<PAGE>
As filed with the Securities and Exchange Commission on March 9, 1999
Registration No. 333-48231
333-48231-01
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
BTI CAPITAL TRUST
(Exact name of registrant as specified in its Trust Agreement)
Delaware
(State or other jurisdiction of 59-3500807
(I.R.S. Employer
incorporation or organization) Identification No.)
BREED TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2767118
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5300 Old Tampa Highway
Lakeland, Florida 33807
(941) 668-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
Charles J. Speranzella, Jr.
Vice Chairman
Breed Technologies, Inc.
5300 Old Tampa Highway
Lakeland, Florida 33807
(941) 668-6473
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Mary A. Bernard
King & Spalding
1185 Avenue of the Americas
New York, New York 10036
(212) 556-2100
----------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement, as determined
in light of market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
The registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This prospectus shall not constitute an offer to sell or +
+the solicitation of an offer to buy nor shall there be any sale of these +
+securities in any state in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such state. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 8, 1999
PROSPECTUS
$250,000,000
BTI Capital Trust
5,000,000 6.50% Convertible Trust Preferred Securities
(Liquidation amount $50 per Convertible Trust Preferred Security)
Guaranteed to the Extent Set Forth Herein by, and Convertible into Common Stock
of,
Breed Technologies, Inc.
This Prospectus relates to the resale from time to time of the 6.50%
Convertible Trust Preferred Securities (the "Preferred Securities"), which
represent preferred undivided beneficial interests in the assets of BTI Capital
Trust, a statutory business trust created under the laws of the State of
Delaware (the "Trust") and the shares of common stock, par value $.01 per share
("Common Stock"), of Breed Technologies, Inc., a Delaware corporation (the
"Company"), issuable upon conversion of the Preferred Securities. The Preferred
Securities were originally issued and sold (the "Original Offering") by the
Trust in a private placement to the Initial Purchasers (as defined herein) on
November 25, 1997 (the "Original Offering Date") and were simultaneously resold
by the Initial Purchasers in transactions exempt from the Securities Act of
1933, as amended (the "Securities Act"), in the United States to persons
reasonably believed by the Initial Purchasers to be qualified institutional
buyers as defined in Rule 144A under the Securities Act, and outside the United
States to non-U.S. persons in reliance on Regulation S under the Securities
Act. The Company owns all of the common securities of the Trust, which
represent undivided beneficial interests in the assets of the Trust (the
"Common Securities" and, together with the Preferred Securities, the "Trust
Securities"). The Trust exists for the sole purpose of issuing the Preferred
Securities and the Common Securities and investing the proceeds thereof in an
equivalent amount of 6.50% Convertible Subordinated Debentures due 2027 (the
"Convertible Debentures") of the Company in an aggregate principal amount equal
to the aggregate liquidation amount of Trust Securities. The Convertible
Debentures are unsecured, subordinated obligations of the Company as described
herein. Upon an event of default under the Declaration (as defined herein), the
holders of Preferred Securities will have a preference over the holders of the
Common Securities with respect to payments in respect of distributions and
payments upon redemption, liquidation and otherwise.
Each Preferred Security is convertible in the manner described herein, at the
option of the holder thereof, into shares of the Company's Common Stock, at a
conversion rate of 2.1973 shares of Common Stock for each Preferred Security
(equivalent to $22.755 per share of Common Stock), subject to adjustment in
certain circumstances. The Common Stock is listed on The New York Stock
Exchange (the "NYSE") under the symbol "BDT." See "Description of the Preferred
Securities--Conversion Rights." On March 5, 1999, the last reported sales price
of the Common Stock on the NYSE was $4.50 share.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 6.50% of the liquidation amount of $50 per
Preferred Security, accruing from, and including, November 25, 1997 and payable
quarterly in arrears on February 15, May 15, August 15 and November 15 of each
year, commencing February 15, 1998 (the "Distributions"). The distribution rate
and the distribution and other payment dates for the Preferred Securities
correspond to the interest rate and interest and other payment dates on the
Convertible Debentures, which are the sole asset of the Trust. As a result, if
principal and interest are not paid on the Convertible Debentures, no amounts
will be paid on the Preferred Securities.
The Preferred Securities, the Convertible Debentures, the Common Stock
issuable upon conversion thereof and the associated Guarantee (as defined
below) (collectively, the "Offered Securities") may be offered and sold from
time to time by the holders named herein or in an accompanying supplement to
this Prospectus (a "Prospectus Supplement") or by their transferees, pledgees,
donees or their successors (collectively, the "Selling Holders") pursuant to
this Prospectus. The Offered Securities may be sold by the Selling Holders from
time to time directly to purchasers or through agents, underwriters or dealers.
See "Plan of Distribution" and "Selling Holders." If required, the names of any
such agents or underwriters involved in the sale of the Offered Securities and
the applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in a Prospectus Supplement. The Selling
Holders will receive all of the net proceeds from the sale of the Offered
Securities and will pay all underwriting discounts and selling commissions, if
any, applicable to any such sale. No portion of the net proceeds from the sale
of Offered Securities will be received by the Company or the Trust. The Company
is responsible for payment of certain other expenses incident to the offer and
sale of the Offered Securities. The Selling Holders and any broker/dealers,
agents or underwriters that participate in the distribution of the Offered
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commission received by them and any profit on the
resale of the Offered Securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for a description of indemnification arrangements.
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE PREFERRED SECURITIES OFFERED HEREBY.
APPLICATION WILL BE MADE TO LIST THE COMMON STOCK REGISTERED PURSUANT HERETO
ON THE NEW YORK STOCK EXCHANGE
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The Date of this Prospectus is March , 1999
<PAGE>
(continued from cover page)
The payment of Distributions out of moneys held by the Trust and payments on
liquidation of the Trust or the redemption of Preferred Securities, as set
forth below, are guaranteed by the Company (the "Guarantee") to the extent
described under "Description of the Guarantee." The Guarantee covers payments
of Distributions and other payments on the Preferred Securities only if and to
the extent that the Trust has funds available therefor, which will not be the
case unless the Company has made corresponding payments of interest or
principal or other payments on the Convertible Debentures held by the Trust.
The Guarantee, when taken together with the Company's obligations under the
Convertible Debentures, the Indenture (as defined herein) pursuant to which
the Convertible Debentures are issued and its obligations under the
Declaration, including its obligations to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities),
provides a full and unconditional guarantee of amounts due on the Preferred
Securities. See "Effect of Obligations Under the Convertible Debentures and
the Guarantee" and "Description of the Guarantee."
The Convertible Debentures are redeemable by the Company, in whole or in
part, from time to time, on or after November 25, 2000 at the redemption
prices specified herein, or at any time, in whole or in part, in certain
circumstances upon the occurrence of a Tax Event (as defined herein). If the
Company redeems Convertible Debentures, the Trust must redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Convertible Debentures so redeemed at the redemption prices specified
herein per Trust Security, plus accrued and unpaid Distributions thereon to
the date fixed for redemption. The outstanding Preferred Securities will be
redeemed upon maturity of the Convertible Debentures on November 15, 2027. In
addition, upon the occurrence of a Special Event (as defined herein) arising
from a change in laws or a change in legal interpretation regarding tax or
investment company matters, unless the Convertible Debentures are redeemed in
the limited circumstances described herein, the Trust shall be dissolved, with
the result that the Convertible Debentures will be distributed to the holders
of the Trust Securities, on a pro rata basis, in lieu of any cash
distribution. See "Description of the Preferred Securities--Mandatory
Redemption," "Description of the Preferred Securities--Special Event
Redemption or Distribution" and "Description of the Convertible Debentures."
In the event of the voluntary or involuntary dissolution, winding up or
termination of the Trust, after satisfaction of liabilities to creditors of
the Trust as required by applicable law, the holders of the Preferred
Securities will be entitled to receive for each Preferred Security a
liquidation amount of $50 plus accrued and unpaid Distributions thereon to the
date of payment, unless, in connection with such dissolution, winding-up or
termination of the Trust, the Convertible Debentures are distributed to the
holders of the Preferred Securities. See "Description of the Preferred
Securities--Liquidation Distribution Upon Dissolution."
The obligations of the Company under the Guarantee rank (i) subordinate and
junior in right of payment to all other liabilities of the Company except any
liabilities that may be pari passu expressly by their terms, (ii) pari passu
with the most senior preferred or preference stock, if any, issued from time
to time by the Company, and with any guarantee now or hereafter entered into
by the Company in respect of any preferred or preference stock or preferred
securities of any affiliate of the Company and (iii) senior to the Common
Stock. If the Company does not make principal or interest payments on the
Convertible Debentures, the Trust will not have sufficient funds to redeem or
make distributions on the Preferred Securities, in which event holders of the
Preferred Securities would not be able to rely on the Guarantee for payment of
such redemption or distributions until the Trust has sufficient funds
available therefor. The obligations of the Company under the Convertible
Debentures are subordinate and junior in right of payment to all present and
future Senior Indebtedness (as defined herein) of the Company. As of December
31, 1998, the aggregate Senior Indebtedness of the Company was approximately
$907.2 million. The obligations of the Company under the Convertible
Debentures are also effectively subordinated to all existing and future
indebtedness and other liabilities, including trade payables, of the Company's
subsidiaries. As of December 31, 1998, the aggregate of such indebtedness and
other liabilities, including trade payables, of the Company's subsidiaries was
approximately $455.3 million.
The Company has the right to defer payments of interest on the Convertible
Debentures by extending the interest payment period on the Convertible
Debentures at any time (so long as no Indenture Event of Default (as defined
herein) has occurred and is continuing) for up to 20 consecutive quarters
(each, an "Extension Period"); provided that no such Extension Period may
extend beyond the maturity date of the Convertible Debentures. If interest
payments are so deferred, Distributions on the Preferred Securities will also
be deferred. During any Extension Period, Distributions on the Preferred
Securities will continue to accrue with interest thereon (to the extent
permitted by applicable law) at an annual rate of 6.50% per annum, compounded
quarterly. Additionally, during any Extension Period, holders of Preferred
Securities will continue to recognize interest income in the form of original
issue discount ("OID") for United States federal income tax purposes in
advance of receipt of cash distributions with respect to such deferred
interest payments. There could be multiple Extension Periods of varying
lengths throughout the term of the Convertible Debentures. The Company has no
current intention of exercising its right to defer payments of interest by
extending the interest payment period on the Convertible Debentures. See
"Description of the Convertible Debentures--Interest Income and Option to
Extend Interest Payment Periods," "Risk Factors--Company Option to Extend
Interest Payment Periods; OID Risk" and "United States Federal Income
Taxation--Interest Income and Original Issue Discount."
2
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offering made by this Prospectus, and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Trust. This Prospectus does not
constitute an offer to sell or the solicitation of any offer to buy any
security other than the Offered Securities offered by this Prospectus, nor
does it constitute an offer to sell or a solicitation of any offer to buy the
Offered Securities by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication the information contained herein is correct as of any time
subsequent to the date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................................................. 3
Incorporation of Certain Documents by Reference....................... 4
Risk Factors.......................................................... 5
The Company........................................................... 13
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends............................................................ 14
Ratio of Earnings to Fixed Charges.................................... 14
The Trust............................................................. 15
Use of Proceeds....................................................... 15
Accounting Treatment.................................................. 16
Description of the Preferred Securities............................... 16
Description of the Convertible Debentures............................. 35
Description of the Guarantee.......................................... 44
Effect of Obligations Under the Convertible Debentures and the
Guarantee............................................................ 47
Description of the Capital Stock...................................... 48
United States Federal Income Taxation................................. 51
Selling Holders....................................................... 58
Plan of Distribution.................................................. 61
Legal Matters......................................................... 62
Experts............................................................... 62
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith, files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by the Company may be examined without charge at, or
copies obtained upon payment of prescribed fees from, the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and are also available for inspection and copying at
the regional offices of the Commission located at Seven World Trade Center,
New York, New York 10048 and at 500 West Madison Street, Chicago, Illinois
60661-2511. Information regarding the operation of the public facilities of
the Commission may be obtained by calling the Commission at 1-800-SEC-0330.
