Accordingly, subject to certain provisions set
forth in the Registration Rights Agreement and to the limitations set out
herein, the Company and the Trust have agreed that this Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of such Exchange Capital Securities for a period
commencing on the Expiration Date and ending 90 days after the Expiration Date
(subject to extension in certain limited circumstances set forth in the
Registration Rights Agreement) or, if earlier, when all such Exchange Capital
Securities have been disposed of by such broker-dealer. See "Plan of
Distribution." Any broker-dealer who is an "affiliate" of the Trust or the
Company, within the meaning of such term under Rule 405 of the Securities Act,
may not rely on such no-action letters and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction including compliance with the selling security holder
prospectus information requirements of Item 507 of Regulation S-K under the
Securities Act.
In that regard, each broker-dealer who surrenders Old Capital Securities
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the
32
<PAGE>
Company or the Trust of the occurrence by an event or the discovery of any
fact which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain
other events specified in the Registration Agreement, such broker-dealer will
suspend the sale of Exchange Capital Securities (or the Exchange Subordinated
Debt Securities, as applicable) pursuant to this Prospectus until the Company
and the Trust have amended or supplemented this Prospectus to correct such
misstatement or omission and have furnished copies of the amended or
supplemented Prospectus to such broker-dealer or the Company and the Trust
have given notice that the sale of the Exchange Capital Securities (or the
Exchange Subordinated Debentures, as applicable) may be resumed. If the
Company or the Trust gives such notice to suspend the sale of the Exchange
Capital Securities (or the Exchange Subordinated Debentures, as applicable) it
shall extend the 90 day period referred to in the immediately preceding
paragraph during which such broker-dealers are entitled to use this Prospectus
in connection with the resale of Exchange Capital Securities (or the Exchange
Subordinated Debentures, as applicable) by the number of days during the
period from and including the date of the giving of such notice to and
including the date when such broker-dealers shall have received copies of the
supplemented or amended Prospectus necessary to permit such resales or to and
including the date on which the Company and the Trust give notice that the
sale of Exchange Capital Securities (or the Exchange Subordinated Debentures,
as applicable) may be resumed.
Neither the Company nor the Trust has sought its own interpretive letter and
there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such no-
action letters to third parties.
DISTRIBUTIONS ON THE EXCHANGE CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are accepted
for exchange will not receive accumulated Distributions on such Old Capital
Securities for any period from the Distribution Date with respect to such Old
Capital Securities immediately preceding the original issue date of the
Exchange Capital Securities or, if no such Distribution Date has occurred,
from the original issue date of such Old Capital Securities (May 28, 1997),
and such tendering holders will be deemed to have waived the right to receive
any such Distributions. However, because Distributions on the Exchange Capital
Securities will accumulate from the later of the Distribution Date of the Old
Capital Securities immediately preceding the original issue date of the
Exchange Capital Securities and the original issue date of the Old Capital
Securities, the amount of the Distributions received by holders whose Old
Capital Securities are accepted for exchange will not be affected by the
exchange.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Trust will not be required to accept for exchange,
or to exchange, any Old Capital Securities for any Exchange Capital
Securities, and, as described below, may terminate the Exchange Offer (whether
or not any Old Capital Securities have theretofore been accepted for exchange)
or may waive any conditions to or amend the Exchange Offer, if any of the
following conditions has occurred or exists or has not been satisfied:
(a) there shall occur a change in the current interpretation by the staff
of the Commission which permits the Exchange Capital Securities issued
pursuant to the Exchange Offer in exchange for Old Capital Securities to be
offered for resale, resold and otherwise transferred by holders thereof
(other than broker-dealers and any such holder which is an "affiliate" of
the Trust or the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange
Capital Securities are acquired in the ordinary course of such holder's
business and such holders have no arrangement or understanding with any
person to participate in the distribution of such Exchange Capital
Securities; or
(b) any action or proceeding shall have been instituted or threatened in
any court or by or before any government agency or body with respect to the
Exchange Offer which, in the Company's and the Trust's
33
<PAGE>
judgment, would reasonably be expected to impair the ability of the Company
or the Trust to proceed with the Exchange Offer; or
(c) any law, statute, rule or regulation shall have been adopted or
enacted which, in the Company's and the Trust's judgment, would reasonably
be expected to impair the ability of the Company or the Trust to proceed
with the Exchange Offer; or
(d) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Company or the Trust, threatened for that purpose; or
(e) there is a reasonable likelihood in the Company's judgment that, or a
material uncertainty exists in the Company's judgment as to whether,
consummation of the Exchange Offer would result in an adverse tax
consequence to the Company.
If the Company and the Trust determine in their sole and absolute discretion
that any of the foregoing events or conditions has occurred or exists or has
not been satisfied, the Company and the Trust may, subject to applicable law,
terminate the Exchange Offer (whether or not any Old Capital Securities have
theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the Exchange Offer in any respect. If such waiver
or amendment constitutes a material change to the Exchange Offer, the Company
and the Trust will promptly disclose such waiver or amendment by means of a
prospectus supplement that will be distributed to the registered holders of
the Old Capital Securities, and the Company and the Trust will extend the
Exchange Offer to the extent required by applicable law.
EXCHANGE AGENT
The First National Bank of Chicago has been appointed as Exchange Agent for
the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the letter of Transmittal should be
directed to the Exchange Agent as follows:
By Hand, Overnight Delivery or Facsimile Transmissions
By Registered or Certified Mail:
(Eligible Institutions Only):
(212) 240-8938
The First National Bank of Chicago
c/o First Chicago Trust Company To Confirm by Telephone
of New York or for Information Call:
8th Floor, Window 2
New York, NY 10005 (312) 240-8801
Delivery to other than the above addresses in the manner prescribed for such
address or facsimile number will not constitute a valid delivery.
34
<PAGE>
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Capital Securities, and in tendering
for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Capital Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Old Capital
Securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of Old Capital Securities in connection with the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Neither the Company nor the Trust will make any payment to brokers, dealers
or others soliciting acceptances of the Exchange Offer.
35
<PAGE>
DESCRIPTION OF CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Issuer Trustees have
issued the Old Capital Securities and the Common Securities and will issue the
Exchange Securities. The Exchange Capital Securities will represent preferred
undivided beneficial interests in the assets of the Trust, and the holders
thereof will be entitled to a preference over the Common Securities in certain
circumstances with respect to Distributions and amounts payable on redemption
of the Trust Securities or liquidation of the Trust. See "--Subordination of
Common Securities." The Trust Agreement has been qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). This summary of
certain provisions of the Capital Securities, the Common Securities and the
Trust Agreement, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part, 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, including the definitions therein of
certain terms.
GENERAL
The Capital Securities (including the Old Capital Securities and the
Exchange Capital Securities) will be limited to $200,000,000 aggregate
Liquidation Amount at any one time outstanding. The Capital Securities will
rank pari passu, and payments will be made thereon pro rata, with the Common
Securities except that upon the occurrence of a Debenture Event of Default,
the rights of the holders of the Common Securities to receive Distributions
and payments upon liquidation, redemption and otherwise will be subordinated
to the rights of the holders of Capital Securities. Legal title to the Old
Subordinated Debentures is, and legal title to the Exchange Subordinated
Debentures will be, held by the Property Trustee in trust for the benefit of
the holders of the Trust Securities. The Trust may not borrow money, issue
debt or any securities other than the Trust Securities, execute mortgages or
pledge any of its assets. The Guarantee will not guarantee payment of
Distributions or amounts payable on redemption of the Capital Securities or
liquidation of the Trust when the Trust does not have funds on hand legally
available for such payments. See "Description of Guarantee." In such event,
the remedy of a holder of Capital Securities is to direct the Property Trustee
to enforce its rights under the Subordinated Debentures. In addition, a holder
of Capital Securities may institute a legal proceeding directly against the
Company, without first instituting a legal proceeding against the Property
Trustee or any other person or entity, for enforcement of payment to such
holder of principal of, premium, if any, or interest on the Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Capital Securities of such holder on or after the due date specified in
the Subordinated Debentures.
Holders of the Capital Securities have no preemptive or similar rights.
The Exchange Capital Securities, the Private Exchange Securities (if any)
and any Old Capital Securities which remain outstanding after consummation of
the Exchange Offer will constitute a single class of Capital Securities under
the Trust Agreement and, accordingly, will vote together for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Trust Agreement. The terms of the Exchange Capital Securities
are identical in all material respects to the terms of the Old Capital
Securities, except that the Exchange Capital Securities have been registered
under the Securities Act and therefore are not subject to certain restrictions
on transfer applicable to the Old Capital Securities and will not provide for
any increase in the Distribution rate thereon. See "Description of the Old
Securities."
DISTRIBUTIONS
Distributions on the Capital Securities will be payable semi-annually in
arrears on June 1 and December 1 of each year, commencing December 1, 1997, at
the annual rate of 8.316% of the Liquidation Amount to the holders of the
Capital Securities on the relevant record dates. The Distribution rate and the
relevant Distribution Date (as defined below) for the Trust Securities will
correspond to the payments and payment dates on the Subordinated Debentures.
The ability of the Trust to make timely payments of Distributions on the Trust
Securities is solely dependent on the Company's making interest payments on
the Subordinated Debentures as
36
<PAGE>
and when required. The record dates for the Capital Securities will be the
fifteenth day of the month preceding the month in which the relevant
Distribution Date falls. Distributions on the Old Capital Securities
accumulate from the date of original issuance, May 28, 1997, and the first
Distribution Date thereon is June 1, 1997. Holders of Old Capital Securities
whose Old Capital Securities are accepted for exchange will not receive
accumulated Distributions on such Old Capital Securities for any period from
the Distribution Date with respect to such Old Capital Securities immediately
preceding the original issue date of the Exchange Capital Securities or, if no
such Distribution Date has occurred, from the original issue date of such Old
Capital Securities, and such tendering holders will be deemed to have waived
the right to receive any such Distributions. However, because Distributions on
the Exchange Capital Securities will accumulate from the later of the
Distribution Date of the Old Capital Securities immediately preceding the
original issue date of the Exchange Capital Securities and the original issue
date of the Old Capital Securities, the amount of the Distributions received
by holders whose Old Capital Securities are accepted for exchange will not be
affected by the exchange. The amount of Distributions payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months. In
the event that any date on which Distributions are payable on the Capital
Securities is not a Business Day (as defined below), payment of the
Distribution 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 to any
such delay), except that if such next succeeding Business Day falls in the
next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable (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 Chicago, Illinois or Houston, Texas
are authorized or required by law or executive order to remain closed.
So long as no Debenture Event of Default has occurred and is continuing, the
Company will have the right under the Indenture to elect to defer the payment
of interest on the Subordinated Debentures at any time and from time to time
for a period not exceeding 10 consecutive semi-annual periods with respect to
each Extension Period; provided that no Extension Period shall end on a date
other than an Interest Payment Date or extend beyond the Stated Maturity Date.
Semi-annual Distributions on the Capital Securities will be deferred by the
Trust during any such Extension Period. Distributions to which holders of the
Capital Securities are entitled during any such Extension Period will
accumulate additional Distributions thereon at the rate per annum of 8.316%
thereof, compounded semi-annually from the relevant Distribution Date (to the
extent permitted by applicable law), but not exceeding the interest rate then
accruing on the Subordinated Debentures. The term "Distributions," as used
herein, shall include any such additional Distributions.
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods, end
on a date other than an Interest Payment Date or extend beyond the Stated
Maturity Date. 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 must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any such
Extension Period (or an extension thereof) at least five Business Days prior
to the earlier of (i) the date the Distributions on the Capital Securities
would have been payable except for the election to begin such Extension Period
or (ii) the date the Administrative Trustees are required to give notice to
any securities exchange or to holders of such Capital Securities of the record
date or the date such Distributions are payable, but in any event not less
than five Business Days prior to such record date. There is no limitation on
the number of times that the Company may elect to begin an Extension Period.