The Commission also maintains a web site that contains reports, proxy
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov. Such material can also be inspected and copied at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect
3
<PAGE>
to the Offered Securities. This Prospectus does not contain all of the
information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the Rules and Regulations of the
Commission. For further information with respect to the Company and the
Offered Securities, reference is made to the Registration Statement and the
exhibits filed or incorporated as a part thereof, which are on file at the
offices of the Commission and may be obtained upon payment of the fee
prescribed by the Commission, or may be examined without charge at the offices
of the Commission or on the Commission's web site. Statements contained in
this Prospectus as to the contents of any documents referred to are not
necessarily complete; with respect to any such document filed as an exhibit to
the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
No separate financial statements of the Trust have been included herein. The
Company does not believe that such financial statements would be material to
holders of Preferred Securities because (i) all of the voting securities of
the Trust are, and will continue to be, owned, directly or indirectly, by the
Company, a reporting company under the Exchange Act, (ii) the Trust has no
independent operations and exists for the sole purpose of issuing the Trust
Securities, investing the proceeds thereof in the Convertible Debentures
issued by the Company and engaging in only those other activities that are
necessary or incidental thereto and (iii) the obligations of the Trust under
the Trust Securities are fully and unconditionally guaranteed by the Company
if and to the extent that the Trust has funds available to meet such
obligations. See "The Trust," "Description of the Preferred Securities,"
"Description of the Convertible Debentures" and "Description of the
Guarantee."
The summaries of various agreements referred to in this Prospectus do not
purport to be complete descriptions of such agreements and are subject to the
detailed provisions contained in the various documents. Copies of forms of
such agreements are available upon request from the Secretary of the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference: (a) the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1998, as amended on October 1, 1998; (b)
the Company's Quarterly Reports on Form 10-Q for the quarters ended September
30, 1998 and December 31, 1998; (c) the information set forth under the
captions "2. Selected Historical Combined Financial Information of SRS" and
"3. Management's Discussion and Analysis of Financial Condition and Results of
Operations--SRS" in the Company's Current Report on Form 8-K filed on June 15,
1998; (d) the Company's Current Report on Form 8-K/A filed on January 13,
1998; (e) the Company's Current Reports on Form 8-K filed on August 31, 1998,
September 4, 1998, September 18, 1998, September 21, 1998, November 5, 1998
and March 9, 1999 and (f) the description of the Company's Common Stock
contained in the Company's Registration Statement on Form 8-A as filed with
the Commission on October 19, 1992.
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 the offering of the Offered Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein 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 Stuart Boyd, Esq., Vice President--Legal Affairs,
Breed Technologies, Inc., 5300 Old Tampa Highway, P.O. Box 33050, Lakeland,
Florida 33807, or by telephone at 941-668-6000.
4
<PAGE>
RISK FACTORS
An investment in the Offered Securities involves a high degree of risk.
Prospective investors should carefully consider the following risk factors, in
addition to the other information set forth in this Prospectus or incorporated
by reference herein, in connection with an investment in the Offered
Securities.
Risks Relating to the Company
Substantial Leverage. The Company has been and will continue to be highly
leveraged. The Company has indebtedness that is substantial in relation to its
stockholders' deficit. As of December 31, 1998, the Company had outstanding
approximately $907.2 million of total debt (excluding the Convertible
Debentures) and approximately $61.6 million of stockholders' deficit. All of
this debt is senior to the Convertible Debentures, the interest payments on
which will provide the funds required for Distributions on the Preferred
Securities. See "Risk Factors--Ranking of Subordinate Obligations Under the
Guarantee and Convertible Debentures."
The degree to which the Company is leveraged could have important
consequences for the holders of the Preferred Securities (or Common Stock
which may be acquired upon conversion), including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of principal and interest on its
indebtedness and will not be available for other purposes; (ii) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions or other purposes may be impaired; (iii)
the Company's leverage may increase its vulnerability to economic downturns
and limit its ability to withstand competitive pressures; and (iv) the
Company's ability to capitalize on significant business opportunities may be
limited.
The ability of the Company to meet its debt service obligations and its
obligations under the Convertible Debentures will depend on the future
operating performance and financial results of the Company, which will be
subject in part to factors beyond the Company's control. Although management
believes that the Company's cash flow will be adequate to meet its interest
and principal payments, there can be no assurance that the Company will
continue to generate earnings in the future sufficient to cover its fixed
charges. If the Company is unable to generate earnings in the future
sufficient to cover its fixed charges (including its obligations under the
Convertible Debentures) and is unable to borrow sufficient funds under its
existing credit facilities or from other sources, it may be required to
refinance all or a portion of its existing debt (including the Convertible
Debentures) or to sell all or a portion of its assets. There can be no
assurance that a refinancing would be possible, nor can there be any assurance
as to the timing of any asset sales or the proceeds the Company could realize
therefrom.
Waiver of Potential Defaults under the Credit Facility; Need to Amend Credit
Facility. On April 28, 1998, the Company entered into a $675.0 million credit
facility. At December 31, 1998, the Company had an aggregate of $528.0 million
of borrowings outstanding under the credit facility, which bore interest at a
weighted average rate of 7.48% per annum at such date, and had aggregate
borrowing availability thereunder of $54.4 million. Because the Company would
have been in violation of the net worth covenant in the loan agreement
relating to the credit facility as of December 30, 1998, the Company obtained
a waiver of this covenant from the lenders that was effective from December
30, 1998 through February 12, 1999 (the "First Waiver"). Pursuant to the First
Waiver, the maximum borrowing availability under the Company's revolving line
of credit was decreased from $150.0 million (including letters of credit) to
$110.0 million (including letters of credit).
On February 11, 1999, the Company obtained a new waiver (the "Second
Waiver") of such net worth covenant as well as a waiver of an event of default
that existed due to the Company's failure to register certain securities as
required under certain agreements to which it is a party. The Second Waiver is
effective from February 13, 1999 through March 30, 1999. In connection with
the Second Waiver, the maximum borrowing availability under the revolving line
of credit was increased to $125.0 million (including letters of credit). As of
February 15, 1999, the Company had an aggregate of $570.9 million of
borrowings outstanding under the credit facility (including $82.9 million of
revolver borrowings). Additionally, $15.6 million of letters of credit were
5
<PAGE>
outstanding under the revolving line of credit leaving an aggregate borrowing
availability thereunder of $26.5 million. The Company paid the lenders fees
aggregating $1.3 million in connection with the Second Waiver. The Company is
not currently in violation of any covenants contained in the loan agreement.
The Company is in the process of negotiating an amendment to the loan
agreement relating to the net worth covenant and the existing event of default
as well as certain other financial covenants. The Company is not currently in
violation of these other financial covenants but anticipates that, to the
extent such covenants are not amended, it will be in violation of the two
provisions presently waived as of March 31, 1999 and certain other financial
covenants by June 30, 1999. The Company anticipates that in connection with
any such amendment, borrowing availability under the revolving line of credit
will be restored to $150.0 million. Although the Company believes that it will
be able to negotiate the necessary amendments with its lenders, there can be
no assurance that it will be able to do so. Any amendment to the loan
agreement must be approved by the lenders holding more that 50% of the
commitments and borrowings outstanding under the credit facility. In the
absence of a further waiver or an amendment to the loan agreement, after March
30, 1999, the lenders would be entitled to exercise all of their rights under
the loan agreement including, without limitation, declaring all amounts
outstanding under the credit facility immediately due and payable and/or
exercising their rights with respect to the collateral securing the credit
facility, which consists of, among other things, substantially all of the real
and personal property of the Company and its subsidiaries.
If the Company is unable to obtain a further waiver or amendment to the loan
agreement, the Company may not have sufficient cash to meet its working
capital, debt service and capital expenditure needs beyond March 30, 1999, in
which case, the Company may be required to obtain financing from other
sources. There can be no assurance that such financing will be available or,
if available, that it will be on terms satisfactory to the Company.
Consequently, the inability to obtain any such waiver, amendment or
alternative financing would have a material adverse effect on the Company's
financial condition and results of operations.
Integration and Management of Acquired Businesses. Since August 1994, the
Company has completed eleven acquisitions, including the acquisition of the
safety restraint systems business ("SRS") of AlliedSignal Inc.
("AlliedSignal") on October 30, 1997 (the "SRS Acquisition"). The SRS
Acquisition was significantly larger than any acquisition previously completed
by the Company and represents a substantial increase in the scope of the
Company's business. The Company has limited experience in the design,
development, manufacture and sale of seat belt systems, which represent a
significant portion of the SRS business. Pro forma for the SRS Acquisition,
seat belt system sales would have accounted for 29.5% of the Company's fiscal
1998 net sales. There can be no assurance that the Company will be able to
successfully integrate the operations of SRS or the other recently acquired
businesses into the Company's operations. In particular, the Company may
experience (i) difficulty in assimilating the operations and personnel of the
acquired companies, (ii) disruption of the Company's ongoing business, (iii)
the inability of management to maximize the financial and strategic position
of the Company by the successful incorporation of acquired products or
technologies into the Company's offerings, (iv) difficulty in the maintenance
of uniform standards, controls, procedures and policies and (v) the impairment
of relationships with employees and customers. In addition, the Company has
committed to a plan to reposition and combine certain of the Company's
manufacturing and sales and engineering facilities and, in connection with
such plan, incurred a repositioning charge of $177.0 million during the three
months ended December 31, 1997 (the "Repositioning Charge"). Any failure on
the part of the Company to successfully implement its repositioning program or
integrate and manage the operations of SRS or the other recently acquired
businesses could have a material adverse effect on the Company's financial
condition and results of operations. The Company has little or no history of
operations on a combined basis with SRS or the other most recently acquired
businesses.
Risks Associated with Siemens Joint Venture. In December 1997 the Company
and Siemens Aktiengesellschaft ("Siemens") agreed to form a joint venture,
BSRS Restraint Systems International G.m.b.H & Co. KG ("BSRS"), pursuant to a
joint venture agreement. When fully operational over the next several years,
6
<PAGE>
BSRS is expected to assume the sales and marketing, as well as the research,
development and engineering, functions for the Company's integrated occupant
protection systems and components. As a result, because BSRS will employ the
personnel responsible for such functions, the Company expects to substantially
reduce its sale and marketing and research, development and engineering staff.
In the event that BSRS is terminated, there can be no assurance that the
Company will be able to rehire a sufficient number of such personnel and any
inability to do so could have a material adverse effect on the Company.
Further, all significant operating decisions regarding BSRS must be approved
by Siemens and the Company. In the event of a deadlock regarding material
operating decisions, either party may sell their interest in BSRS to the other
or BSRS may be terminated. If the Company sells its interest in BSRS or BSRS
is otherwise terminated, the Company will likely no longer have access to
Siemens' expertise in sensors and electronics, which may materially adversely
affect the Company's ability to develop next generation, intelligent,
integrated occupant protection systems. Any failure to develop such systems
would adversely affect the Company's competitive position and could have a
material adverse effect on the Company's financial condition and results of
operations.
Pursuant to the joint venture agreement relating to BSRS, the Company and
Siemens are required to fund the operations of BSRS pursuant to an operating
budget to be agreed upon by the parties. The New Credit Facility and the Notes
restrict the amount that the Company can invest in BSRS. The New Credit
Facility limits the Company's investments in BSRS to $10.0 million in fiscal
1999 and 2000 and $15.0 million in each year thereafter provided that the
Company may make investments in BSRS in excess of the specified amounts
beginning in fiscal 2000 and thereafter if, after adding such specified
amounts to consolidated fixed charges (as defined in the New Credit Facility),
the Company is in compliance with the covenants in the New Credit Facility.
Any inability to make sufficient investments in BSRS could have a material
adverse effect on the operations of BSRS.
Dependence on the Development of New Products. In recent years, automotive
occupant protection systems have changed significantly, based on changes in
government regulations, the demand by OEMs and consumers for improved systems
and rapid advances in the technology underlying these systems. The Company
believes that occupant protection systems will continue to change rapidly,
with industry participants seeking to develop and introduce intelligent
occupant protection systems that will be able to react differently to
individual crash situations and to make improvements in other components of
occupant protection systems. The Company believes that its future success will
depend in part on its ability to enhance its existing products and to develop
new products that meet changing government regulatory requirements and satisfy
OEM and consumer requirements, particularly requirements for intelligent
occupant protection systems. There can be no assurance that the Company will
meet these objectives and any failure to do so could have a material adverse
effect on the Company's financial condition and results of operations.
Reliance on Major Customers. Pro forma for the SRS Acquisition, sales to
Fiat, GM, Chrysler and Ford represented approximately 20%, 19%, 19% and 16%,
respectively, of the Company's net sales during fiscal 1998. These customers
are not committed to purchase any specified quantities of products from the
Company and there can be no assurance that these customers will continue to
purchase products from the Company at levels consistent with previous
purchases. A significant decline in sales of the Company's products to these
customers would have a material adverse effect on the Company's financial
condition and results of operations.
Effects of Likely Price Decreases. The Company anticipates that the prices
of automotive occupant protection systems and components such as those sold by
the Company will continue to decline over the next several years as a result
of competitive pressures and OEM requirements. The Company's future
profitability, therefore, will depend, among other things, on its ability to
continue to reduce its per-unit costs and maintain a cost structure,
internally and with its suppliers, that will enable it to offer competitive
prices. There can be no assurance that the Company will be successful in doing
so.
Dependence on the Automotive Industry. Sales of products to the automotive
industry have accounted for substantially all of the net sales of the Company.
The automobile market is cyclical and dependent on general
7
<PAGE>
economic conditions. Future declines in car production in the United States or
in markets outside the United States could have a material adverse effect on
the Company's financial condition and results of operations. In addition, most
of the Company's customers are unionized and may, from time to time,
experience labor disruptions. Any disruption in production by the Company's
customers could have an adverse effect on the Company's financial condition
and results of operations.
Government Regulation. The North American market for automotive occupant
protection systems has been significantly affected by federal safety
regulations and the Company believes that such regulations will continue to
have a significant effect on this market. Specifically, the rapid installation
of driver-side and passenger-side airbags was initially caused in the United
States by federal safety regulations. Recently, there has been negative
publicity concerning airbag performance, particularly the performance of
passenger-side airbags, and it is possible that federal safety regulations
will be revised in response to the concerns raised. It is difficult to predict
the nature of any such regulatory changes or the impact of such changes on the
Company's financial condition and results of operations.
Product Liability. The sale of the Company's products entails an inherent
risk of product liability claims. Although the Company maintains product
liability insurance covering certain types of claims, the Company's policies
are subject to substantial deductibles and there can be no assurance that the
coverage limits of the Company's insurance policies will be adequate or that
any particular loss will be covered. Such insurance can be expensive and in
the future may not be available on acceptable terms, if at all. A successful
claim brought against the Company not covered by the Company's insurance or
resulting in a recovery in excess of its insurance coverage could have a
material adverse effect on the Company's financial condition and results of
operations.
Warranty and Recall Exposure. The Company warrants to its OEM customers that
its products are free from defects and that they meet certain OEM designated
specifications. The OEMs in turn offer product warranties to the purchasers of
vehicles. In some instances of common complaint, the automobile manufacturer
will institute a vehicle recall or will be required by a governmental agency
to conduct a recall. As a result, from time to time, the Company has received
claims against it and requests for payment from its OEM customers to remedy
complaints made by the purchasers of vehicles. There can be no assurance that
the Company will not incur substantial warranty or recall expense in the
future. Such complaints and the related expenses could have a material adverse
effect on the Company's relationship with its OEM customers and its financial
condition and results of operations.
Potential Fluctuations in Quarterly Results. The Company's quarterly
operating results may vary significantly depending on factors such as the
timing of significant orders, the level of sales by automobile manufacturers,
disruptions caused by labor disputes and the seasonal patterns of its
customers, especially those located in Europe. A large portion of the
Company's expenses are fixed and cannot be adjusted in response to a shortfall
in quarterly revenues. There can be no assurance that the Company will operate
profitably in any quarter.
Long Lead Times for Sales. The Company typically competes for new business
at the beginning of the development of new vehicle models and upon the
redesign of existing models by its customers. New model development generally
begins three to five years prior to the marketing of such models to the
public. As a result of the relatively long lead times required for sales of
automotive occupant protection systems and components, it may be difficult for
the Company to obtain new sales to replace any unexpected decline in sales to
existing customers. The failure of the Company to obtain new business for new
models or to retain or increase business on redesigned existing models could
adversely affect the Company's financial condition and results of operations.
Competition. The markets for automotive occupant protection systems and
components are highly competitive. Increased competition could result in price
reductions and loss of market share, which would adversely affect the
Company's financial condition and results of operations. Many of the Company's
current
8
<PAGE>
and potential competitors have greater financial and other resources than the
Company. There can be no assurance that the Company will be able to continue
to compete successfully with its existing competitors or will be able to
compete successfully with new competitors.
Risks Associated with International Sales. Pro forma for the SRS
Acquisition, international sales accounted for approximately 40% of the
Company's net sales in fiscal 1998. The Company expects that international
sales will continue to account for a significant portion of its business in
the future. The Company's ability to compete effectively outside the United
States will depend on its ability to develop the relationships and, if demand
requires, additional facilities necessary to service international customers.
In addition, the Company's financial results attributable to international
sales may be affected by fluctuations in currency exchange rates, increases in
duty rates, difficulties in obtaining export licenses, trade and tariff
regulations, political instability, difficulties or delays in collecting
accounts receivable and difficulties in staffing and managing international
operations. Pro forma for the SRS Acquisition, sales in Asia accounted for
approximately 4.1% of the Company's net sales for fiscal 1998. In recent
months, certain Asian currencies have devalued significantly in relation to
the United States dollar and financial markets in Asia have experienced
significant turmoil. There can be no assurance that the Company's sales in
Asia will not be materially adversely affected by such developments.
Dependence on Key Personnel. The Company's success depends to a significant
degree upon the continued contributions of its key personnel, and the loss of
the services of such key personnel could have a material adverse effect on the
Company and there can be no assurance that the Company would be able to find
suitable replacements for such key personnel.
Dependence on Suppliers. Certain key components used in the Company's
products, such as restraints control modules and certain hybrid inflators, are
currently purchased from single sources. In addition, the Company subcontracts
the manufacture of certain of its subassemblies to third parties. The
inability to obtain sufficient sources of components or subassemblies as
required, or to obtain or develop alternative sources at competitive prices
and quality if and as required in the future, could result in delays in
product shipments or increase the Company's supply costs, either of which
would adversely affect the Company's financial condition and results of
operations.
Patents and Proprietary Technology. The Company relies on a number of
patents, trade secrets and non-disclosure agreements to protect its
technology. There can be no assurance that any patents now or hereafter owned
by the Company will afford protection against competitors that develop similar
technology. In addition, upon expiration of such patents, competitors may
develop and sell products based on technologies similar or equivalent to those
currently covered by the Company's patents. In addition, the laws of some
foreign countries do not protect the Company's patents and other proprietary
rights to the same extent as do the laws of the United States. There can be no
assurance that the steps taken by the Company to protect its proprietary
rights will be adequate to prevent imitation of its products or technology,
that the Company's proprietary information will not become known to
competitors, that the Company can effectively protect its rights to unpatented
proprietary information or that the Company's competitors will not
independently develop products or technologies that are superior to the
Company's products or technologies without infringing on the Company's
intellectual property rights. Although the Company believes that its products
and technology do not infringe on the proprietary rights of others, there can
be no assurance that third parties will not assert infringement claims in the
future.
Safety and Environmental Considerations. Sodium azide, which is used in the
propellant for certain of the Company's inflators, is flammable and has
exhibited toxicity in laboratory animal tests. In addition, the manufacture of
propellant containing sodium azide, as well as primers used in certain of the
Company's products, entails certain hazards. The Company's method of
production limits the quantity of these energetic materials in process at any
one time and utilizes certain safety measures. Notwithstanding these
precautions, the Company
9
<PAGE>
has on occasion experienced fires and explosions at its manufacturing
facilities. Although the Company's facilities and processes are designed in a
manner intended to minimize risks associated with the use of energetic
materials such as sodium azide and primers, there can be no assurance that the
Company will not encounter additional incidents or safety issues relating to
the use and manufacture of these energetic materials. The Company uses various
hazardous and toxic substances in its manufacturing processes, including
certain solvents, lubricants, sodium azide and other pyrotechnic materials.
The inadvertent release of any of these materials into the environment could
subject the Company to significant liability for clean-up costs or fines,
which could have a material adverse effect on the Company's financial
condition and results of operations. Additionally, the Company may be required
to make significant expenditures to ensure that the Company's facilities and
operations continue to satisfy environmental regulations and these regulations
may change significantly in the future.
Risks Relating to Year 2000. Based on recent assessments, the Company has
determined that it will be required to modify or replace portions of its
software and hardware so that its computer systems will properly utilize dates
beyond December 31, 1999. The Company has also queried its important suppliers
and customers that do not share information systems with the Company. To date,
the Company is not aware of any Year 2000 problems of its suppliers and
customers that would materially impact the Company's results of operations or
financial condition. However, there can be no assurance that the Company's
suppliers and customers will be Year 2000 compliant, and any such failure on
their part could adversely impact the Company. During fiscal 1998, the Company
incurred approximately $1.0 million of costs in connection with implementing
its Year 2000 program. The Company estimates that it will spend an additional
$6.0 million to complete its Year 2000 program. There can be no assurance that
the cost to complete the Company's Year 2000 program will not materially
exceed the Company's expectations. In addition, to the extent that any
material Year 2000 problem is not remedied by the Company in a timely manner,
such problem could have a material adverse effect upon the Company's results
of operations and financial condition.