Accordingly, there could be multiple Extension Periods of varying lengths
throughout the term of the Capital Securities. See "Description of
Subordinated Debentures--Option to Extend Interest Payment Date" and "Certain
Federal Income Tax Considerations--Interest Income and Original Issue
Discount."
During any such Extension Period, the Company may not, and will not permit
any subsidiaries of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a
37
<PAGE>
liquidation payment with respect to, any of the Company's capital stock (other
than (a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock, (b) any
declaration of a dividend in connection with the implementation of a
shareholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) as a result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock, (d) 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, and (e) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Company's benefit plans
for its directors, officers or employees or any of the Company's dividend
reinvestment plans), (ii) make any payment of principal of or premium, if any,
or interest on or repay, repurchase or redeem any debt securities of the
Company (including Other Debentures) that rank pari passu with or junior in
right of payment to the Subordinated Debentures or (iii) make any guarantee
payments (other than payments under the Guarantee) with respect to any
guarantee by the Company of the debt securities of any subsidiary of the
Company (including Other Guarantees) if such guarantee ranks pari passu with
or junior in right of payment to the Subordinated Debentures. The Company has
no current intention to exercise its option to defer payments of interest on
the Subordinated Debentures.
The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. See "Description of Subordinated Debentures--
General." If the Company does not make interest payments on the Subordinated
Debentures, the Property Trustee will not have funds available to pay
Distributions on the Capital Securities. The payment of Distributions (if and
to the extent the Trust has funds on hand legally available for the payment of
such Distributions) will be guaranteed by the Company on a limited basis as
set forth herein under "Description of Guarantee."
PAYMENT OF ADDITIONAL SUMS
If a Tax Event has occurred and is continuing and the Trust is the holder of
all of the Subordinated Debentures, the Corporation will pay Additional Sums
(as defined below), if any, on the Subordinated Debentures. "Additional Sums"
means the additional amounts as may be necessary in order that the amount of
Distributions then due and payable by the Trust on the outstanding Capital
Securities and Common Securities of the Trust will not be reduced as a result
of any additional taxes, duties and other governmental charges to which the
Trust has become subject as a result of a Tax Event.
REDEMPTION
Upon the repayment on the Stated Maturity Date or prepayment prior to the
Stated Maturity Date of the Subordinated Debentures (other than following the
distribution of the Subordinated Debentures to the holders of the Trust
Securities), the proceeds from such repayment or prepayment shall be applied
by the Property Trustee to redeem a Like Amount (as defined below) of the
Trust Securities, upon not less than 30 nor more than 60 days' notice of a
date of redemption to the holders of the Trust Securities (the "Redemption
Date"), at the applicable Redemption Price, which shall be equal to (i) in the
case of the payment of the Subordinated Debentures on the Stated Maturity
Date, the Maturity Redemption Price (equal to the principal amount of, plus
accrued and unpaid interest on, the Subordinated Debentures), (ii) in the case
of the optional prepayment of the Subordinated Debentures, upon the occurrence
and continuation of a Special Event, the Special Event Redemption Price (equal
to the Special Event Prepayment Price in respect of the Subordinated
Debentures) and (iii) in the case of the optional prepayment of the
Subordinated Debentures, the Optional Redemption Price (equal to the Optional
Prepayment Price in respect of the Subordinated Debentures). See "Description
of Subordinated Debentures--Optional Prepayment" and "--Special Event
Prepayment." If less than all of the Subordinated Debentures are to be prepaid
on a Redemption Date, then the proceeds of such prepayment shall be allocated
pro rata among the Trust Securities.
38
<PAGE>
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Subordinated Debentures to be paid in accordance with
their terms and (ii) with respect to a distribution of Subordinated Debentures
upon the liquidation of the Trust, Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Trust Securities of the holder
to whom such Subordinated Debentures are being distributed.
The Company will have the option to prepay the Subordinated Debentures, (i)
in whole at any time or in part from time to time at the Optional Prepayment
Price and (ii) in whole but not in part, at any time within 90 days of the
occurrence of a Special Event, at the Special Event Prepayment Price. See
"Description of Subordinated Debentures--Optional Prepayment" and "--Special
Event Prepayment."
REDEMPTION PROCEDURES
If applicable, Trust Securities shall be redeemed at the applicable
Redemption Price with the proceeds from the contemporaneous repayment or
prepayment of the Subordinated Debentures. Any redemption of Trust Securities
shall be made and the applicable Redemption Price shall be payable on the
Redemption Date only to the extent that the Trust has funds legally available
for the payment of such applicable Redemption Price. See also "--Subordination
of Common Securities."
If the Trust gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are legally available, with respect to the Capital
Securities held by DTC or its nominees, the Property Trustee will deposit
irrevocably with DTC funds sufficient to pay the applicable Redemption Price.
See "--Form, Denomination, Book-Entry Procedures and Transfer." With respect
to the Capital Securities held in certificated form, the Property Trustee, to
the extent funds are legally available, will irrevocably deposit with the
paying agent for the Capital Securities funds sufficient to pay the applicable
Redemption Price and will give such paying agent irrevocable instructions and
authority to pay the applicable Redemption Price to the holders thereof upon
surrender of their certificates evidencing the Capital Securities. See "--
Payment and Paying Agency." Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date shall be payable to the holders of
such Capital Securities on the relevant record dates for the related
Distribution Dates. 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 the Capital Securities called for redemption will cease, except the
right of the holders of the Capital Securities to receive the applicable
Redemption Price, but without interest on such Redemption Price, and the
Capital Securities will cease to be outstanding. In the event that any
Redemption Date of Capital Securities is not a Business Day, then the
applicable Redemption Price payable on such date will be paid on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such next succeeding
Business Day falls in the next calendar year, such payment shall be made on
the immediately preceding Business Day. In the event that payment of the
applicable Redemption Price is improperly withheld or refused and not paid
either by the Trust or by the Company pursuant to the Guarantee as described
under "Description of Guarantee," (i) Distributions on Capital Securities will
continue to accumulate at the then applicable rate, from the Redemption Date
originally established by the Trust to the date such applicable Redemption
Price is actually paid and (ii) the actual payment date will be the Redemption
Date for purposes of calculating the applicable Redemption Price.
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 Capital Securities by tender, in the
open market or by private agreement.
The Trust may not redeem fewer than all of the outstanding Capital
Securities unless all accumulated and unpaid Distributions have been paid on
all Capital Securities for all semi-annual Distribution periods terminating on
or prior to the Redemption Date. If less than all of the Capital Securities
and Common Securities issued by the Trust are to be redeemed on a Redemption
Date, then the aggregate amount of such Capital Securities and Common
Securities to be redeemed shall be allocated pro rata among the Capital
Securities and the Common
39
<PAGE>
Securities. The particular Capital Securities to be redeemed shall be selected
on a pro rata basis not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Capital Securities not previously called
for redemption, 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 $1,000 or integral multiples of $1,000 in excess thereof) of the
Liquidation Amount of Capital Securities in denominations larger than $1,000.
The Property Trustee shall promptly notify the trust registrar in writing of
the Capital Securities selected for redemption and, in the case of any Capital
Security selected for partial redemption, the Liquidation Amount thereof to be
redeemed. For all purposes of the Trust Agreement, unless the context
otherwise requires, all provisions relating to the redemption of Capital
Securities shall relate, in the case of any Capital Security redeemed or to be
redeemed only in part, to the portion of the aggregate Liquidation Amount of
Capital Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Company defaults in payment of the applicable
Redemption Price on, or in the repayment of, the Subordinated Debentures, on
and after the Redemption Date Distributions will cease to accrue on the Trust
Securities called for redemption.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF SUBORDINATED DEBENTURES
The Company will have the right at any time to dissolve the Trust and, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust. Such right is
subject to the Administrative Trustees having received an opinion of counsel
to the effect that such distribution will not be a taxable event to holders of
Capital Securities.
The Trust shall automatically dissolve upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the distribution of a Like Amount of the Subordinated Debentures to the
holders of the Trust Securities, if the Company has given written direction to
the Property Trustee to dissolve the Trust (which direction is optional and,
except as described above, wholly within the discretion of the Company, as
Sponsor); (iii) redemption of all of the Trust Securities as described under
"--Redemption;" (iv) expiration of the term of the Trust; and (v) the entry of
an order for the dissolution of the Trust by a court of competent
jurisdiction.
If a dissolution occurs as described in clause (i), (ii), (iv), or (v)
above, the Trust shall be liquidated by the Administrative Trustees as
expeditiously as the Administrative Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the holders of the Trust Securities a Like
Amount of the Subordinated Debentures, unless such distribution is determined
by the Property Trustee not to be practicable, in which event such holders
will be entitled to receive pro rata out of the assets of the Trust legally
available for distribution to holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the Liquidation Amount plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets on hand legally available to pay in
full the aggregate Liquidation Distribution, then the amount payable directly
by the Trust on the Trust Securities shall be paid on a pro rata basis, except
that if a Debenture Event of Default has occurred and is continuing, the
Capital Securities shall have a priority over the Common Securities. See "--
Subordination of Common Securities."
If the Company elects not to prepay the Subordinated Debentures prior to
maturity in accordance with their terms and either elects not to or is unable
to liquidate the Trust and distribute the Subordinated Debentures to holders
of the Trust Securities, the Trust Securities will remain outstanding until
the repayment of the Subordinated Debentures on the Stated Maturity Date.
40
<PAGE>
After the liquidation date is fixed for any distribution of Subordinated
Debentures to holders of the Trust Securities, (i) the Trust Securities will
no longer be deemed to be outstanding, (ii) DTC or its nominee will receive,
in respect of each registered global certificate, if any, representing Trust
Securities and held by it, a registered global certificate or certificates
representing the Subordinated Debentures to be delivered upon such
distribution and (iii) any certificates representing Trust Securities not held
by DTC or its nominee will be deemed to represent Subordinated Debentures
having a principal amount equal to the Liquidation Amount of such Trust
Securities, and bearing accrued and unpaid interest in an amount equal to the
accumulated and unpaid Distributions on such Trust Securities until such
certificates are presented to the Administrative Trustees or their agent for
cancellation, whereupon the Company will issue to such holder, and the
Debenture Trustee will authenticate, a certificate representing such
Subordinated Debentures.
There can be no assurance as to the market prices for the Capital Securities
or the Subordinated Debentures that may be distributed in exchange for the
Trust Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Capital Securities or the Subordinated Debentures may trade
at a discount to the price that the investor paid to purchase the Capital
Securities offered hereby.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Trust
Securities, as applicable, shall be made pro rata based on the Liquidation
Amount of the Trust Securities; provided, however, that if on any Distribution
Date or Redemption Date a Debenture Event of Default has occurred and is
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of the Common Securities, shall
be made unless payment in full in cash of all accumulated and unpaid
Distributions on all of the outstanding Capital Securities for all
Distribution periods terminating on or prior thereto, or in the case of
payment of the applicable Redemption Price the full amount of such Redemption
Price, 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 Capital Securities then due and
payable.
In the case of any Event of Default under the Trust Agreement, the Company,
as holder of the Common Securities, will be deemed to have waived any right to
act with respect to such Event of Default until the effect of such Event of
Default shall have been cured, waived or otherwise eliminated. Until any such
Event of Default has been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of the Capital
Securities and not on behalf of the Company as holder of the Common
Securities, and only the holders of the Capital Securities will have the right
to direct the Property Trustee to act on their behalf.
EVENTS OF DEFAULT; NOTICE
The occurrence of a Debenture Event of Default (see "Description of
Subordinated Debentures--Debenture Events of Default") constitutes an "Event
of Default" under the Trust Agreement (a "Trust Agreement Event of Default").
Within five Business Days after the occurrence of any Trust Agreement Event
of Default actually known to the Property Trustee, the Property Trustee shall
transmit notice of such Trust Agreement Event of Default to the holders of the
Capital Securities, the Administrative Trustees and the Company, as Sponsor,
unless such Trust Agreement Event of Default shall have been cured or waived.
The Company, as Sponsor, and the Administrative Trustees 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.
Upon the occurrence of a Trust Agreement Event of Default, the Debenture
Trustee or the Property Trustee as the holder of the Subordinated Debentures
will have the right under the Indenture to declare the principal of and
interest on the Subordinated Debentures to be immediately due and payable.
41
<PAGE>
If a Trust Agreement Event of Default occurs and is continuing, then the
holders of not less than a majority in aggregate Liquidation Amount of Capital
Securities have the right 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 under the Trust Agreement to exercise the
remedies available to it as holder of the Subordinated Debentures and the
Guarantee. If the Property Trustee fails to enforce its rights with respect to
the Subordinated Debentures held by the Trust, any record holder of Capital
Securities may, to the fullest extent permitted by law, institute legal
proceedings directly against the Company to enforce the Property Trustee's
rights under such Subordinated Debentures without first instituting any legal
proceedings against such Property Trustee or any other person or entity. In
addition, if a Trust Agreement Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest,
principal or other required payments on the Subordinated Debentures issued to
the Trust on the date such interest, principal or other payment is otherwise
payable, then a record holder of Capital Securities may, on or after the
respective due dates specified in the Subordinated Debentures, institute a
proceeding directly against the Company for enforcement of payment on
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Capital Securities held by such holder. In
connection with such Direct Action, the Company will be subrogated to the
rights of such record holder of Capital Securities to the extent of any
payment made by the Company to such record holder of Capital Securities.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described
under "--Liquidation of the Trust and Distribution of Subordinated Debentures"
and "--Subordination of Common Securities."
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing,
the Property Trustee and the Delaware Trustee may be removed at such time by
the holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Company as the holder of the
Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, convert into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets as
an entirety or substantially as an entirety to any corporation or other
Person, except as described below or as otherwise described under "--
Liquidation of the Trust and Distribution of Subordinated Debentures." The
Trust may, at the request of the Company, as Sponsor, with the consent of the
Administrative Trustees and without the consent of the holders of the Capital
Securities, the Delaware Trustee or the Property Trustee, merge with or into,
convert into, consolidate, amalgamate, or be replaced by or convey, transfer
or lease its properties and assets as an entirety or 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 Trust with respect to the Trust Securities and the Trust
Agreement or (b) substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Securities rank in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Company, as Sponsor, expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Subordinated 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 Trust Securities are then listed or quoted, if
any, (iv) if the Capital Securities (including any Successor Securities) are
rated by any nationally recognized statistical rating organization prior to
such transaction, such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause
42
<PAGE>
the Capital Securities (including any Successor Securities) or, if the
Subordinated Debentures are so rated, the Subordinated Debentures, to be
downgraded by any such nationally recognized statistical rating organization,
(v) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including
any Successor Securities) in any material respect, (vi) such successor entity
has a purpose substantially identical to that of the Trust, (vii) prior to
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Company, as Sponsor, has received an opinion from independent
counsel to the Trust 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 Trust Securities (including any Successor Securities) in any
material respect, and (b) following such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease, (1) neither the
Trust nor such successor entity will be required to register as an investment
company under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and (2) the Trust or the successor entity will continue to be
classified as a grantor trust for United States federal income tax purposes,
(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 and the Common Guarantee and (ix) there shall have
been furnished to the Property Trustee an officer's certificate and an opinion
of counsel, each to the effect that all conditions precedent in the Trust
Agreement to such transaction have been satisfied. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100% in
Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge
with or into, convert into, or be replaced by or convey, transfer or lease its
properties and assets as an entirety or 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 Trust or the
successor entity not to be classified as a grantor trust for United States
federal income tax purposes or would cause the holders of the Trust Securities
not to be treated as owning an undivided interest in the Subordinated
Debentures.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "--Mergers, Consolidations, Amalgamations
or Replacements of the Trust" and "Description of Guarantee--Amendments and
Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust 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, which shall not be
inconsistent with the other provisions of the Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities are outstanding or to ensure that the Trust will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in each such case such action shall not adversely
affect in any material respect the interests of the holders of the Trust
Securities. Any amendments of the Trust Agreement pursuant to the foregoing
shall become effective when notice thereof is given to the holders of the
Trust Securities. The Trust Agreement may be amended by the Issuer Trustees
and the Company (i) with the consent of holders representing a majority (based
upon Liquidation Amount) of the outstanding Trust Securities, and (ii) upon
receipt by the Issuer Trustees of an opinion of counsel experienced in such
matters 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
Trust's status as a grantor trust for United States federal income tax
purposes or the Trust's exemption from status as an "investment company" under
the Investment Company Act; provided that, without the consent of each holder
of Trust Securities, the Trust Agreement may not be amended to (a) change the
amount or timing of any Distribution on the Trust Securities or otherwise
adversely affect the amount of any
43
<PAGE>
Distribution required to be made in respect of the Trust Securities as of a
specified date or (b) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Subordinated Debentures are held by the Trust, 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 the
Subordinated Debentures, (ii) waive any past defaults under the Indenture,
(iii) exercise any right to rescind or annul a declaration of acceleration of
the maturity of the principal of the Subordinated Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Subordinated Debentures, where such consent shall be required, without, in
each case, obtaining the prior approval of the holders of a majority in
Liquidation Amount of all outstanding Capital Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Subordinated Debentures affected thereby, no such consent shall be
given by the Property Trustee without the prior consent of each holder of the
Capital Securities. The Issuer Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Capital Securities
except pursuant to a subsequent vote of such holders. The Property Trustee
shall notify each holder of Capital Securities of any notice of default which
it receives with respect to the Subordinated Debentures. In addition to
obtaining the foregoing approvals of the holders of the Capital Securities,
prior to taking any of the foregoing actions, the Issuer Trustees shall obtain
an opinion of counsel experienced in such matters to the effect that the Trust
will not fail to be classified as a grantor trust for United States federal
income tax purposes on account of such action.
Any required approval of holders of Capital Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Capital 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 Capital Securities in the manner set forth in the
Trust Agreement.
No vote or consent of the holders of Capital Securities will be required for
the Trust to redeem and cancel the Capital Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Trustees or any affiliate of the
Company or any Trustee shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
PAYMENT AND PAYING AGENCY
Payments in respect of the Exchange Capital Securities held in global form
shall be made to the Depositary, which shall credit the relevant accounts at
the Depositary on the applicable Distribution Dates, or in respect of the
Exchange Capital Securities that are not held by the Depositary, such payments
shall be made by check mailed to the address of the holder entitled thereto as
such address shall appear on the register. The paying agent (the "Paying
Agent") shall initially be an affiliate of 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 shall be permitted
to resign as Paying Agent upon 30 days' written notice to the Property
Trustee, the Administrative Trustees 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.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
In the event that Exchange Capital Securities are issued in certificate
form, such Exchange Capital Securities will be in blocks having a Liquidation
Amount of not less than $100,000 (100 Exchange Capital Securities) and may be
transferred or exchanged only in such blocks in the manner and at the offices
described below.
44
<PAGE>
The Exchange Capital Securities will be initially represented by one or more
Capital Securities in registered, global form (collectively, the "Global
Exchange Capital Securities"). The Global Exchange Capital Securities will be
deposited upon issuance with DTC, in New York, New York, and registered in the
name of DTC or its nominee, in each case for credit to an account of a direct
or indirect participant in DTC as described below.
A Global Exchange Capital Security may not be transferred as a whole except
by DTC to another nominee of DTC or to a successor of DTC or its nominee.
Beneficial interests in the Global Exchange Capital Securities shall be
transferred and exchanged through the facilities of DTC. Beneficial interests
in the Global Exchange Capital Securities may not be exchanged for Exchange
Capital Securities in certificated form except in the limited circumstances
described below. See "--Exchange of Book-Entry Capital Securities for
Certificated Capital Securities."
DEPOSITARY PROCEDURES
DTC has advised the Trust and the Company that 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 participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also 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 (collectively, the "Indirect Participants"). Persons
who are not Participants may beneficially own securities held by or on behalf
of DTC only through the Participants or the Indirect Participants. The
ownership interest and transfer of ownership interest of each actual purchaser
of each security held by or on behalf of DTC are recorded on the records of
the Participants and the Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Exchange Capital Securities,
DTC will credit the accounts of Participants designated by the Exchange Agent
with portions of the Liquidation Amount of the Global Exchange Capital
Securities and (ii) ownership of such interests in the Global Exchange Capital
Securities will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Exchange Capital
Securities).
Investors in the Global Exchange Capital Securities may hold their interests
therein directly through DTC if they are participants in such system, or
indirectly through organizations which are participants in such system.
All interests in a Global Exchange Capital Security will be subject to the
procedures and requirements of DTC. Those interests held through Euroclear or
Cedel Bank may also be subject to the procedures and requirements of such
system. The laws of some states require that certain persons take physical
delivery in certificated form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Exchange Capital Security
to such persons will be limited to that extent. Because DTC can act only on
behalf of Participants, which in turn act on behalf of Indirect Participants
and certain banks, the ability of a person having beneficial interests in a
Global Exchange Capital Security to pledge such interests 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. For certain other restrictions on the
transferability of the Capital Securities, see "--Exchange of Book-Entry
Exchange Capital Securities for Certificated Exchange Capital Securities."
Except as described below, owners of interests in the Global Exchange
Capital Securities will not have Exchange Capital Securities registered in
their name, will not receive physical delivery of Exchange Capital Securities
in certificated form and will not be considered the registered owners or
holders thereof under the Trust Agreement for any purpose.
45
<PAGE>
Payments in respect of each Global Exchange Capital Security registered in
the name of DTC or its nominee will be payable by the Property Trustee to DTC
in its capacity as the registered holder under the Trust Agreement. Under the
terms of the Trust Agreement, the Property Trustee will treat the persons in
whose names the Exchange Capital Securities, including the Global Exchange
Capital Securities, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Property Trustee nor any agent thereof has or will
have any responsibility or liability for (i) any aspect of DTC's records or
any Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interests in the Global Capital
Securities, or for maintaining, supervising or reviewing any of DTC's records
or any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Exchange Capital Securities or
(ii) any other matter relating to the actions and practices of DTC or any of
its Participants or Indirect Participants. DTC has advised the Trust and the
Company that its current practice, upon receipt of any payment in respect of
securities such as the Capital Securities, is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in Liquidation Amount of beneficial
interests in the relevant security as shown on the records of DTC unless DTC
has reason to believe it will not receive payment on such payment date.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Exchange Capital Securities represented by Global Exchange Capital
Securities will be governed by standing instructions and customary practices
and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Property Trustee,
the Trust or the Company. None of the Trust, the Company or the Property
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Exchange Capital Securities, and the
Trust, the Company and the Property Trustee may conclusively rely on and will
be protected in relying on instructions from DTC or its nominee for all
purposes.
Interests in the Global Exchange Capital Securities 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.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of Exchange Capital Securities only at the
direction of one or more Participants to whose account with DTC interests in
the Global Exchange Capital Securities are credited and only in respect of
such portion of the Liquidation Amount of the Exchange Capital Securities as
to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Trust Agreement, DTC
reserves the right to exchange the Global Exchange Capital Securities for
Exchange Capital Securities in certificated form and to distribute such
Exchange Capital Securities to its Participants.