Control of the Company by Principal Stockholders. As of February 16, 1999,
Allen K. Breed and Johnnie Cordell Breed and certain trusts established for
their benefit beneficially owned approximately 46.3% of the outstanding Common
Stock of the Company. As of result, Mr. and Mrs. Breed are able to exercise
control over the Company's affairs through their ability to elect all of the
directors of the Company and control the vote on all matters requiring
stockholder approval. There can be no assurance that the interests of Mr. and
Mrs. Breed and those of the holders of the Offered Securities will not
conflict.
Risks Relating to the Offered Securities
Ranking of Subordinate Obligations Under the Guarantee and Convertible
Debentures. The Company's obligations under the Guarantee are subordinate and
junior in right of payment to all liabilities of the Company and pari passu
with the most senior preferred or preference stock issued, from time to time,
if any, by the Company. The obligations of the Company under the Convertible
Debentures are subordinate and junior in right of payment to all present and
future Senior Indebtedness of the Company. No payment of principal (including
redemption payments, if any), or premium, if any, on the Convertible
Debentures may be made if (i) any Senior Indebtedness of the Company is not
paid when due and any applicable grace period with respect to such default has
ended with such default not having been cured or waived or ceasing to exist,
or (ii) the maturity of any Senior Indebtedness has been accelerated because
of a default. At December 31, 1998, Senior Indebtedness, aggregated
approximately $907.2 million. In addition, because a significant portion of
the Company's operations are conducted through its subsidiaries and the
subsidiaries have not guaranteed the payment of principal of and interest on
the Convertible Debentures, all liabilities of such subsidiaries, including
trade payables (which aggregated approximately $455.3 million at December 31,
1998), are effectively senior to the Convertible Debentures and the Guarantee.
There are no terms in the Preferred Securities, the Convertible Debentures or
the Guarantee that limit the Company's or any subsidiary's ability to incur
additional indebtedness, including
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<PAGE>
indebtedness that ranks senior to the Convertible Debentures and the
Guarantee. See "Description of the Convertible Debentures" and "Description of
the Guarantee--Status of the Guarantee."
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accrued and unpaid Distributions that are required to be
paid on the Preferred Securities, to the extent the Trust has funds available
therefor, (ii) the Redemption Price, including all accrued and unpaid
Distributions with respect to the Preferred Securities called for redemption
by the Trust, to the extent the Trust has funds available therefor, and (iii)
upon a voluntary or involuntary dissolution, winding-up or termination of the
Trust (other than in connection with the distribution of Convertible
Debentures to the holders of Preferred Securities or a redemption of all the
Preferred Securities), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Preferred Securities to
the date of the payment, to the extent the Trust has funds available therefor,
or (b) the amount of assets of the Trust remaining available for distribution
to holders of the Preferred Securities in liquidation of the Trust. The
holders of a majority in liquidation amount of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee (as defined herein) or to
direct the exercise of any trust or power conferred upon the Guarantee Trustee
under the Guarantee. Notwithstanding the foregoing, if the Company fails to
make a payment under the Guarantee, any holder of Preferred Securities may
directly institute a legal proceeding against the Company to enforce its
rights under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity. If the
Company were to default on its obligation to pay amounts payable on the
Convertible Debentures, the Trust would lack available funds for the payment
of Distributions or amounts payable on redemption of the Preferred Securities
or otherwise, and, in such event, holders of the Preferred Securities would
not be able to rely upon the Guarantee for payment of such amounts. Instead,
holders of the Preferred Securities would be required to rely on the
enforcement by (i) the Institutional Trustee of its rights as registered
holder of the Convertible Debentures against the Company pursuant to the terms
of the Convertible Debentures or (ii) such holder of its right against the
Company under certain circumstances to enforce payments on the Convertible
Debentures. See "--Enforcement of Certain Rights by Holders of Preferred
Securities," "Description of the Guarantee" and "Description of the
Convertible Debentures." The Declaration provides that each holder of
Preferred Securities, by acceptance thereof, agrees to the provisions of the
Guarantee, including the subordination provisions thereof, and the Indenture.
Enforcement of Certain Rights by Holders of Preferred Securities. If a
Declaration Event of Default occurs and is continuing, then the holders of
Preferred Securities would rely on the enforcement by the Institutional
Trustee of its rights as a holder of the Convertible Debentures against the
Company. In addition, the holders of a majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee or to direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee to exercise the remedies available to it as a holder of
the Convertible Debentures. If the Institutional Trustee fails to enforce its
rights under the Convertible Debentures, to the fullest extent permitted by
law, any holder of Preferred Securities may directly institute a legal
proceeding against the Company to enforce the Institutional Trustee's rights
under the Convertible Debentures without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay principal on the Convertible Debentures on the date such principal is
otherwise payable (or in the case of redemption, on the redemption date), then
a holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder of the principal of the Convertible
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder (a "Direct Action") on or after the
respective due date specified in the Convertible Debentures. In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities under the Declaration to the extent of any
payment made by the Company to such holder of Preferred Securities in such
Direct Action. The holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Convertible
Debentures. The Indenture provides that the Indenture Trustee shall give
holders of the Convertible Debentures notice of all uncured defaults or events
of default within 30 days after occurrence.
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<PAGE>
However, except in the case of a default or an event of default in payment on
the Convertible Debentures, the Indenture Trustee is protected in withholding
such notice if its officers or directors in good faith determine that
withholding of such notice is in the interest of the holders.
Company Option to Extend Interest Payment Periods; OID Risk. The Company has
the right under the Indenture to defer payment of interest on the Convertible
Debentures by extending the interest payment period at any time (so long as no
Indenture Event of Default has occurred and is continuing), and from time to
time, on the Convertible Debentures. As a consequence of such an extension,
quarterly Distributions on the Preferred Securities would be deferred
(although such Distributions would continue to accrue thereon compounded
quarterly) by the Trust during any such extended interest payment period. Such
right to extend the interest payment period for the Convertible Debentures is
limited to a period not exceeding 20 consecutive quarters, during which no
interest shall be due and payable, provided that no such Extension Period may
extend beyond the maturity date of the Convertible Debentures. In the event
that the Company exercises this right to defer interest payments, the Company
has agreed, among other things, (a) not to declare or pay dividends on, or
make a distribution with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security requiring the Company to purchase shares of Common Stock,
(ii) as a result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock, (iii) the purchase
of fractional interests in shares of the Company's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, (iv) purchases or acquisitions of shares of the
Company's Common Stock to be used in connection with acquisitions of the
Company's Common Stock by stockholders pursuant to a dividend reinvestment
plan or (v) stock dividends paid by the Company where the dividend stock is
the same stock as that on which the dividend is paid), (b) not to make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company that
rank pari passu with or junior to the Convertible Debentures and (c) not to
make any guarantee payments with respect to the foregoing (other than pursuant
to the Guarantee). Prior to the termination of any such Extension Period, the
Company may further extend the interest payment period; provided that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
date of the Convertible Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may commence a new
Extension Period, subject to the above requirements. See "Description of the
Preferred Securities--Distributions," "Description of the Convertible
Debentures--Interest Income and Option to Extend Interest Payment Periods" and
"United States Federal Income Taxation--Interest Income and Original Issue
Discount."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities
will continue to accrue income (as OID) in respect of the deferred interest
allocable to its Preferred Securities for United States federal income tax
purposes, which will be allocated but not distributed to holders of record of
Preferred Securities. As a result, each such holder of Preferred Securities
will recognize income for United States federal income tax purposes in advance
of the receipt of cash and will not receive the cash from the Trust related to
such income if such holder disposes of its Preferred Securities prior to the
record date for distributions of such amounts. There could be multiple
Extension Periods of varying lengths throughout the term of the Convertible
Debentures. The Company has no current intention of exercising its rights to
defer payments of interest by extending the interest payment period on the
Convertible Debentures. However, should the Company determine to exercise such
right in the future, the market price of the Preferred Securities is likely to
be adversely affected. In that event, a holder that disposes of its Preferred
Securities during an Extension Period might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities. See
"--Uncertainty with Respect to Trading Price" and "United States Federal
Income Taxation--Interest Income and Original Issue Discount."
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<PAGE>
Special Event Redemption or Distribution. Upon the occurrence of a Special
Event, the Trust shall be dissolved, except in the limited circumstance
described below, with the result that the Convertible Debentures would be
distributed to the holders of the Trust Securities in connection with the
liquidation of the Trust. In the case of a Special Event that is a Tax Event,
in certain circumstances, the Company shall have the right to redeem the
Convertible Debentures, in whole or in part, in lieu of a distribution of the
Convertible Debentures by the Trust, in which event the Trust will redeem the
Trust Securities on a pro rata basis to the same extent as the Convertible
Debentures are redeemed by the Company. See "Description of the Preferred
Securities--Special Event Redemption or Distribution."
Under current United States federal income tax law, a distribution of
Convertible Debentures upon the dissolution of the Trust would not be a
taxable event to holders of the Preferred Securities. Upon the occurrence of a
Tax Event, however, a dissolution of the Trust in which holders of the
Preferred Securities receive cash would be a taxable event to such holders.
See "United States Federal Income Taxation--Receipt of Convertible Debentures
or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Preferred
Securities or the Convertible Debentures that may be distributed in exchange
for the Preferred Securities if a dissolution or liquidation of the Trust were
to occur. Accordingly, the Preferred Securities that an investor may purchase,
whether in this Offering or in the secondary market, or the Convertible
Debentures that a holder of Preferred Securities may receive on dissolution
and liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby. Because
holders of Preferred Securities may receive Convertible Debentures upon the
occurrence of a Special Event, prospective purchasers of Preferred Securities
are also making an investment decision with regard to the Convertible
Debentures and should carefully review all the information regarding the
Convertible Debentures contained in this Prospectus. See "Description of the
Preferred Securities---Special Event Redemption or Distribution."
Limited Voting Rights. Holders of Preferred Securities have limited voting
rights and are not entitled to vote to appoint, remove, replace, or increase
or decrease the number of Trustees, which voting rights are vested exclusively
in the holder of the Common Securities. Prior to any conversion, holders of
Preferred Securities do not have any voting rights with respect to the Common
Stock of the Company. See "Description of the Preferred Securities."
Uncertainty with Respect to Trading Price. The Preferred Securities may
trade at a price that does not fully reflect the value of accrued but unpaid
interest with respect to the underlying Convertible Debentures. In addition,
as a result of the Company's right to defer interest payments, the market
price of the Preferred Securities (which represent an undivided interest in
the assets of the Trust) may be more volatile than other similar securities
where the issuer does not have such right to defer interest payments. A holder
who disposes of his or her Preferred Securities between record dates for
payments of distributions thereon will be required to include in income
accrued but unpaid interest on the Convertible Debentures through the date of
disposition as ordinary income (i.e., OID) and to add such amount to his or
her adjusted tax basis in his or her pro rata share of the underlying
Convertible Debentures deemed disposed. To the extent the selling price is
less than the holder's adjusted tax basis, a holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied
to offset ordinary income for federal income tax purposes. See "United States
Federal Income Taxation -- Interest Income and Original Issue Discount" and
"-- Sales of Preferred Securities."
THE COMPANY
The Company is a worldwide leader in the design, development, manufacture
and sale of all of the components used in complete, integrated occupant
protection systems and components. Its principal products include sensors,
electronics and related software, airbag modules and inflators, seat belt
systems and steering wheels. These products are used in over 400 vehicle
models manufactured by over 45 automobile manufacturers ("OEMs"), including
General Motors, Fiat, Ford, Chrysler, Suzuki and most of the other largest
OEMs in the world.
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The Company's goal is to become the leading worldwide supplier of complete,
integrated occupant protection systems, which consist of (i) sensors and
electronics (including crash and occupant protection sensors, electronics and
related software), (ii) airbag modules (consisting primarily of airbags and
inflators), seat belt systems (including pretensioners and retractors) and
(iv) steering wheels. Since August 1994, the Company has completed eleven
acquisitions. As a result of these eleven acquisitions, the Company has
rapidly evolved from predominately the producer of a single product --
electromechanical sensors ("EMS sensors") -- to a leading manufacturer of all
of the components required for complete, integrated occupant protection
systems.
The Company was incorporated under the laws of the State of Delaware in
1986. The Company's principal executive offices are located at 5300 Old Tampa
Highway, P.O. Box 33050, Lakeland, FL 33807-3050 and its telephone number is
(941) 668-6000.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth for the periods indicated the consolidated
ratio of earnings to combined fixed charges and preferred stock dividends of
the Company. For purposes of computing the ratio of earnings to combined fixed
charges and preferred stock dividends, earnings consist of earnings before
income taxes and extraordinary item plus combined fixed charges and preferred
stock dividends. Combined fixed charges and preferred stock dividends consist
of interest expense, whether expensed or capitalized, amortization of debt
issuance costs, an estimated portion of rental expense that is representative
of the interest factor in such rentals and distributions on the Preferred
Securities (which are calculated on the basis of the amount of pre-tax income
required to pay such distributions).
<TABLE>
<CAPTION>
Year Ended June 30, Pro Forma
------------------------------------ Year Ended Six Months Ended
1994 1995 1996 1997 1998 June 30, 1998 December 31, 1998
----- ----- ----- ---- ---- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
53.1x 92.7x 33.8x 2.0x (1) (1) (2)
</TABLE>
- --------
(1) During fiscal 1998, the Company incurred repositioning, impairment and
certain other special charges aggregating $387.1 million and, as a result,
earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $418.9 million for fiscal 1998. On a pro forma basis,
fiscal 1998 earnings were insufficient to cover combined fixed charges by
$432.8 million.
(2) During the six months ended December 31, 1998, the Company's earnings were
insufficient to cover combined fixed charges and preferred stock dividends
by $61.1 million.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth for the periods indicated the consolidated
ratio of earnings to fixed charges of the Company. For purposes of computing
the ratio of earnings to fixed charges, earnings consist of earnings before
income taxes and extraordinary item plus fixed charges. Fixed charges consist
of interest expense, whether expensed or capitalized, amortization of debt
issuance costs and an estimated portion of rental expense that is
representative of the interest factor in such rentals.
<TABLE>
<CAPTION>
Year Ended June 30, Pro Forma
------------------------------------ Year Ended Six Months Ended
1994 1995 1996 1997 1998 June 30, 1998 December 31, 1998
----- ----- ----- ---- ---- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
53.1x 92.7x 33.8x 2.0x (1) (1) (2)
</TABLE>
- --------
(1) During fiscal 1998, the Company incurred repositioning, impairment and
certain other special charges aggregating $387.1 million incurred during
the three months ended December 31, 1997 and, as a result, earnings were
insufficient to cover fixed charges by $408.9 million for fiscal 1998. On
a pro forma basis, fiscal 1998 earnings were insufficient to cover fixed
charges by $416.5 million.
(2) During the six months ended December 31, 1998, the Company's earnings were
insufficient to cover fixed charges by $52.4 million.
14
<PAGE>
THE TRUST
The Trust is a statutory business trust created under Delaware law pursuant
to (i) a trust agreement, dated as of October 17, 1997, as amended by the
Amended and Restated Declaration of Trust dated as of November 25, 1997 (the
"Declaration"), executed by the Company, as sponsor (the "Sponsor"), and
certain of the trustees of the Trust (as described below) and (ii) the filing
of a certificate of trust with the Secretary of State of the State of Delaware
on October 17, 1997. The Declaration has been qualified as an indenture under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). See
"Description of the Preferred Securities." The Company has acquired all of the
Common Securities of the Trust. The Trust exists for the exclusive purposes of
(i) issuing the Trust Securities representing undivided beneficial interests
in the assets of the Trust, (ii) investing the gross proceeds of the Trust
Securities in the Convertible Debentures and (iii) engaging in only those
other activities necessary or incidental thereto.
The Trust's business and affairs are conducted by its trustees, each
appointed by the Company as holder of the Common Securities. Pursuant to the
Declaration, the number of trustees of the Trust is currently five: Wilmington
Trust Company, as the institutional trustee (the "Institutional Trustee"),
Wilmington Trust Company, as the Delaware trustee (the "Delaware Trustee"),
and three individual trustees (the "Regular Trustees" and, together with the
Institutional Trustee and the Delaware Trustee, the "Trustees"), who are, and
any successor Regular Trustees must be, persons who are employees or officers
of, or who are affiliated with, the Company. The Regular Trustees are
initially Charles J. Speranzella, Jr., Fred J. Musone and Frank J. Gnisci,
each of whom is an officer of the Company. The Institutional Trustee will act
as the sole indenture trustee under the Declaration for purposes of compliance
with the Trust Indenture Act until removed or replaced by the holder of the
Common Securities. Wilmington Trust Company will also act as indenture trustee
(the "Guarantee Trustee") under the Guarantee for the purposes of compliance
with the provisions of the Trust Indenture Act. See "Description of the
Guarantee" and "Description of the Convertible Debentures."
The Institutional Trustee holds title to the Convertible Debentures for the
benefit of the holders of the Trust Securities and, in its capacity as the
holder, the Institutional Trustee has the power to exercise all rights, powers
and privileges under the Indenture pursuant to which the Convertible
Debentures are issued. In addition, the Institutional Trustee maintains
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the Convertible
Debentures for the benefit of the holders of the Trust Securities. The
Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise for the holders of the Trust Securities
out of funds from the Property Account. The Guarantee Trustee holds the
Guarantee for the benefit of the holders of the Preferred Securities. The
Company, as the direct or indirect holder of all the Common Securities, has
the right, subject to certain restrictions contained in the Declaration, to
appoint, remove or replace any Trustee and to increase or decrease the number
of Trustees. The Company has agreed to pay all fees and expenses related to
the Trust and the Offering of the Trust Securities. See "Description of the
Convertible Debentures--Miscellaneous".
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from any sale of the
Offered Securities. Neither the Company nor the Trust will receive any
proceeds from the sale of the Offered Securities.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights are set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act"),
and the Trust Indenture Act. See "Description of the Preferred Securities."
The place of business and the telephone number of the Trust are the
principal executive offices and telephone numbers of the Company.
15
<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements, with the Preferred Securities shown as
"Company-obligated Mandatorily Redeemable Convertible Preferred Securities of
BTI Capital Trust holding solely Convertible Debentures."
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities were issued pursuant to the terms of the
Declaration. The Declaration has been qualified as an indenture under the
Trust Indenture Act. Wilmington Trust Company, as Institutional Trustee, acts
as indenture trustee under the Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Preferred Securities
include those stated in the Declaration and those made part of the Declaration
by the Trust Indenture Act. The following summary of the material terms and
provisions of the Preferred Securities does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Declaration,
the Trust Act and the Trust Indenture Act.
General
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities are owned, directly or
indirectly, by the Company. The Common Securities rank pari passu, and
payments are made thereon on a pro rata basis, with the Preferred Securities,
except that upon the occurrence and during the continuance of a Declaration
Event of Default, the rights of the holders of the Common Securities to
receive payment of periodic Distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights of the holders of the
Preferred Securities. The Declaration does not permit the issuance by the
Trust of any securities other than the Trust Securities or the incurrence of
any indebtedness by the Trust. Pursuant to the Declaration, the Institutional
Trustee holds title to the Convertible Debentures purchased by the Trust for
the benefit of the holders of the Trust Securities. The payment of
Distributions out of money held by the Trust, and payments upon redemption of
the Preferred Securities or liquidation of the Trust out of money held by the
Trust, are guaranteed by the Company to the extent described under
"Description of the Guarantee." The Guarantee is held by the Guarantee
Trustee, for the benefit of the holders of the Preferred Securities. The
Guarantee does not cover payment of Distributions when the Trust does not have
sufficient available funds to pay such Distributions. In such event, the
remedy of a holder of Preferred Securities is to (i) vote to direct the
Institutional Trustee to enforce the Institutional Trustee's rights under the
Convertible Debentures or (ii) if the failure of the Trust to pay
distributions is attributable to the failure of the Company to pay interest or
principal on the Convertible Debentures, to institute a proceeding directly
against the Company for enforcement of payment to such holder of the principal
of or interest on the Convertible Debentures having a principal amount equal
to the aggregate liquidation amount of the Preferred Securities of such holder
on or after the respective due date specified in the Convertible Debentures.
See "--Declaration Events of Default" and "--Voting Rights."
Distributions
Distributions on Preferred Securities are fixed at a rate per annum of 6.50%
of the stated liquidation amount of $50 per Preferred Security. Distributions
in arrears beyond the first date such Distributions are payable or would be
payable, if not for any Extension Period or default by the Company on the
Convertible Debentures, bear interest thereon at the rate per annum of 6.50%
thereof, compounded quarterly. The term "Distribution" as used herein includes
any such interest payable unless otherwise stated. The amount of Distributions
payable for any period is computed on the basis of a 360-day year of twelve
30-day months.
Distributions on the Preferred Securities are cumulative, accrue from the
date of initial issuance and are payable quarterly in arrears on February 15,
May 15, August 15 and November 15 of each year, commencing February 15, 1998,
when, as and if available for payment. Distributions are made by the
Institutional Trustee, except as otherwise described below.
16
<PAGE>
The Distribution rate and the Distribution payment dates and other payment
dates for the Preferred Securities correspond to the interest rate and
interest payment dates and other payment dates on the Convertible Debentures.
Distributions on the Preferred Securities are made on the dates payable to
the extent that the Trust has funds available for the payment of such
Distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities are limited to
payments received by the Trust from the Company pursuant to the Convertible
Debentures. See "Description of the Convertible Debentures." The payment of
Distributions out of monies held by the Trust is guaranteed by the Company to
the extent set forth under "Description of the Guarantee."
Distributions on the Preferred Securities are payable to the holders thereof
as they appear on the books and records of the Trust at the close of business
on the relevant record dates, which, as long as the Preferred Securities
remain in book-entry-only form, will be one Business Day (as defined below)
prior to the relevant payment dates. Such Distributions will be paid through
the Institutional Trustee, who holds amounts received in respect of the
Convertible Debentures in the Property Account for the benefit of the holders
of the Trust Securities. In the event that any date on which Distributions are
payable on the Preferred Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date (the date on which Distributions are actually payable, a
"Distribution Date"). The period beginning on, and including, the date of
original issuance of the Preferred Securities, and ending on, but excluding,
the first Distribution Date, and each successive period beginning on, and
including, a Distribution Date, and ending on, but excluding, the next
succeeding Distribution Date is herein called a "Distribution Period." A
"Business Day" shall mean any day other than Saturday, Sunday or any other day
on which banking institutions in New York, New York or Wilmington, Delaware
are permitted or required by any applicable law or executive order to close.