The information in this section concerning DTC and its book-entry system has
been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
Although DTC, has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Exchange Capital Securities among Participants in
DTC, they are under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. None of the
Trust, the Company or the Property Trustee will have any responsibility for
the performance by DTC or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
EXCHANGE OF BOOK-ENTRY EXCHANGE CAPITAL SECURITIES FOR CERTIFICATED EXCHANGE
CAPITAL SECURITIES
A Global Exchange Capital Security is exchangeable for Exchange Capital
Securities in certificated form if (i) DTC notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Exchange Capital
Security or has ceased to be a clearing agency registered under the Exchange
Act, and the Trust thereupon fails to appoint a successor Depositary within 90
days, (ii) the Company, on behalf of the Trust, in its sole discretion
46
<PAGE>
elects to cause the issuance of the Exchange Capital Securities in
certificated form or (iii) there shall have occurred and be continuing an
Event of Default under the Trust Agreement. In addition, beneficial interests
in a Global Exchange Capital Security may be exchanged for certificated
Exchange Capital Securities upon request but only upon at least 20 days' prior
written notice given to the Property Trustee by or on behalf of DTC in
accordance with customary procedures. In all cases, certificated Exchange
Capital Securities delivered in exchange for any Global Exchange Capital
Security or beneficial interests therein will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
Depositary (in accordance with its customary procedures).
RESTRICTIONS ON TRANSFER
The Exchange Capital Securities will be issued, and may be transferred, only
in blocks having a Liquidation Amount of not less than $100,000 (100 Exchange
Capital Securities) and multiples of $1,000 in excess thereof. Any attempted
sale, transfer or other disposition of Exchange Capital Securities in a block
having a Liquidation Amount of less than $100,000 shall be deemed to be void
and of no legal effect whatsoever. Any such transferee shall be deemed not to
be the holder of such Exchange Capital Securities for any purpose, including
but not limited to the receipt of Distributions on such Exchange Capital
Securities, and such transferee shall be deemed to have no interest whatsoever
in such Exchange Capital Securities.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Exchange Capital Securities.
Registration of transfers of the Exchange Capital Securities will be
effected without charge by or on behalf of the Trust, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required to register or cause to
be registered the transfer of the Exchange Capital Securities after they have
been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of a
Trust Agreement Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, during the existence of
a Trust Agreement 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 Trust Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby. If no Trust Agreement Event of Default has occurred and is
continuing and the Property Trustee is required to decide between alternative
courses 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 the Capital Securities or the Common
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 Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
The First National Bank of Chicago, the Property Trustee, also serves as the
Indenture Trustee and the Guarantee Trustee. First Chicago Delaware Inc.
serves as the Delaware Trustee. The Company and certain of its subsidiaries
maintain deposit accounts and banking relationships with The First National
Bank of Chicago.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust 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
Exchange Subordinated Debentures will be treated as indebtedness of the
47
<PAGE>
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 Trust 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 Trust Securities.
The Trust Agreement and the Exchange Capital Securities will be governed by
and construed in accordance with the internal laws of the State of Delaware;
provided that the immunities and standard of care of the Property Trustee
should be governed by New York law.
DESCRIPTION OF SUBORDINATED DEBENTURES
The Old Subordinated Debentures were issued, and the Exchange Subordinated
Debentures will be issued under an Indenture dated as of May 28, 1997 (the
"Indenture"), between the Company and The First National Bank of Chicago, as
trustee (the "Debenture Trustee"). The Indenture has been qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). This
summary of certain terms and provisions of the Subordinated 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 and those terms made a part of
the Indenture by the Trust Indenture Act. A copy of the Indenture is filed as
an exhibit to the Registration Statement of which this Prospectus is a part.
In certain circumstances, Subordinated Debentures may be distributed to the
holders of the Trust Securities in liquidation of the Trust. See "Description
of the Capital Securities--Liquidation of the Trust and Distribution of
Subordinated Debentures." Until the liquidation of the Trust, each
Subordinated Debenture will be registered in the name of the Property Trustee
and held by it in trust for the benefit of the holders of the Trust
Securities. Notwithstanding the registration of the Exchange Subordinated
Debentures under the Securities Act, the Exchange Subordinated Debentures may
not be offered for resale, resold or otherwise transferred on behalf of the
Trust without further compliance with the registration and prospectus delivery
requirements of the Securities Act. If the Exchange Subordinated Debentures
are distributed to the holders of Capital Securities, however, the Trust and
the Company believe (based on existing interpretations by the staff of the
Commission) such holders would be permitted, subject to certain limitations,
to offer for resale, resell or transfer the Exchange Subordinated Debentures
without further compliance with the registration and prospectus delivery
requirements of the Securities Act. See "The Exchange Offer--Resales of
Exchange Capital Securities."
GENERAL
Concurrently with the issuance of the Old Capital Securities, the Trust
invested the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in the Old Subordinated Debentures issued
by the Company. Pursuant to the Exchange Offer, the Company will exchange the
Old Subordinated Debentures for the Exchange Subordinated Debentures as soon
as practicable after the date hereof. No Old Subordinated Debentures will
remain outstanding after such exchange. The Subordinated Debentures bear
interest from May 28, 1997 at the annual rate of 8.316% of the principal
amount thereof, payable semi-annually in arrears on June 1 and December 1 of
each year (each, an "Interest Payment Date"), commencing December 1, 1997, to
the person in whose name each Subordinated Debenture is registered, subject to
certain exceptions, at the close of business on the 15th day of the month
preceding the month in which the relevant payment date falls. It is
anticipated that, until the liquidation, if any, of the Trust, each
Subordinated Debenture will be held in the name of the Property Trustee in
trust for the benefit of the holders of the Trust Securities. The amount of
interest payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which interest is
payable on the Subordinated Debentures is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay), except that if such next succeeding Business Day falls in the
next succeeding calendar year, then such payment shall be made on the
48
<PAGE>
immediately preceding Business Day, in each case with the same force and
effect as if made on the date such payment was originally payable. 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 rate per annum of 8.136% thereof, compounded semi-annually. The term
"interest," as used herein, shall include semi-annual interest payments,
interest on semi-annual interest payments not paid on the applicable Interest
Payment Date and Additional Sums (as defined below), as applicable.
The Exchange Subordinated Debentures will be issued in denominations of
$1,000 and integral multiples thereof. The Subordinated Debentures will mature
on June 1, 2027 (the "Stated Maturity Date").
The Subordinated Debentures will rank pari passu with all Other Debentures
and will be unsecured and subordinate and junior in right of payment to all
Senior Indebtedness to the extent and in the manner set forth in the
Indenture. See "--Subordination."
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Indebtedness to the extent provided in the
Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, or in connection with
any insolvency, receivership or bankruptcy proceeding of the Company, all
Senior Indebtedness must be paid in full before the holders of Subordinated
Debentures will be entitled to receive or retain any payment in respect
thereof.
In the event of the acceleration of the maturity of Subordinated Debentures,
the holders of all Senior Indebtedness outstanding at the time of such
acceleration will first be entitled to receive payment in full of such Senior
Indebtedness before the holders of Subordinated Debentures will be entitled to
receive or retain any payment in respect of the Subordinated Debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Indebtedness" shall mean (i) every obligation of the Company for money
borrowed; (ii) every obligation of the Company evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses; (iii) every
reimbursement obligation of the Company with respect to letters of credit,
banker's acceptances or similar facilities issued for the account of the
Company; (iv) every obligation of the Company issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business);
(v) every capital lease obligation of the Company; (vi) all indebtedness of
the Company whether incurred on or prior to the date of the Indenture or
thereafter incurred, for claims in respect of derivative products, including
interest rate, foreign exchange rate and commodity forward contracts, options
and swaps and similar arrangements; and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, the Company has
guaranteed or is responsible or liable, directly or indirectly, as obligor or
otherwise.
"Indebtedness Ranking on a Parity with the Subordinated Debentures" shall
mean (i) Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, to the extent such
Indebtedness specifically by its terms ranks equally with and not prior to the
Subordinated Debentures in right of payment upon the happening of the
dissolution or winding-up or liquidation or reorganization of the Company and
(ii) all other debt securities, and guarantees in respect of those debt
securities (including Other Debentures and Other Guarantees), issued to any
other trust, or a trustee of such trust, partnership or other entity
affiliated with the Company that is a financing vehicle of the Company (a
"financing
49
<PAGE>
entity") in connection with the issuance by such financing entity of equity
securities that are similar to the Capital Securities or other securities
guaranteed by the Company. The securing of any Indebtedness, otherwise
constituting Indebtedness Ranking on a Parity with the Subordinated
Debentures, shall not be deemed to prevent such Indebtedness from constituting
Indebtedness Ranking on a Parity with the Subordinated Debentures.
"Indebtedness Ranking Junior to the Subordinated Debentures" shall mean any
Indebtedness, whether outstanding on the date of execution of the Indenture or
thereafter created, assumed or incurred, to the extent such Indebtedness
specifically by its terms ranks junior to and not equally with or prior to the
Subordinated Debentures (and any other Indebtedness Ranking on a Parity with
the Subordinated Debentures) in right of payment upon the happening of the
dissolution or winding-up or liquidation or reorganization of the Company. The
securing of any Indebtedness, otherwise constituting Indebtedness Ranking
Junior to the Subordinated Debentures shall not be deemed to prevent such
Indebtedness from constituting Indebtedness Ranking Junior to the Subordinated
Debentures.
"Senior Indebtedness" shall mean all Indebtedness, whether outstanding on
the date of execution of the Indenture or thereafter created, assumed or
incurred, except Indebtedness Ranking on a Parity with the Subordinated
Debentures or Indebtedness Ranking Junior to the Subordinated Debentures, and
any deferrals, renewals or extensions of such Senior Indebtedness.
The Company is a holding company and all of the operating assets of the
Company are owned by the Company's subsidiaries. The Company relies primarily
on dividends from its subsidiaries to meet its obligations for payment of
principal and interest on its outstanding debt obligations and corporate
expenses. The Company is a legal entity separate and distinct from its
subsidiaries. Holders of Subordinated Debentures should look only to the
Company for payments on the Subordinated Debentures.
Because the Company is a holding company, the right of the Company to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability
of holders of the Capital Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of that subsidiary,
except to the extent the Company may itself be recognized as a creditor of
that subsidiary. At June 30, 1997, the subsidiaries of the Company had total
liabilities (excluding liabilities owed to the Company) of approximately $2.3
billion. Accordingly, the Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries and all liabilities of any future subsidiaries of the Company.
The Indenture does not limit the incurrence or issuance of other secured or
unsecured debt of the Company or any subsidiary, including Senior
Indebtedness.
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no Debenture Event of Default has occurred and is continuing, the
Company will have the right under the Indenture at any time and from time to
time during the term of the Subordinated Debentures to defer the payment of
interest for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period; provided that no Extension Period shall end
on a date other than an Interest Payment Date or extend beyond the Stated
Maturity Date. At the end of such Extension Period, the Company must pay all
interest then accrued and unpaid (together with interest thereon at the annual
rate of 8.316%, compounded semi-annually, to the extent permitted by
applicable law ("Compounded Interest")). During an Extension Period, interest
will continue to accrue and holders of Subordinated Debentures (or holders of
the Trust Securities while Trust Securities are outstanding) will be required
to accrue such deferred interest income for United States federal income tax
purposes prior to the receipt of cash attributable to such income. See
"Certain Federal Income Tax Considerations--Interest Income and Original Issue
Discount."