So long as no Indenture Event of Default has occurred and is continuing, the
Company has the right under the Indenture to defer payments of interest on the
Convertible Debentures by extending the interest payment period from time to
time on the Convertible Debentures for an Extension Period not exceeding 20
consecutive quarterly interest periods during which no interest shall be due
and payable; provided, that no such Extension Period may extend beyond the
maturity date of the Convertible Debentures. As a consequence of the Company's
extension of the interest payment period, quarterly Distributions on the
Preferred Securities would be deferred (though such Distributions would
continue to accrue with interest thereon compounded quarterly since interest
would continue to accrue on the Convertible Debentures) during any such
Extension Period. In the event that the Company exercises its right to extend
the interest payment period, then (a) the Company shall not declare or pay
dividends on, or make any distribution or liquidation payment with respect to,
or redeem, purchase or acquire any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security requiring the Company to purchase shares of the Common
Stock, (ii) as a result of a reclassification of the Company's capital stock
or the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock, (iii) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (iv) purchases or acquisitions of
shares of the Company's Common Stock to be used in connection with the
acquisition of the Company's Common Stock by stockholders pursuant to a
dividend reinvestment plan or (v) stock dividends paid by the Company where
the dividend stock is the same stock as that on which the dividend is paid),
(b) the Company shall not make any payment of interest on or principal of (or
premium, if any, on) or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company that rank pari passu with or
junior to the Convertible Debentures and (c) the Company shall not make any
guarantee payment with respect to the foregoing (other than pursuant to the
Guarantees). Prior to the termination of any Extension Period, the Company
17
<PAGE>
may further extend such Extension Period; provided, that such Extension
Period, together with all previous and further extensions thereof, may not
exceed 20 consecutive quarters; and provided further that no Extension Period
may extend beyond the maturity date of the Convertible Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due,
the Company may commence a new Extension Period, subject to the above
requirements. See "Description of the Convertible Debentures--Interest" and
"Description of the Convertible Debentures--Interest Income and Option to
Extend Interest Payment Periods." The Regular Trustees shall give the holders
of the Preferred Securities notice of any Extension Period upon receipt of
notice thereof from the Company. See "Description of the Convertible
Debentures--Interest Income and Option to Extend Interest Payment Periods." If
distributions are deferred as a result of an Extension Period, the deferred
distributions and accrued interest thereon shall be paid to holders of record
of the Preferred Securities as they appear on the books and records of the
Trust on the record date next following the termination of such deferral
period.
Conversion Rights
General. The Preferred Securities are convertible at any time prior to the
close of business on the Business Day immediately preceding the date of
repayment of such Preferred Securities (or in the case of Preferred Securities
called for redemption, prior to the close of business on the Business Day
prior to the Redemption Date), whether at maturity or upon redemption, at the
option of the holder thereof and in the manner described below, into shares of
Common Stock at an initial conversion rate of 2.1973 shares of Common Stock
for each Preferred Security (equivalent to a conversion price of $22.755 per
share of Common Stock) (the "Initial Conversion Price"), subject to adjustment
as described under "--Conversion Price Adjustments--General" and "--Conversion
Price Adjustments--Fundamental Change" below.
The Indenture Trustee has covenanted in the Indenture not to convert
Convertible Debentures held by it except pursuant to a notice of conversion
delivered to the Institutional Trustee, as conversion agent (the "Conversion
Agent"), by a holder of Preferred Securities. A holder of a Preferred Security
wishing to exercise its conversion right must deliver an irrevocable notice of
conversion, together, if the Preferred Security is held in certificated form,
with such certificated Preferred Security, to the Conversion Agent, which
shall, on behalf of such holder, exchange such Preferred Security for a
portion of the Convertible Debentures and immediately convert such Convertible
Debentures into Common Stock. Holders may obtain copies of the required form
of the notice of conversion notice from the Conversion Agent. Procedures for
converting book-entry Preferred Securities into shares of Common Stock will
differ, as described under "--Book-Entry-Only Issuance--The Depository Trust
Company."
Accrued Distributions will not be paid on Preferred Securities that are
converted, except that holders of Preferred Securities at the close of
business on a Distribution record date will be entitled to receive the
Distribution payable on such Preferred Securities on the corresponding
Distribution Date notwithstanding the conversion of such Preferred Securities
following such Distribution record date but prior to such Distribution Date,
and when so surrendered for conversion, the Preferred Securities must be
accompanied by payment of an amount equal to the Distribution payable on such
Distribution payment date. Except as described above, no Distribution will be
payable by the Company on converted Preferred Securities with respect to any
Distribution Date subsequent to the date of conversion. Except as provided
above, neither the Trust nor the Company will make, or be required to make,
any payment, allowance or adjustment for accumulated and unpaid Distributions,
whether or not in arrears, on Preferred Securities. Each conversion will be
deemed to have been effected immediately prior to the close of business on the
day on which the related conversion notice was received by the Conversion
Agent.
Shares of Common Stock issued upon conversion of Preferred Securities will
be validly issued, fully paid and nonassessable. No fractional shares of
Common Stock will be issued as a result of conversion, but in lieu thereof
such fractional interest will be paid by the Company in cash based on the last
reported sale price of Common Stock on the date such Preferred Securities are
surrendered for conversion.
18
<PAGE>
Conversion Price Adjustments--General. The Initial Conversion Price is
subject to adjustment (under formulae set forth in the Indenture) in certain
events, including (a) the issuance of shares of Common Stock as a dividend or
a distribution with respect to Common Stock, (b) subdivisions, combinations
and reclassifications of Common Stock, (c) the issuance to all holders of
Common Stock of rights or warrants entitling them (for a period not exceeding
45 days) to subscribe for shares of Common Stock at less than the then Current
Market Price (as defined below) of the Common Stock, (d) the distribution to
holders of Common Stock of (i) equity securities of the Company (other than
Common Stock), (ii) evidences of indebtedness of the Company and/or (iii)
other assets (including securities, but excluding (A) any rights or warrants
referred to in clause (c) above, (B) any rights or warrants to acquire any
capital stock of any entity other than the Company or any subsidiary of the
Company, (C) any dividends or distributions in connection with the
liquidation, dissolution or winding-up of the Company, (D) any dividends
payable solely in cash that may from time to time be fixed by the Board of
Directors of the Company and (E) any dividends or distributions referred to in
clause (a) above), (e) distributions to all holders of Common Stock,
consisting of cash, excluding (i) any cash dividends on Common Stock to the
extent that the aggregate cash dividends per share of Common Stock in any
consecutive 12-month period do not exceed the greater of (x) the amount per
share of Common Stock of the cash dividends paid on Common Stock in the
immediately preceding 12-month period, to the extent that such dividends for
the immediately preceding 12-month period did not require an adjustment of the
conversion price pursuant to this clause (e) (as adjusted to reflect
subdivisions or combinations of Common Stock), and (y) 15% of the Current
Market Price of Common Stock for the trading day immediately prior to the date
of declaration of such dividend, and (ii) any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company or a
redemption of any rights issued under a rights agreement; provided, however,
that no adjustment shall be made pursuant to this clause (e) if such
distribution would otherwise constitute a Fundamental Change (as defined
below) and be reflected in a resulting adjustment described below, and (f) the
consummation of a tender offer by the Company or any subsidiary of the Company
for the Common Stock that involves an aggregate consideration that, together
with (X) any cash and other consideration payable in respect of any tender
offer consummated by the Company or a subsidiary of the Company for the Common
Stock consummated within the 12 months preceding the consummation of such
tender offer and (Y) the aggregate amount of all cash distributions (excluding
any cash distributions referred to in (d) above) to all holders of the Common
Stock within the 12 months preceding the consummation of such tender offer,
exceeds 110% of the Company's market capitalization at the date of
consummation of such tender offer. "Current Market Price" means the average of
the daily closing prices for the ten consecutive trading days selected by the
Company commencing not more than 20 trading days before, and ending not later
than, the day in question.
If any adjustment is required to be made as set forth in clause (e) above as
a result of a distribution that is a dividend described in clause (e) above
but exceeds the amount of the dividend permitted to be excluded pursuant to
such subclause (i) of clause (e), such adjustment would be based upon the
amount by which such distribution exceeds the amount permitted to be excluded.
If an adjustment is required to be made as set forth in clause (e) above as a
result of a distribution that is not such a dividend, such adjustment would be
based upon the full amount of such distribution. If an adjustment is required
to be made as set forth in clause (f) above, such adjustment would be
calculated based upon the amount by which the aggregate consideration paid for
the Common Stock acquired in the tender offer exceeds 110% of the Company's
market capitalization at the date of consummation of such tender offer. In
lieu of making such a conversion price adjustment in the case of certain
dividends or distributions, the Company may provide that upon the conversion
of the Preferred Securities the holder converting such Preferred Securities
will receive, in addition to the Common Stock to which such holder is
entitled, the cash, securities or other property which such holder would have
received if such holder had, immediately prior to the record date for such
dividend or distribution, converted its Preferred Securities into Common
Stock.
The Company from time to time may, to the extent permitted by law, reduce
the conversion price of the Convertible Debentures (and thus, the conversion
price of the Preferred Securities) by any amount selected by the Company for
any period of at least 20 days, in which case the Company shall give at least
15 days' notice of such reduction. The Company may, at its option, make such
reductions in the conversion price, in addition to
19
<PAGE>
those set forth above, as the Company's Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes. See "United States Federal
Income Taxation-- Conversion of Preferred Securities."
No adjustment of the conversion price will be made upon the issuance of any
shares of Common Stock pursuant to any present or future plan providing for
the reinvestment of dividends or interest payable on securities of the Company
and the investment of additional optional amounts in shares of Common Stock
under any such plan. No adjustment in the conversion price will be required
unless such adjustment would require a change of at least 1% in the conversion
price then in effect; provided, however, that any adjustment that would not be
required to be made shall be carried forward and taken into account in any
subsequent adjustment. If any action would require adjustment of the
conversion price pursuant to more than one of the provisions described above,
only one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the holders of the Preferred
Securities.
Conversion Price Adjustments--Fundamental Change. In the event that the
Company shall be a party to any transaction or series of transactions
constituting a Fundamental Change, including, without limitation, (i) any
recapitalization or reclassification of the Common Stock (other than a change
in par value or as a result of a subdivision or combination of the Common
Stock); (ii) any consolidation or merger of the Company with or into another
entity as a result of which holders of Common Stock shall be entitled to
receive securities or other property or assets (including cash) with respect
to or in exchange for Common Stock (other than a merger which does not result
in a reclassification, conversion, exchange or cancellation of the outstanding
Common Stock); (iii) any sale or transfer of all or substantially all of the
assets of the Company constituting a Fundamental Change; or (iv) any
compulsory share exchange, pursuant to any of which holders of Common Stock
shall be entitled to receive other securities, cash or other property or
assets, then appropriate provision shall be made so that the holders of all
the Preferred Securities then outstanding shall have the right thereafter to
convert such Preferred Securities only into (x) if any such transaction is a
Non-Stock Fundamental Change (as defined below), the kind and amount of the
securities, cash or other property or assets that would have been receivable
upon such recapitalization, reclassification, consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
issuable upon conversion of such Preferred Securities immediately prior to
such recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange, after giving effect to any adjustment in the conversion
price in accordance with clause (i) of the following paragraph, and (y) if any
such transaction constitutes a Common Stock Fundamental Change (as defined
below), shares of common stock of the kind received by holders of Common Stock
as a result of such Common Stock Fundamental Change in an amount determined in
accordance with clause (ii) of the following paragraph. The company formed by
such consolidation or resulting from such merger or which acquires such assets
or which acquires the Common Stock, as the case may be, shall enter into a
supplemental indenture with the Indenture Trustee, satisfactory in form to the
Indenture Trustee and executed and delivered to the Indenture Trustee, the
provisions of which shall establish such right. Such supplemental indenture
shall provide for adjustments, which, for events subsequent to the effective
date of such supplemental indenture, shall be as nearly equivalent as
practical to the relevant adjustments provided for in the preceding paragraphs
and in this paragraph.
Notwithstanding any other provision in the preceding paragraphs, if any
Fundamental Change occurs, the conversion price in effect will be adjusted
immediately after that Fundamental Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the conversion price
per share of Common Stock immediately following such Non-Stock Fundamental
Change will be the lower of (A) the conversion price in effect immediately
prior to such Non-Stock Fundamental Change, but after giving effect to any
other prior adjustments effected pursuant to the preceding paragraphs, and
(B) the result obtained by multiplying (X) the greater of the Applicable
Price (as defined below) and the then applicable Reference Market Price (as
defined below) by (Y) a fraction, the numerator of which is $50 and the
denominator of which is (I) the applicable Redemption Price for one
Preferred Security if the redemption date were the date of such Non-Stock
Fundamental Change (or for the twelve-month periods commencing November 25,
1997,
20
<PAGE>
November 25, 1998 and November 25, 1999, the product of 106.50%, 105.20%
and 103.90%, respectively, times $50) plus (II) any then-accrued but unpaid
Distributions on one Preferred Security; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price per share of Common Stock will be the conversion price in effect
immediately prior to the Common Stock Fundamental Change, but after giving
effect to any other prior adjustments effected pursuant to the preceding
paragraphs, multiplied by a fraction, the numerator of which is the
Purchaser Stock Price (as defined below) and the denominator of which is
the Applicable Price; provided, however, that in the event of a Common
Stock Fundamental Change in which (A) 100% of the value of the
consideration received by a holder of Common Stock (subject to certain
limited exceptions) is shares of common stock of the successor, acquiror or
other third party (and cash, if any, paid with respect to any fractional
interests in the shares of common stock resulting from the Common Stock
Fundamental Change) and (B) all of the Common Stock (subject to certain
limited exceptions) shall have been exchanged for, converted into, or
acquired for, shares of common stock (and cash, if any, with respect to
fractional interests) of the successor, acquiror or other third party, the
conversion price per share of Common Stock immediately following the Common
Stock Fundamental Change shall be the conversion price in effect
immediately prior to the Common Stock Fundamental Change divided by the
number of shares of common stock of the successor, acquiror, or other third
party received by a holder of one share of Common Stock as a result of the
Common Stock Fundamental Change.
The foregoing conversion price adjustments are designed, in "Fundamental
Change" transactions where all or substantially all of the Common Stock is
converted into securities, cash, or property and not more than 50% of the
value received by the holders of Common Stock consists of stock listed or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the Nasdaq National Market ("NNM") (a "Non-Stock
Fundamental Change," as defined herein), to increase the securities, cash or
property into which each Preferred Security is convertible.
In a Non-Stock Fundamental Change transaction where the initial value
received per share of Common Stock (measured as described in the definition of
Applicable Price below) is lower than the then applicable conversion price of
the Preferred Securities but greater than or equal to the Reference Market
Price, the conversion price will be adjusted as described above with the
effect that each Preferred Security will be convertible into securities, cash
or property of the same type received by the holders of Common Stock in such
transaction but in an amount per Preferred Security equal to the amount
indicated as the denominator as of the date of such transaction as set forth
in clause (i) above with respect to conversion prices for Non-Stock
Fundamental Changes.
In a Non-Stock Fundamental Change transaction where the initial value
received per share of Common Stock (measured as described in the definition of
Applicable Price below) is lower than both the conversion price of a Preferred
Security and the Reference Market Price, the conversion price will be adjusted
as described above but calculated as though such initial value had been the
Reference Market Price.
In a Fundamental Change transaction where all or substantially all the
Common Stock is converted into securities, cash, or property and more than 50%
of the value received by the holders of Common Stock (subject to certain
limited exceptions) consists of listed or NNM-traded common stock (a "Common
Stock Fundamental Change," as defined herein), the foregoing adjustments are
designed to provide in effect that (a) where Common Stock is converted partly
into such common stock and partly into other securities, cash, or property,
each Preferred Security will be convertible solely into a number of shares of
such common stock determined so that the initial value of such shares
(measured as described in the definition of Purchaser Stock Price below)
equals the value of the shares of Common Stock into which such Preferred
Security was convertible immediately before the transaction (measured as
aforesaid) and (b) where Common Stock is converted solely into such common
stock, each Preferred Security will be convertible into the same number of
shares of such common stock receivable by a holder of the number of shares of
Common Stock into which such Preferred Security was convertible before such
transaction.
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In determining the amount and type of consideration received by a holder of
Common Stock in the event of a Fundamental Change, consideration received by a
holder of Common Stock pursuant to a statutory right of appraisal will be
disregarded.
"Applicable Price" means (i) in the event of a Non-Stock Fundamental Change
in which the holders of Common Stock receive only cash, the amount of cash
receivable by a holder of one share of Common Stock and (ii) in the event of
any other Fundamental Change, the Current Market Price for one share of Common
Stock on the record date for the determination of the holders of Common Stock
entitled to receive cash, securities, property or other assets in connection
with such Fundamental Change or, if there is no such record date, on the date
on which the holders of the Common Stock will have the right to receive such
cash, securities, property or other assets.
"Common Stock Fundamental Change" means any Fundamental Change in which more
than 50% of the value (as determined in good faith by the Company's Board of
Directors) of the consideration received by holders of Common Stock (subject
to certain limited exceptions) pursuant to such transaction consists of shares
of common stock that, for the twenty consecutive trading days immediately
prior to such Fundamental Change, has been admitted for listing or admitted
for listing subject to notice of issuance on a national securities exchange or
quoted on the NNM; provided, however, that a Fundamental Change will not be a
Common Stock Fundamental Change unless either (i) the Company continues to
exist after the occurrence of such Fundamental Change and the outstanding
Preferred Securities continue to exist as outstanding Preferred Securities, or
(ii) the outstanding Preferred Securities continue to exist as Preferred
Securities and are convertible into shares of common stock of the successor to
the Company.
"Fundamental Change" means the occurrence of any transaction or event or
series of transactions or events pursuant to which all or substantially all of
the Common Stock is exchanged for, converted into, acquired for or constitutes
solely the right to receive cash, securities, property or other assets
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided, however, in the case of a plan involving more than one
such transaction or event, for purposes of adjustment of the conversion price,
such Fundamental Change will be deemed to have occurred when substantially all
of the Common Stock has been exchanged for, converted into, or acquired for or
constitutes solely the right to receive cash, securities, property or other
assets but the adjustment shall be based upon the consideration that the
holders of Common Stock received in the transaction or event as a result of
which more than 50% of the Common Stock shall have been exchanged for,
converted into, or acquired for, or shall constitute solely the right to
receive such cash, securities, property or other assets.
"Non-Stock Fundamental Change" means any Fundamental Change other than a
Common Stock Fundamental Change.
"Purchaser Stock Price" means, with respect to any Common Stock Fundamental
Change, the Current Market Price of common stock received by holders of Common
Stock in such Common Stock Fundamental Change on the record date for the
determination of the holders of Common Stock entitled to receive such shares
of common stock or, if there is no such record date, on the date upon which
the holders of Common Stock shall have the right to receive such shares of
common stock.
"Reference Market Price" will initially mean $12.33 (which was 66 2/3% of
the last reported sales price per share of Common Stock on the NYSE on the
date of the Offering Memorandum used in connection with the Original Offering)
and, in the event of any adjustment to the conversion price other than as a
result of a Fundamental Change, the Reference Market Price will also be
adjusted so that the ratio of the Reference Market Price to the conversion
price after giving effect to any adjustment will always be the same as the
ratio of the initial Reference Market Price to the Initial Conversion Price of
the Preferred Securities.
Conversions of the Preferred Securities may be effected by delivering them
to the office or agency of the Company maintained for such purpose in the
Borough of Manhattan, The City of New York.
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<PAGE>
Conversion price adjustments or omissions in making such adjustments may,
under certain circumstances, result in constructive distributions that could
be taxable as dividends under the Internal Revenue Code of 1986, as amended
(the "Code") to holders of Preferred Securities or to the holders of Common
Stock. See "United States Federal Income Taxation--Conversion of Preferred
Securities."
Mandatory Redemption
The Preferred Securities have no stated maturity date but will be redeemed
upon the maturity of the Convertible Debentures or to the extent the
Convertible Debentures are redeemed. The Convertible Debentures will mature on
November 15, 2027 and are redeemable in whole or in part, from time to time,
on or after November 25, 2000 (as described under "Description of the
Convertible Debentures--Optional Redemption"). The Institutional Trustee shall
simultaneously use the proceeds from any such redemption to redeem Trust
Securities with an aggregate liquidation amount equal to the aggregate
principal amount of the Convertible Debentures redeemed by the Company at the
redemption prices (expressed as a percentage of the liquidation amount)
specified below for the twelve-month period commencing November 25, in the
year indicated:
<TABLE>
<CAPTION>
Original
Year Redemption Price
---- ----------------
<S> <C>
2000...................................................... 102.60%
2001...................................................... 101.30
</TABLE>
and 100% if redeemed on or after November 25, 2002.
plus, in each case, accrued and unpaid Distributions to the date set for
redemption.
Upon the redemption of the Convertible Debentures by the Company, in whole
or in part, at any time in certain circumstances upon the occurrence of a Tax
Event described under "--Special Event Redemption or Distribution," the
Institutional Trustee shall simultaneously use the proceeds from such
redemption to redeem Trust Securities with an aggregate liquidation amount
equal to the aggregate principal amount of the Convertible Debentures redeemed
by the Company at a redemption price equal to 100% of the liquidation amount
thereof plus accrued and unpaid Distributions (including Distributions with
respect to Additional Interest (as defined herein) and Compound Interest (as
defined herein), if any, on the corresponding Convertible Debentures so
redeemed) to the date set for redemption (subject to the right of holders on
the relevant record date to receive Distributions due on the applicable
Distribution payment date that is on or prior to the redemption date).
Holders of the Trust Securities shall be given not less than 30 nor more
than 60 days' notice of any redemption. In the event that fewer than all of
the outstanding Preferred Securities are to be redeemed, the Preferred
Securities will be redeemed pro rata as described under "--Book-Entry-Only
Issuance--The Depository Trust Company" below.
Special Event Redemption or Distribution
As used herein, "Tax Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent tax counsel
experienced in such matters (a "Dissolution Tax Opinion") to the effect that
as a result of (a) any amendment to, clarification of, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof
or therein, (b) any judicial decision, official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action"), or (c) any amendment to, clarification of, or change
in, the official position or the interpretation of such Administrative Action
or judicial decision that differs from the theretofore generally accepted
position by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of
any judicial decision or regulatory determination), in each case after the
date of this Prospectus, there is more than an insubstantial risk that (i) the
Trust is, or will be, subject to United States federal income tax with respect
to income accrued or received on the Convertible
23
<PAGE>
Debentures, (ii) the Trust is, or will be, subject to more than a de minimis
amount of other taxes, duties or other governmental charges or (iii) interest
paid in cash by the Company to the Trust on the Convertible Debentures is not,
or will not be, deductible, in whole or in part, by the Company for United
States federal income tax purposes.