During any such Extension Period, the Company may not, and will not permit
any subsidiary of the Company 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 (other than (a) dividends
or distributions in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock, (b) any
50
<PAGE>
declaration of a dividend in connection with the implementation of a
shareholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) as a result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock, (d) 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, and (e) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Company's benefit plans
for its directors, officers or employees or any of the Company's dividend
reinvestment plans), (ii) make any payment of principal of, or premium, if
any, or interest on or repay, repurchase or redeem any debt securities of the
Company (including Other Debentures) that rank pari passu with or junior in
right of payment to the Subordinated Debentures or (iii) make any guarantee
payments (other than payments under the Guarantee) with respect to any
guarantee by the Company of the debt securities of any subsidiary of the
Company (including Other Guarantees) if such guarantee ranks pari passu with
or junior in right of payment to the Subordinated Debentures.
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods, end
on a date other than an Interest Payment Date or extend beyond the Stated
Maturity Date. 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 must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any Extension
Period (or an extension thereof) at least five Business Days prior to the
earlier of (i) the date the Distributions on the Trust Securities would have
been payable except for the election to begin or extend such Extension Period
or (ii) the date the Administrative Trustees are required to give notice to
any securities exchange or to holders of Capital Securities of the record date
or the date such Distributions are payable, but in any event not less than
five Business Days prior to such record date. The Property Trustee shall give
notice of the Company's election to begin or extend a new Extension Period to
the holders of the Capital Securities. There is no limitation on the number of
times that the Company may elect to begin an Extension Period. Accordingly,
there could be multiple Extension Periods of varying lengths throughout the
term of the Subordinate Debenture.
OPTIONAL PREPAYMENT
The Subordinated Debentures will be prepayable, in whole at any time or in
part from time to time, at the option of the Company at a prepayment price
(the "Optional Prepayment Price") equal to the greater of (i) 100% of the
principal amount of the Subordinated Debentures to be so prepaid plus accrued
and unpaid interest thereon (including Additional Sums and Liquidated Damages,
if any) to the date of prepayment and (ii) the sum of the present values of
the remaining scheduled payments of principal of the Subordinated Debentures
to be so prepaid and interest thereon (including Additional Sums and
Liquidated Damages, if any) discounted to the date of prepayment, on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months),
at the Treasury Rate (as defined herein) plus 25 basis points plus accrued and
unpaid interest thereon to the date of prepayment.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Reference Treasury Dealer as having a maturity comparable to
the remaining term of the Subordinated Debentures to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Subordinated Debentures.
"Treasury Rate" means, with respect to any prepayment date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury
Price for such prepayment date.
51
<PAGE>
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for
U.S. Government Securities" or (ii) if such release (or any successor release)
is not published or does not contain such prices on such business day, the
average of the Reference Treasury Dealer Quotations for such prepayment date.
"Reference Treasury Dealer Quotations" means, with respect to the Reference
Treasury Dealer and any prepayment date, the average, as determined by the
Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Debenture Trustee by the Reference Treasury Dealer at 5:00
p.m., New York City time, on the third business day preceding such prepayment
date.
"Reference Treasury Dealer" means Lehman Brothers Inc. and its successors;
provided however, that if Lehman Brothers Inc. shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury
Dealer.
SPECIAL EVENT PREPAYMENT
If a Special Event shall occur and be continuing, the Company may, at its
option, prepay the Subordinated Debentures in whole (but not in part) at any
time within 90 days of the occurrence of such Special Event, at a prepayment
price (the "Special Event Prepayment Price") equal to the Make-Whole Amount
(as defined below). The "Make-Whole Amount" shall be equal to the greater of
(x) 100% of the principal amount of the Subordinated Debentures or (y) the
sum, as determined by the Reference Treasury Dealer, of the present values of
the remaining scheduled payments of principal and interest on the Subordinated
Debentures discounted to the date of prepayment on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate, plus, in each case, accrued and unpaid interest thereon
(including Additional Sums and Liquidated Damages, if any), to the date of
prepayment.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity date corresponding to the Stated Maturity Date
(if no maturity date is within three months before or after the Stated
Maturity Date, yields for the two published maturities most closely
corresponding to the Stated Maturity Date shall be interpolated and the
Adjusted Treasury Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding to the nearest month) or (ii) if such
release (or any successor release) is not published during the week preceding
the calculation date or does not contain such yields, the rate per annum equal
to the semi-annual equivalent yield to maturity of the Comparable Treasury
Issue, assuming a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such prepayment date plus (i) 1.03% if such prepayment date occurs prior to
June 1, 1998 and (ii) 0.50% in all other cases.
A "Special Event" means a Tax Event or an Investment Company Event.
"Investment Company Event" means the receipt by the Trust and the Company of
an opinion of counsel from counsel experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change (including any announced prospective change) in interpretation
or application of law or regulation by any legislative body, court,
governmental agency or regulatory authority, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of original issuance of the Capital Securities, there is more than an
insubstantial risk that the Trust is or will be considered an
52
<PAGE>
"investment company" that is required to be registered under the Investment
Company Act, which change or prospective change becomes effective or would
become effective, as the case may be, on or after the date of the original
issuance of the Capital Securities.
A "Tax Event" means the receipt by the Company and the Trust of an opinion
of counsel experienced in such matters 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, or as a result of any
amendment or change in 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 Issue Date, there is more than an insubstantial risk that (i) the Trust
is, or will be within 90 days of the date of such opinion, subject to United
States federal income tax with respect to income received or accrued on the
Subordinated Debentures, (ii) interest payable by the Company on the
Subordinated Debentures is not, or within 90 days of the date of such opinion
will not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, or (iii) the Trust is, or will be within 90 days
of the date of such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Subordinated Debentures
to be prepaid at its registered address. Unless the Company defaults in
payment of the prepayment price, on and after the prepayment date interest
ceases to accrue on such Subordinated Debentures called for prepayment.
ADDITIONAL SUMS
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Subordinated Debentures such additional amounts as
may be necessary in order that the amount of Distributions then due and
payable by the Trust on the outstanding Trust Securities shall not be reduced
as a result of any such additional taxes, duties and other governmental
charges ("Additional Sums").
CERTAIN COVENANTS OF THE COMPANY
The Company covenants in the Indenture that if and so long as the Trust is
the holder of all Subordinated Debentures, the Company, as borrower, will pay
to the Trust all fees and expenses related to the Trust and the offering of
the Capital Securities and will pay, directly or indirectly, all ongoing
costs, expenses and liabilities of the Trust (including any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any domestic taxing authority upon the
Trust but excluding obligations under the Capital Securities).
The Company also covenants that it will not, and will not permit any
subsidiary of the Company 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 (which includes common and
preferred stock) (other than (a) dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of, Common
Stock, (b) any declaration of a dividend in connection with the implementation
of a shareholders' rights plan, or the issuance of stock under any such plan
in the future, or the redemption or repurchase of any such rights pursuant
thereto, (c) as a result of a reclassification of the Company's capital stock
or the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock, (d) 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, and (e) purchases of Common Stock
related to the issuance of Common Stock or rights under any of the Company's
benefit plans for its directors, officers, employees or any of the Company's
dividend reinvestment plans), (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities of
the Company (including Other Debentures) that rank pari passu with or junior
in right of payment
53
<PAGE>
to the Subordinated Debentures or (iii) make any guarantee payments (other
than payments under the Guarantee) with respect to any guarantee by the
Company of the debt securities of any subsidiary of the Company (including
under Other Guarantees) if such guarantee ranks pari passu or junior in right
of payment to the Subordinated Debentures, if at such time (1) 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 be a Debenture
Event of Default and (b) in respect of which the Company shall not have taken
reasonable steps to cure, (2) a Debenture Event of Default shall have occurred
and be continuing, (3) if such Subordinated Debentures are held by the
Property Trustee, the Company shall be in default with respect to its payment
of any obligations under the Guarantee or (4) the Company shall have given
notice of its election of an Extension Period as provided in the Indenture, or
such Extension Period, or any extension thereof, shall have commenced and be
continuing.
So long as the Trust Securities remain outstanding, the Company also
covenants (i) to maintain 100% direct or indirect ownership of the Common
Securities; provided, however, that any successor of the Company permitted
under the Indenture may succeed to the Company's ownership of such Common
Securities, (ii) to use its reasonable efforts to cause the Trust (a) to
remain a business trust, except in connection with the distribution of
Subordinated Debentures to the holders of Trust Securities in liquidation of
the Trust, the redemption of all of the Trust Securities, or certain mergers,
consolidations or amalgamations, each as permitted by the Trust Agreement, and
(b) to otherwise continue to be treated as a grantor trust for United States
federal income tax purposes and (iii) to use its reasonable efforts to cause
each holder of Trust Securities to be treated as owning an undivided
beneficial interest in the Subordinated Debentures.
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of Subordinated Debentures, amend the Indenture for
specified purposes, including, among other things, to cure any ambiguity or to
correct or supplement any provision contained in the Indenture or any
supplemental indenture which is defective or inconsistent with any other
provision contained therein (provided that any such action does not materially
adversely affect the interest of the holders of Subordinated Debentures) 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 a majority in
aggregate principal amount of Subordinated Debentures, to amend the Indenture
in a manner affecting the rights of the holders of Subordinated Debentures;
provided that no such modification may, without the consent of the holders of
each outstanding Subordinated Debenture so affected, (i) change the Stated
Maturity, or reduce the rate of interest (including Compounded Interest) or
extend the time of payment of interest thereon except pursuant to the
Company's right under the Indenture to defer the payment of interest as
provided therein (see "--Option to Extend Interest Payment Date") or reduce
the principal amount of, or the amount of premium on, the Subordinated
Debentures or reduce the amount payable on redemption thereof or make the
principal of, or interest or premium on, the Subordinated Debentures payable
in any coin or currency other than that provided in the Subordinated
Debentures, or impair or affect the right of any holder of Subordinated
Debentures to institute suit for the payment thereof, (ii) modify the
provisions of the Indenture with respect to the subordination of the
Subordinated Debentures in a manner adverse to the holders, (iii) reduce the
percentage of principal amount of Subordinated Debentures, the holders of
which are required to consent to any such modification of the Indenture, or
are required to consent to any waiver provided for in the Indenture or (iv)
modify certain other provisions of the Indenture relating to amendments and
waivers of holders; provided, however, that if the Subordinated Debentures are
held by the Trust, such amendment shall not be effective until the holders of
a majority in liquidation amount of the Trust Securities shall have consented
to the amendment; and provided, further, that if the consent of the holders of
each Trust Security is required, such amendment will not be effective until
each holder of the Trust Securities has consented to such amendment.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Subordinated Debentures constitute a "Debenture
Event of Default" (whatever the reason for such Debenture
54
<PAGE>
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):
(i) failure to pay any interest (including Compounded Interest and
Additional Sums, if any) or Liquidated Damages, if any, on the Subordinated
Debentures or any Other Debentures, when due and the continuance of such
failure for 30 days (subject to the deferral of any due date in the case of
an Extension Period); or
(ii) failure to pay any principal or premium, if any, on the Subordinated
Debentures or any Other Debentures when due whether at maturity, upon
redemption, by declaration of acceleration of maturity or otherwise; or
(iii) failure to perform, or breach of, any other covenant or warranty of
the Company contained in the Indenture for 90 days after written notice to
the Company from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of Subordinated Debentures; or
(iv) certain events of bankruptcy, insolvency or reorganization of the
Company.
Within five Business Days after the occurrence of a Debenture Event of
Default actually known to the Indenture Trustee, the Indenture Trustee shall
transmit notice of such Indenture Event of Default to the Debenture holders,
unless such Indenture Event of Default shall have been cured or waived. The
Indenture requires the annual filing by the Company with the Debenture Trustee
of a certificate as to the absence of certain defaults under the Indenture.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee or
to exercise any trust or power conferred upon the Debenture Trustee under the
Indenture. If a Debenture Event of Default has occurred and is continuing, the
Debenture Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of the Subordinated Debentures may declare the principal
amount on all Subordinated Debentures due and payable immediately upon a
Debenture Event of Default and should the Debenture Trustee or such holders of
Subordinated Debentures fail to make such declaration, the holders of not less
than 25% in aggregate Liquidation Amount of the Capital Securities shall have
such right. The holders of a majority in aggregate outstanding principal
amount of the Subordinated Debentures may annul such declaration and waive the
default if the default (other than the non-payment of the principal of the
Subordinated Debentures which has become due solely by such acceleration) has
been cured and a sum sufficient to pay all matured installments of interest
(including Compounded Interest and Additional Sums, if any) and Liquidated
Damages, if any, and principal of, and premium, if any, due otherwise than by
acceleration (with any Compounded Interest due thereon) has been deposited
with the Debenture Trustee, and should the holders of such Subordinated
Debentures fail to annul such declaration and waive such default, the holders
of a majority in aggregate Liquidation Amount of the Capital Securities shall
have such right.
Prior to the declaration accelerating the maturity of the Subordinated
Debentures, the holders of a majority in aggregate outstanding principal
amount of the Subordinated Debentures may, on behalf of the holders of all the
Subordinated Debentures, waive any past default or Debenture Event of Default
and its consequences, except a default in the payment of principal (or
premium, if any) on or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest (and premium, if any)
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee) (including Compounded Interest and Additional Sums, if any)
and Liquidated Damages, if any, 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 Subordinated Debenture affected, and
should the holders of such Subordinated Debentures fail to waive such default,
the holders of a majority in aggregate Liquidation Amount of the Capital
Securities shall have such right.
In case a Debenture Event of Default shall occur and be continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Subordinated Debentures and any other amounts payable under
55
<PAGE>
the Indenture, to be forthwith due and payable and to enforce its other rights
as a creditor with respect to such Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of the Company to pay the principal of
(or premium, if any), or interest (including Compounded Interest and
Additional Sums, if any) or Liquidated Damages, if any, on the Subordinated
Debentures on the date such payment is otherwise required, a holder of Capital
Securities may institute a Direct Action. 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 Capital Securities.
Notwithstanding any payments made to a holder of Capital Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of (or premium, if any) or interest (including Compounded
Interest and Additional Sums, if any) or Liquidated Damages, if any, on the
Subordinated Debentures, and the Company shall be subrogated to the rights of
the holder of such Capital Securities with respect to payments on the Capital
Securities to the extent of any payments made by the Company to such holder in
any Direct Action.
The holders of the Capital Securities will not be able to exercise directly
any remedies, other than those set forth in the preceding paragraph, available
to the holders of the Subordinated Debentures unless there shall have been an
Event of Default under the Trust Agreement. See "Description of Capital
Securities--Events of Default; Notice."
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 as an
entirety or 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 as an entirety or 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 substantially as an
entirety to any Person, the successor Person is organized and existing 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
Subordinated Debentures and the Indenture; (ii) immediately after giving
effect thereto, no Debenture Event of Default, and no event which, after
notice or lapse of time or both, would become a Debenture Event of Default,
shall have occurred and be continuing; and (iii) certain other conditions as
prescribed in the Indenture are met.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Subordinated
Debentures not previously cancelled or delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at maturity or called for redemption within one year, and the Company
deposits or causes to be deposited with the Debenture Trustee funds, in trust,
for the purpose and in an amount sufficient to pay on the Stated Maturity Date
or upon redemption of all the Subordinated Debentures not previously delivered
to the Debenture Trustee for cancellation, the principal (and premium, if any)
and interest (including Compounded Interest and Additional Sums, if any) and
Liquidated Damages, if any, due or to become due on the Stated Maturity Date,
or the redemption date, 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.
FORM, REGISTRATION AND TRANSFER
If the Subordinated Debentures are distributed to the holders of the Trust
Securities, the Subordinated Debentures may be represented by one or more
global certificates registered in the name of the DTC or its
56
<PAGE>
nominee. Under such circumstances, the depositary arrangements for the
Subordinated Debentures would be expected to be substantially similar to those
in effect for the Capital Securities. For a description of DTC and the terms
of the depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Description of Capital
Securities--Form, Denomination, Book-Entry Procedures and Transfer" and "--
Depositary Procedures."
PAYMENT AND PAYING AGENTS
Payment of principal of (and premium, if any) and interest on Subordinated
Debentures will be made at the office of the Debenture Trustee in Wilmington,
Delaware or at the office of such Paying Agent or Paying Agents as the Company
may designate from time to time, except that at the option of the Company
payment of any interest may be made, except in the case of Subordinated
Debentures in global form, (i) by check mailed to the address of the holder
thereof as such address shall appear in the register for Subordinated
Debentures or (ii) by transfer to an account maintained by the holder thereof,
provided that proper transfer instructions have been received by the relevant
Record Date. Payment of any interest on any Subordinated Debenture will be
made to the Person in whose name such Subordinated Debenture is registered at
the close of business on the Record Date for such interest, except in the case
of defaulted interest. The Company may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent; however the Company
will at all times be required to maintain a Paying Agent in each place of
payment for the Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent for the
payment of the principal of (and premium, if any) or interest on any
Subordinated Debenture 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
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to the Company for payment thereof.
RESTRICTIONS ON TRANSFER
The Subordinated Debentures will be issued, and may be transferred, only in
blocks having an aggregate principal amount of not less than $100,000 and
multiples of $1,000 in excess thereof. Any attempted sale, transfer or other
disposition of Subordinated Debentures in a block having an aggregate
principal amount of less than $100,000 shall be deemed to be void and of no
legal effect whatsoever. Any such transferee shall be deemed not to be the
holder of such Subordinated Debentures for any purpose, including but not
limited to the receipt of payments on such Subordinated Debentures, and such
transferee shall be deemed to have no interest whatsoever in such Subordinated
Debentures.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee is subject to all the duties and responsibilities
specified with respect to an indenture trustee under the Trust Indenture Act.
Subject to such provisions, 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 Subordinated 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. The First National Bank of Chicago
serves as Debenture Trustee. See "Description of Capital Securities--
Information Concerning the Property Trustee."
57
<PAGE>
DESCRIPTION OF GUARANTEE
The Old Guarantee was executed and delivered by the Company concurrently
with the issuance by the Trust of the Old Capital Securities for the benefit
of the holders from time to time of the Old Capital Securities. The First
National Bank of Chicago acts as trustee ("Guarantee Trustee") under the Old
Guarantee, and it will also act as trustee under the Exchange Guarantee. As
soon as practicable after the date hereof, the Old Guarantee will be exchanged
by the Company for the Exchange Guarantee. The Old Guarantee shall be of no
further force or effect after such exchange. Unless otherwise expressly
indicated, references in this section of the Prospectus to the "Guarantee"
refer only to the Exchange Guarantee.
The Guarantee has been qualified under the Trust Indenture Act. 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, including the definitions therein of certain
terms, and those provisions made a part of the Guarantee Indenture by the
Trust Indenture Act. Copies of both the Old Guarantee and the Exchange
Guarantee are filed as exhibits to the Registration Statement of which this
Prospectus is a part. The Guarantee Trustee will hold the Guarantee for the
benefit of the holders of the Capital Securities.
GENERAL
The Company will irrevocably and unconditionally agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the Capital Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust may
have or assert other than the defense of payment. The following payments with
respect to the Capital Securities, to the extent not paid by or on behalf of
the Trust (the "Guarantee Payments"), will be subject to the Guarantee: (i)
any accumulated and unpaid Distributions required to be paid on the Capital
Securities, to the extent that the Trust has funds on hand legally available
therefor at such time, (ii) the applicable Redemption Price with respect to
the Capital Securities called for redemption, to the extent that the Trust has
funds on hand legally available therefor at such time and (iii) upon a
voluntary or involuntary dissolution, winding-up or liquidation of the Trust
(other than in connection with the distribution of the Subordinated Debentures
to holders of the Capital Securities), the lesser of (a) the Liquidation
Distribution, to the extent the Trust has funds legally available therefor at
the time, and (b) the amount of assets of the Trust remaining available for
distribution to holders of Capital Securities after satisfaction of
liabilities to creditors of the Trust as required by applicable law. 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 Capital
Securities or by causing the Trust to pay such amounts to such holders.
The Guarantee will be a guarantee of the Guarantee Payments with respect to
the Capital Securities from the time of issuance of the Capital Securities,
but will not apply to Distributions and other payments on the Capital
Securities when the Trust does not have sufficient funds legally and
immediately available to make such Distributions or other payments. IF THE
COMPANY DOES NOT MAKE INTEREST PAYMENTS ON THE SUBORDINATED DEBENTURES HELD BY
THE PROPERTY TRUSTEE, THE TRUST WILL NOT MAKE DISTRIBUTIONS ON THE CAPITAL
SECURITIES.
The Guarantee will rank subordinate and junior in right of payment to all
Senior Indebtedness to the extent provided therein. See "--Status of the
Guarantee." Because the Company is a holding company, the right of the Company
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise is subject to the
prior claims of creditors of that subsidiary, except to the extent the Company
may itself be recognized as a creditor of that subsidiary. Accordingly, the
Company's obligations under the Guarantee effectively will be subordinated to
all existing and future liabilities of the Company's subsidiaries and all
liabilities of any future subsidiaries of the Company. Claimants should look
only to the Company for payments under the Guarantee. See "Description of the
Subordinated Debentures--General." The Guarantee does not limit the incurrence
or issuance of other secured or unsecured debt of the Company or any
subsidiary of the Company, including Senior Indebtedness, whether under the
Indenture, any other indenture that the Company may enter into in the future
or otherwise.
58
<PAGE>
The Company will, through the Guarantee, the Trust Agreement, the
Subordinated Debentures and the Indenture, taken together, fully, irrevocably
and unconditionally guarantee all of the Trust's obligations under the Capital
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 Trust's obligations under
the Capital Securities. See "Relationship Among the Capital Securities, the
Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior
Indebtedness in the same manner as Subordinated Debentures. See "Description
of Subordinated Debentures--Subordination."
The Guarantee will rank pari passu with all Other Guarantees issued by the
Company after the Issue Date with respect to capital securities (if any)
issued by Other Trusts. The Guarantee will constitute a guarantee of payment
and not of collection (i.e., the guaranteed party may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against any other
person or entity). The Guarantee will be held for the benefit of the holders
of the Capital Securities. The Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Trust
or upon distribution to the holders of the Capital Securities of the
Subordinated Debentures. The Guarantee does not place a limitation on the
amount of additional Senior Indebtedness that may be incurred by the Company.
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;
provided, however, that with respect to a default other than a default in
payment of any Guarantee Payment, the Company shall have received notice of
such default and shall not have cured such default within 60 days after
receipt of such notice. The holders of not less than a majority in Liquidation
Amount of the Capital Securities will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Guarantee.
Any holder of the Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee
or any other person or entity.
The Company, as guarantor, will be 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.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Capital Securities (in which case no vote will be
required), the Guarantee may only be amended with the prior approval of the
holders of a majority of the Liquidation Amount of such outstanding Capital
Securities. The manner of obtaining any such approval will be as set forth
under "Description of Capital Securities--Voting Rights; Amendment of the
Trust Agreement." All guarantees and agreements contained in the Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the Capital
Securities then outstanding.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon (i)
full payment of the applicable Redemption Price of the Capital Securities or
(ii) upon liquidation of the Trust, the full payment of the
59
<PAGE>
Liquidation Distribution or the distribution of Subordinated Debentures to the
holders of the Capital Securities. The Guarantee will continue to be effective
or will be reinstated, as the case may be, if at any time any holder of the
Capital Securities must restore payment of any sums paid under the Capital
Securities or 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, will undertake to
perform only such duties as are specifically set forth in the Guarantee and,
in case a default with respect to the Guarantee has occurred, 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
Guarantee Trustee will be under no obligation to exercise any of the powers
vested in it by the Guarantee at the request of any holder of the Capital
Securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby.
The First National Bank of Chicago, the Guarantee Trustee, also serves as
the Property Trustee under the Trust Agreement, and the Indenture Trustee
under the Indenture and its affiliate, First Chicago Delaware Inc. is the
Delaware Trustee under the Trust Agreement. The Company and certain of its
subsidiaries maintain deposit accounts and banking relationships with the
First National Bank of Chicago.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
DESCRIPTION OF THE OLD SECURITIES
The terms of the Old Securities are identical in all material respects to
the Exchange Securities, except that (i) the Old Securities have not been
registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the Registration Rights
Agreement (which rights will terminate upon consummation of the Exchange
Offer, except under limited circumstances), (ii) the Exchange Capital
Securities will not provide for any increase in the Distribution rate thereon
and (iii) the Exchange Subordinated Debentures will not provide for any
increase in the interest rate thereon. The Registration Rights Agreement
provides that, under certain circumstances specified therein, interest on the
principal amount of the Old Subordinated Debentures and Distributions on the
Liquidation Amount of the Old Capital Securities will accrue or accumulate at
an increased rate. The Exchange Securities are not, and upon consummation of
the Exchange Offer any Old Capital Securities that remain outstanding will not
be, entitled to any such additional interest or Distributions.
60
<PAGE>
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE
SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Capital Securities
(to the extent the Trust has funds on hand legally available for the payment
of such Distributions) are irrevocably guaranteed by the Company as and to the
extent set forth under "Description of Guarantee." Taken together, the
Company's obligations under the Subordinated Debentures, the Indenture, the
Trust Agreement and the Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and other
amounts due on the Capital 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 Trust's obligations under the Capital
Securities. If and to the extent that the Company does not make the required
payments on the Subordinated Debentures, the Trust will not have sufficient
funds to make the related payments, including Distributions, on the Capital
Securities. The Guarantee will not cover any such payment when the Trust does
not have sufficient funds on hand legally available therefor. In such event,
the remedy of a holder of Capital Securities is to institute a Direct Action.
The obligations of the Company under the Guarantee are subordinate and junior
in right of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Securities, primarily
because: (i) the aggregate principal amount or Prepayment Price of the
Subordinated Debentures is equal to the sum of the Liquidation Amount or
Redemption Price, as applicable, of the Trust Securities; (ii) the interest
rate and interest and other payment dates on the Subordinated Debentures will
match the Distribution rate and Distribution and other payment dates for the
Trust Securities; (iii) the Company, as Sponsor, shall pay for all and any
costs, expenses and liabilities of the Trust except the Trust's obligations to
holders of Trust Securities under such Trust Securities; and (iv) the Trust
Agreement will provide that the Trust is not authorized to engage in any
activity that is not consistent with the limited purposes thereof.
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 CAPITAL SECURITIES
A holder of any Capital Security 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 Trust or any
other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Debenture Event of Default. However, in the event of
payment defaults under, or acceleration of, Senior Indebtedness, the
subordination provisions of the Indenture will provide that no payments may be
made in respect of the Subordinated Debentures until such Senior Indebtedness
has been paid in full or any payment default thereunder has been cured or
waived. Failure to make required payments on Subordinated Debentures would
constitute a Debenture Event of Default and a Trust Agreement Event of
Default.
LIMITED PURPOSE OF THE TRUST
The Capital Securities represent preferred undivided beneficial interests in
the assets of the Trust, and the Trust exists for the sole purpose of (i)
issuing and selling the Trust Securities and effecting the Exchange Offer for
the Exchange Securities, (ii) using the proceeds from the sale of the Trust
Securities to acquire the
61
<PAGE>
Subordinated Debentures, (iii) exchanging the Old Subordinated Debt Securities
for the Exchange Subordinated Debentures and (iv) and engaging in only those
other activities necessary, advisable or incidental thereto. A principal
difference between the rights of a holder of a Capital Security and a holder
of a Subordinated Debenture is that a holder of a Subordinated Debenture will
be entitled to receive from the Company the principal amount of (and premium,
if any) and interest on Subordinated Debentures held, while a holder of
Capital Securities is entitled to receive Distributions from the Trust (or, in
certain circumstances, from the Company under the Guarantee) if and to the
extent the Trust has funds on hand legally available for the payment of such
Distributions.
RIGHTS UPON DISSOLUTION
Unless the Subordinated Debentures are distributed to holders of the Trust
Securities, upon any voluntary or involuntary dissolution and liquidation of
the Trust, after satisfaction of liabilities to creditors of the Trust as
required by applicable law, the holders of the Trust Securities will be
entitled to receive, out of assets held by the Trust, the Liquidation
Distribution in cash. See "Description of Capital Securities--Liquidation of
the Trust and Distribution of Subordinated Debentures." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Subordinated Debentures, would be a subordinated creditor of the
Company, subordinated in right of payment to all Senior Indebtedness as set
forth in the Indenture, but entitled to receive payment in full of principal
(and premium, if any) and interest, before any stockholders of the Company
receive payments or distributions. Since the Company will be the guarantor
under the Guarantee and will agree to pay for all costs, expenses and
liabilities of the Trust (other than the Trust's obligations to the holders of
its Trust Securities), the positions of a holder of Capital Securities and a
holder of Subordinated Debentures relative to other creditors and to
stockholders of the Company in the event of liquidation or bankruptcy of the
Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Vinson & Elkins L.L.P. the following summary accurately
describes the material United States federal income tax consequences of the
purchase, ownership and disposition of Capital Securities to a person that
acquired Capital Securities on their original issue at their original offering
price and that is (i) an individual citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any state thereof or the District of Columbia, (iii) an estate the
income of which is includible in gross income for U.S. federal income tax
purposes regardless of its source, or (iv) a trust which is subject to the
supervision of a court within the United States and the control of a United
States fiduciary (a "United States Person"). This summary does not address all
tax consequences that may be applicable to a United States Person that is a
beneficial owner of Capital Securities, nor does it address the tax
consequences to (i) persons that may be subject to special treatment under
United States federal income tax law, such as banks, insurance companies,
thrift institutions, regulated investment companies, real estate investment
trusts, tax-exempt organizations and dealers in securities or currencies, (ii)
persons that will hold Capital Securities as part of a position in a
"straddle" or as part of a "hedging," "conversion" or other integrated
investment transaction for federal income tax purposes, (iii) persons whose
functional currency is not the United States dollar or (iv) persons that do
not hold Capital Securities as capital assets.
This summary is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations, Internal Revenue Service rulings and
pronouncements and judicial decisions now in effect, all of which are subject
to change at any time. Such changes may be applied retroactively in a manner
that could cause the tax consequences to vary substantially from the
consequences described below, possibly adversely affecting a beneficial owner
of Capital Securities. In particular, legislation has been proposed that could
adversely affect the Company's ability to deduct interest on the Subordinated
Debentures, which could in turn permit the Company to advance the Stated
Maturity of the Subordinated Debentures or redeem the Capital Securities. See
62
<PAGE>
"--Possible Tax Law Changes." An opinion of counsel is not binding on the
Internal Revenue Service or the courts, and the authorities on which this
summary is based are subject to various interpretations. It is therefore
possible that the federal income tax treatment of the purchase, ownership and
disposition of Capital Securities may differ from the treatment described
below.
HOLDERS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN LIGHT OF THEIR
OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF CAPITAL SECURITIES, AS WELL AS THE
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF CAPITAL SECURITIES
The Exchange will not be a taxable event for United States federal income
tax purposes. Consequently, no taxable gain or loss will be recognized by a
holder upon the receipt of Exchange Capital Securities in exchange for its Old
Capital Securities, and such holder will have the same adjusted tax basis and
holding period in the Exchange Capital Securities as the holder had in its Old
Capital Securities immediately before such exchange.
CLASSIFICATION OF THE TRUST AND SUBORDINATED DEBENTURES
In connection with the issuance of the Capital Securities, Vinson & Elkins
L.L.P. is of the opinion that, under current law and assuming compliance with
the terms of the Trust Agreement, and based on certain facts and assumptions
(i) the Trust will be classified as a grantor trust and not as an association
or a publicly traded partnership taxable as a corporation for United States
federal income tax purposes and (ii) although not free from doubt, the
Subordinated Debentures will be classified as indebtedness for federal income
tax purposes. Accordingly, each beneficial owner of Capital Securities (a
"Securityholder") will be treated as owning an undivided beneficial interest
in the Subordinated Debentures, and each Securityholder will be required to
include in its gross income its pro rata share of the items of income realized
with respect to the Subordinated Debentures whether or not cash is actually
distributed to the Securityholders. See "Interest Income and Original Issue
Discount." No amount included in income with respect to the Capital Securities
will be eligible for the dividends-received deduction.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Stated interest on a debt instrument is not "qualified stated interest" and,
therefore, will give rise to original issue discount ("OID") unless such
interest is unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed rate. Interest
is considered to be unconditionally payable only if reasonable legal remedies
exist to compel timely payment or the debt instrument otherwise provides terms
and conditions that make the likelihood of late payment (other than late
payment that occurs within a reasonable grace period) or non-payment a "remote
contingency."
Under the Indenture, the Company has the right, at any time and from time to
time during the term of the Subordinated Debentures, to defer payments of
interest by extending the interest payment period for a period not exceeding
10 consecutive semi-annual periods with respect to each Extension Period.
Unless the likelihood of exercise of such right to defer is remote, the
Subordinated Debentures would be issued with OID. During any Extension Period
the Company may not, and will not permit any subsidiary of the Company to, (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to 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 certain guarantees) issued
by the Company that rank pari passu with or junior to the Subordinated
Debentures (although these restrictions will not apply to dividends or
distributions in common stock of the Company and in certain other limited
situations). See "Description of Subordinated Debentures--Option to Extend
Interest Payment Date." The Company currently believes that the adverse impact
that the imposition of such restrictions would have on the Company and the
value of the equity securities of the Company makes the likelihood of the
Company's exercising its right to defer payments of
63
<PAGE>
interest on the Subordinated Debentures remote. Accordingly, the Company
believes that the stated interest on the Subordinated Debentures should be
considered unconditionally payable for purposes of the OID provisions of the
Code and that the Subordinated Debentures should not be considered to have
been issued with OID. As a result, each Securityholder will be required to
include interest payments in taxable income at the time accrued or received in
accordance with its own method of accounting. There can be no assurance,
however, that the Internal Revenue Service will agree with such determination.
However, if the Company does exercise its right to defer payments of
interest thereon, the Subordinated Debentures will be considered to have been
retired and reissued for their adjusted issue price at such time, and the
Subordinated Debentures thereafter will be considered to have been issued with
OID. In such case, the interest thereafter payable on the Subordinated
Debentures will be treated as OID.
If interest on the Subordinated Debentures is treated as OID (either because
the Company exercises its right to defer interest payments or because the
exercise of such right was not remote at the time of issuance), holders must
include that OID in income on an economic accrual basis regardless of their
method of tax accounting and regardless of the amount of interest received.
The amount of OID that accrues in any semi-annual period will approximately
equal the amount of interest that accrues in that semi-annual period at the
stated interest rate. Accordingly, if the interest payment period is extended,
holders will accrue OID approximately equal to the amount of the interest
payment due at the end of the extended interest payment period on an economic
accrual basis over the length of the extended interest period. A
Securityholder that disposes of the Capital Securities during an Extension
Period may suffer a loss because the market value of the Capital Securities
likely will fall if the Company exercises its option to defer payments of
interest on the Subordinated Debentures. To the extent the selling price is
less than the Securityholder's adjusted tax basis (which will include all
accrued but unpaid interest), a Securityholder will recognize a capital loss,
which generally may not be used to offset ordinary income (including interest
income or OID on the Subordinated Debentures).
DISTRIBUTION OF SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL SECURITIES
Under current law, a distribution by the Trust of the Subordinated
Debentures, as described under the caption "Description of Capital
Securities--Liquidation of the Trust and Distribution of Subordinated
Debentures" will be non-taxable and will result in the Securityholder's
receiving directly its pro rata share of the Subordinated Debentures
previously held indirectly through the Trust, with a holding period and
aggregate tax basis equal to the holding period and aggregate tax basis such
Securityholder had in its Capital Securities before such distribution.
SALES OR REDEMPTION OF CAPITAL SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Capital
Securities (including a redemption for cash) in an amount equal to the
difference between the amount realized and the Securityholder's adjusted tax
basis in the Capital Securities sold or so redeemed. The amount realized is
equal to the cash received, less the amount of accrued and unpaid interest
with respect to the Securityholder's pro rata share of the Subordinated
Debentures. A Securityholder's adjusted tax basis in the Capital Securities
will be increased by any OID included in gross income and decreased by any
interest payments not treated as "qualified stated interest" (as defined
above). See "--Interest Income and Original Issue Discount." Such gain or loss
generally will be a capital gain or loss and generally will be mid-term
capital gain or loss if the Capital Securities have been held more than one
year, but not more than 18 months, and generally will be long-term capital
gain or loss if the Capital Securities have been held more than 18 months.
Under certain circumstances, mid-term capital gains and long-term capital
gains of individuals are taxed at lower rates than ordinary income. Amounts
attributable to accrued interest with respect to a Securityholder's pro rata
share of the Subordinated Debentures not previously included in income will be
taxable as ordinary income.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest paid or OID accrued on the Capital Securities held of
record by United States Persons (other than Company and other exempt
Securityholders) will be reported to the Internal Revenue Service. Backup
withholding at a rate of 31% will apply to payments of interest to nonexempt
United States
64
<PAGE>
Persons unless the Securityholder furnishes its taxpayer identification number
in the manner prescribed in applicable Treasury Regulations, certifies that
such number is correct, certifies as to no loss of exemption from backup
withholding and meets certain other conditions.
Payment of the proceeds from the disposition of Capital Securities to or
through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information
is furnished to the Internal Revenue Service.
It is anticipated that income on the Capital Securities will be reported to
security holders on Form 1099 and mailed to holders of the Capital Securities
by January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
On February 6, 1997, as part of the Clinton Administration's Fiscal 1998
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate
issuers a deduction for interest in respect of debt obligations, such as the
Subordinated Debentures, issued on or after the date of "first committee
action" with respect to the Proposed Legislation if such debt obligations have
a maximum term in excess of 15 years and are not shown as indebtedness on the
issuer's balance sheet or if such debt obligations have a maximum weighted
average maturity of more than 40 years. The Proposed Legislation has not yet
been introduced by any member of the current Congress and was not included in
the Revenue Reconciliation Bills recently passed by the House and Senate.
Under current law, the Company will be able to deduct interest on the
Subordinated Debentures. There can be no assurance, however, that future
legislation will not affect the ability of the Company to deduct interest on
the Subordinated Debentures. Such a change could give rise to a Tax Event,
which may permit the Company to prepay the Subordinated Debentures or redeem
the Capital Securities, as described more fully under "Description of
Subordinated Debentures--Special Event Prepayment" and "Description of Capital
Securities--Redemption."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any,
individual, corporation partnership, estate or trust that is not a United
States person as defined above.
Under present United States federal income tax laws: (i) payments by the
Trust or any of its paying agents to any holder of a Capital Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the
Capital Security does not actually or constructively own 10 percent or more of
the total combined voting power of all classes of stock of the Company
entitled to vote, (b) the beneficial owner of the Capital Security is not a
controlled foreign corporation that is related to the Company through stock
ownership, and (c) either (A) the beneficial owner of the Capital Security
certifies to the Trust or its agent, under penalties of perjury, that it is
not a United States Person and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
"Financial Institution"), and holds the Capital Security in such capacity,
certifies to the Trust or its agent, under penalties of perjury, that such
statement has been received from the beneficial owner by it or by a Financial
Institution between it and the beneficial owner and furnishes the Trust or its
agent with a copy thereof; and (ii) a United States Alien Holder of a Capital
Security will not be subject to United States federal withholding tax on any
gain realized upon the sale or other disposition of a Capital Security.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
65
<PAGE>
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an
investment in the Exchange Capital Securities, whether pursuant to the
Exchange Offer or otherwise. Accordingly, among other factors, the fiduciary
should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA, whether the investment would constitute
an improper delegation of fiduciary authority and whether the investment would
be consistent with the documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or
"disqualified persons" under the Code ("Parties in Interest") with respect to
such Plan. Unless exemptive relief is available, a violation of these
"prohibited transaction" rules may require correction, cause a Plan fiduciary
to incur liabilities and result in an excise tax or other liabilities under
ERISA and/or Section 4975 of the Code for such Parties in Interest. Employee
benefit plans that are governmental plans (as defined in Section 3(32) of
ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section 4(b)(4) of ERISA) are not subject to
the requirements of ERISA or Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Trust may be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire Exchange Capital Securities. If
the Exchange Capital Securities were acquired and held by a Plan (or with the
"plan assets" of such Plan) and the assets of the Trust were deemed to be
"plan assets" of such Plan under the Plan Assets Regulation, certain
transactions involving the Trust could be deemed to constitute direct or
indirect prohibited transactions under Section 406 of ERISA and Section 4975
of the Code with respect to such Plan. For example, if the Company is a Party
in Interest with respect to an investing Plan, extensions of credit between
the Company and the Trust (as represented by the Subordinated Debentures and
the Guarantees) would likely be prohibited by Section 406 (a)(1)(B) of ERISA
and Section 4975 (c)(1)(B) of the Code, unless exemptive relief were available
(see below). Because the assets of the Trust may be considered "plan assets"
for ERISA purposes as a result of a Plan's acquisition and holding of Exchange
Capital Securities, a Plan fiduciary should consider (a) whether powers which
potentially may be exercised by any person or entity with respect to the Trust
or its assets would result in such person or entity being potentially deemed
to be a fiduciary and, therefore, a Party in Interest with respect to a Plan
acquiring or holding Exchange Capital Securities and (b) if so, whether such
acquisition and holding could result in a delegation of fiduciary authority
which is permissible under the Plan's governing instruments or any investment
management agreement with the Plan. In making such determinations, a Plan
fiduciary should note that prior to a Debenture Event of Default, the Issuer
Trustees will have only limited custodial and ministerial authority with
respect to the assets of the Trust.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited
transactions resulting from the purchase or holding of the Exchange Capital
Securities, assuming that assets of the Trust were deemed to be "plan assets"
of Plans investing in the Trust (see above). Those class exemptions are PTCE
96-23 (for certain transactions determined by in-house asset managers), PTCE
95-60 (for certain transactions involving insurance company general accounts),
PTCE 91-38 (for certain transactions involving bank collective investment
funds), PTCE 90-1 (for certain transactions
66
<PAGE>
involving insurance company pooled separate accounts) and PTCE 84-14 (for
certain transactions determined by independent qualified professional asset
managers).
Because of the prohibited transaction exposures described above, the
Exchange Capital Securities may not be purchased or held by any Plan, any
entity whose underlying assets include "plan assets" by reason of any Plan's
investment in the entity (a "Plan Asset Entity") or any person investing "plan
assets" of any Plan, unless such purchaser or holder is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. Any
purchaser or holder of the Exchange Capital Securities or any interest therein
will be deemed to have represented by its purchase and holding thereof that it
either (a) is not a Plan or a Plan Asset Entity and is not purchasing or
holding such securities on behalf of or with "plan assets" of any Plan or (b)
is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38,
90-1 or 84-14 with respect to such purchase or holding. See "Notice to
Investors" herein. Further, the fiduciaries of any Plan or Plan Asset Entity
which may purchase or hold any Exchange Capital Securities will be deemed as a
result of such acquisition or holding to have (a) directed the Trust to invest
in the Exchange Subordinated Debentures and (b) authorized and directed any of
the actions taken or which may be taken with respect to the Trust, the
Exchange Capital Securities by any of the Company, the Issuer Trustees, the
Debenture Trustee, or the Guaranty Trustee as contemplated by the Indenture,
the Trust Agreement, the Guarantee or the Common Guarantee.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries or other persons considering
purchasing Exchange Capital Securities on behalf of or with "plan assets" of
any Plan consult with their counsel regarding the potential consequences if
the assets of the Trust were deemed to be "plan assets" and the availability
of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
67
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Old Capital Securities where such Old Capital
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Trust and the Company have agreed
that, starting on the Expiration Date and ending on the close of business on
the 90th day following the Expiration Date (subject to extension in the
circumstances described in the Registration Rights Agreement), they will make
this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale. In addition, until October 7,
1997, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.
The Company and the Trust will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities received by broker-
dealers for their own account pursuant to the Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit of any such resale of
Exchange Securities and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Exchange
Capital Securities will be passed upon for the Trust by Richards, Layton &
Finger, Wilmington, Delaware, special Delaware counsel to the Company and the
Trust. The validity of the Exchange Subordinated Debentures and the Exchange
Guarantee will be passed upon for the Company by Vinson & Elkins L.L.P.,
Houston, Texas. Certain United States federal income taxation matters will be
passed upon for the Company and the Trust by Vinson & Elkins L.L.P.
EXPERTS
The consolidated financial statements and schedule of NGC Corporation and
its subsidiaries incorporated by reference in this Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated herein
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
The financial statements of Accord Energy Limited as of December 31, 1996
and 1995 and for the years then ended, incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of NGC Corporation for the year
ended December 31, 1996, have been so included in reliance on the report of
Price Waterhouse, Chartered Accountants and Registered Auditors, given on the
authority of said firm as experts in auditing and accounting.
68
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such material filed by the Company with the
Commission may be inspected by anyone without charge at the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material may also be obtained at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. The
Commission also maintains a Web site (http://www.sec.gov.) that contains
reports, proxy and information statements and other information regarding the
Company.
No separate financial statements of the Trust have been included or
incorporated by reference herein. The Company does not believe such financial
statements would be material to holders of the Capital Securities because (i)
all of the common securities of the Trust are owned, directly or indirectly,
by the Company, a reporting company under the Exchange Act, (ii) the Trust has
no independent operations but exists for the sole purpose of issuing
securities representing undivided beneficial interests in its assets and
investing the proceeds thereof in Subordinated Debentures issued by the
Company, and (iii) the obligations of the Trust under the Capital Securities
are guaranteed by the Company to the extent described herein.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Company and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission,
and reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company, the
Trust and the Exchange Securities. Any statements contained herein concerning
the provisions of any document are not necessarily complete, and, in each
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1996, Quarterly Reports on Form 10-Q for the quarters ended March 31 and June
30, 1997 and Current Reports on Form 8-K dated February 17, 1997 and June 27,
1997, previously filed by the Company with the Commission, are incorporated by
reference in this Prospectus and shall be deemed to be a part hereof.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing such
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests for such documents should be
submitted in writing to the Company at 1000 Louisiana, Suite 5800, Houston,
Texas 77002, Attention: Corporate Secretary. In order to ensure timely
delivery of documents, any such request should be made by October 13, 1997.
69