As used herein, "Investment Company Event" means that the Regular Trustees
shall have received an opinion of a nationally recognized independent counsel
experienced in practicing under the Investment Company Act of 1940 (the "1940
Act"), to the effect that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), which Change in 1940 Act Law becomes
effective on or after the date of this Prospectus, there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" which is required to be registered under the 1940 Act.
If, at any time, a Tax Event or an Investment Company Event (in either case,
a "Special Event") shall occur and be continuing, the Trust shall, except in
the limited circumstances described below, be dissolved with the result that
Convertible Debentures, with an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
Distribution rate of, with accrued and unpaid interest equal to accrued and
unpaid Distributions on, and having the same record date for payment as, the
Preferred Securities outstanding at such time, would be distributed to the
holders of the Trust Securities in liquidation of such holders' interests in
the Trust, on a pro rata basis within 90 days following the occurrence of such
Special Event; provided, however, that such dissolution and distribution shall
be conditioned on the Regular Trustees receipt of an opinion of nationally
recognized independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which No Recognition Opinion may rely on, among other
things, published revenue rulings of the Internal Revenue Service, to the
effect that the holders of the Preferred Securities will not recognize any
gain or loss for United States federal income tax purposes as a result of such
dissolution and distribution of Convertible Debentures; and, provided,
further, that if at the time there is available to the Company or the Trust
the opportunity to eliminate, within such 90-day period, the Special Event by
taking some ministerial action, such as filing a form or making an election,
or pursuing some other similar reasonable measure that, in the sole judgment
of the Company, has or will cause no adverse effect on the Trust, the Company
or the holders of the Trust Securities, the Company or the Trust will pursue
such measure in lieu of dissolution. Furthermore, if in the case of the
occurrence of a Tax Event, (i) the Company has received an opinion (a
"Redemption Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters that, as a result of such Tax Event, there is more
than an insubstantial risk that the Company would be precluded from deducting
the interest on the Convertible Debentures, in whole or in part, for United
States federal income tax purposes, even after the Convertible Debentures were
distributed to the holders of Trust Securities in liquidation of such holders'
interests in the Trust as described above, or (ii) the Regular Trustees shall
have been informed by such tax counsel that it cannot deliver a No Recognition
Opinion to the Regular Trustees, the Company shall have the right, upon not
less than 30 nor more than 60 days' notice to the holders of the Preferred
Securities, to redeem the Convertible Debentures, in whole or in part, at 100%
of the principal amount thereof plus accrued and unpaid interest thereon for
cash within 90 days following the occurrence of such Tax Event, and promptly
following such redemption, Preferred Securities with an aggregate liquidation
amount equal to the aggregate principal amount of Convertible Debentures so
redeemed shall be redeemed by the Trust at the Redemption Price on a pro rata
basis; provided, however, that if, at the time, there is available to the
Company or the Trust the opportunity to eliminate, within such 90-day period,
the Tax Event by taking some ministerial action, such as filing a form or
making an election, or pursuing some other similar reasonable measure that, in
the sole judgment of the Company, has or will cause no adverse effect on the
Trust, the Company or the holders of the Trust Securities, the Company or the
Trust will pursue such measure in lieu of redemption.
After the date fixed for any distribution of Convertible Debentures upon
dissolution of the Trust, (i) the Preferred Securities will no longer be
deemed to be outstanding, (ii) the depositary or its nominee, as the record
holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Convertible Debentures to be
delivered to the holders of the Preferred Securities upon such distribution
and (ii) any certificates representing Preferred Securities not held by the
securities depositary or its nominee will be
24
<PAGE>
deemed to represent beneficial interests in Convertible Debentures having an
aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the Distribution rate of, and with
accrued and unpaid interest equal to accrued and unpaid Distributions on, such
Preferred Securities until such certificates are presented to the Company or
its agent for transfer or reissuance.
There can be no assurance as to the market prices either for the Preferred
Securities or for the Convertible Debentures that may be distributed in
exchange for Preferred Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor
may purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Convertible Debentures that the investor may receive if a
dissolution and liquidation of the Trust were to occur, may trade at a
discount to the price the investor paid to purchase Preferred Securities.
Redemption Procedures
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid Distributions have been paid on all
Preferred Securities for all quarterly Distribution Periods occurring on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), then, if the Company has paid to the
Institutional Trustee a sufficient amount of cash in connection with the
related redemption or maturity of the Convertible Debentures by 12:00 noon New
York City time on the redemption date, the Institutional Trustee will
irrevocably deposit (i) with the Depository Trust Company ("DTC"), funds
sufficient to pay the applicable Redemption Price on redemption of all
Preferred Securities represented by the Global Certificates (as defined
herein) and will give DTC irrevocable instructions and authority to pay such
amount in respect of Preferred Securities represented by the Global
Certificates and (ii) with the paying agent for the Preferred Securities,
funds sufficient to pay the applicable Redemption Price in respect of any
certificated Preferred Securities and will give such paying agent irrevocable
instructions and authority to pay such Redemption Price to the holders of
certificated Preferred Securities upon surrender of their certificates. See
"--Book-Entry-Only Issuance--The Depository Trust Company." If notice of
redemption shall have been given and funds are deposited as required, then
immediately prior to the close of business on the date of such deposit
Distributions will cease to accrue and all rights of holders of Preferred
Securities so called for redemption will cease, except the right of the
holders of such Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price. In the event that any date fixed
for redemption of Preferred Securities is not a Business Day, then payment of
the applicable Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (without any interest or other payment
in respect of any such delay), except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day. In the event that payment of the Redemption Price in respect of
Preferred Securities is improperly withheld or refused and not paid either by
the Trust or by the Company pursuant to the Guarantee, Distributions on such
Preferred Securities will continue to accrue at the applicable rate from the
original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed as described below
under "--Book-Entry-Only Issuance--The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
Subordination of Common Securities
Payment of Distributions on, and the amount payable upon redemption 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 Declaration Event of Default shall have
occurred and be
25
<PAGE>
continuing, no payment of any Distribution on, or amount payable upon
redemption of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid
Distributions on all outstanding Preferred Securities for all distribution
periods terminating on or prior thereto, or in the case of payment of the
amount payable upon redemption of the Preferred Securities, all of such amount
in respect of all outstanding Preferred Securities shall have been made or
provided for, and all funds available to the Institutional Trustee shall first
be applied to the payment in full in cash of all Distributions on, or the
amount payable upon redemption of, Preferred Securities then due and payable.
In the case of any Declaration Event of Default, the holders of Common
Securities will be deemed to have waived any such Declaration Event of Default
with respect to the Common Securities until all such Declaration Events of
Default with respect to the Preferred Securities have been cured, waived or
otherwise eliminated. Until any such Declaration Events of Default with
respect to the Preferred Securities have been so cured, waived or otherwise
eliminated, the Institutional Trustee will act solely on behalf of the holders
of the Preferred Securities and not the holders of the Common Securities and
only the holders of the Preferred Securities will have the right to direct the
Institutional Trustee to act on their behalf.
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each, a "Liquidation"), the holders of
the Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities of the Trust, distributions in an
amount equal to the aggregate of the stated liquidation amount of $50 per
Preferred Security plus accrued and unpaid Distributions thereon to the date
of payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Convertible Debentures in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the Distribution rate of, and accrued and unpaid interest equal
to accrued and unpaid Distributions on, the Preferred Securities outstanding
at such time have been distributed on a pro rata basis to the holders of the
Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The
holders of the Common Securities will be entitled to receive distributions
upon any such dissolution pro rata with the holders of the Preferred
Securities, except that if a Declaration Event of Default has occurred and is
continuing, the holders of the Common Securities shall not be permitted to
receive such distributions until such Declaration Event of Default has been
cured.
Pursuant to the Declaration, the Trust shall dissolve: (i) upon the
bankruptcy of the Company or the holder of the Common Securities; (ii) upon
the filing of a certificate of dissolution or its equivalent with respect to
the holder of the Common Securities or the Company, the filing of a
certificate of cancellation with respect to the Trust after having obtained
the consent of at least a majority in liquidation amount of the Trust
Securities, voting together as a single class, to file such certificate of
cancellation, or the revocation of the charter of the Company or the holder of
the Common Securities and the expiration of 90 days after the date of
revocation without a reinstatement thereof; (iii) upon the entry of a decree
of judicial dissolution of the holder of the Common Securities, the Company or
the Trust; (iv) when all of the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof, including any
Additional Interest and Compound Interest, shall have been paid to the holders
thereof in accordance with the terms of the Trust Securities; (v) upon the
distribution of Convertible Debentures upon the occurrence of a Special Event;
(vi) upon the distribution of the Common Stock to all Holders of the Trust
Securities upon conversion of all outstanding Preferred Securities; or (vii)
on November 15, 2027, the expiration of the term of the Trust.
26
<PAGE>
Declaration Events of Default
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the
Trust Securities (a "Declaration Event of Default"); provided, that pursuant
to the Declaration, the holder of the Common Securities will be deemed to have
waived any Declaration Event of Default with respect to the Common Securities
until all Declaration Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated. Until such
Declaration Events of Default with respect to the Preferred Securities have
been so cured, waived or otherwise eliminated, the Institutional Trustee will
be deemed to be acting solely on behalf of the holders of the Preferred
Securities, and only the holders of the Preferred Securities will have the
right to direct the Institutional Trustee with respect to certain matters
under the Declaration and, therefore, the Indenture. In the event any
Declaration Event of Default with respect to the Preferred Securities is
waived by the holders of the Preferred Securities as provided in the
Declaration, the holders of Common Securities pursuant to the Declaration have
agreed that such waiver also constitutes a waiver of such Declaration Event of
Default with respect to the Common Securities for all purposes under the
Declaration without any further act, vote or consent of the holders of Common
Securities. See "--Voting Rights." The Institutional Trustee shall notify all
holders of the Preferred Securities of any notice of default received from the
Indenture Trustee with respect to the Convertible Debentures. Such notice
shall state that such Indenture Event of Default also constitutes a
Declaration Event of Default.
If the Institutional Trustee fails to enforce its rights under the
Convertible Debentures, any holder of Preferred Securities may, to the fullest
extent permitted by law, directly institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest
or principal on the Convertible Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the
redemption date), the Company acknowledges that a holder of Preferred
Securities may then also directly institute a proceeding for enforcement of
payment to such holder of the principal of or interest on the Convertible
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Convertible Debentures without first (i) directing the
Institutional Trustee to enforce the terms of the Convertible Debentures or
(ii) instituting a legal proceeding against the Company to enforce the
Institutional Trustee's rights under the Convertible Debentures. In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities under the Declaration to the extent of any
payment made by the Company to such holder of Preferred Securities in such
Direct Action. Consequently, the Company will be entitled to payment of
amounts that a holder of Preferred Securities receives in respect of an unpaid
Distribution that resulted in the bringing of a Direct Action to the extent
that such holder receives or has already received full payment with respect to
such unpaid Distribution from the Trust. The holders of Preferred Securities
will not be able to exercise directly any other remedy available to the
holders of the Convertible Debentures.
Upon the occurrence of an Indenture Event of Default, the Institutional
Trustee as the sole holder of the Convertible Debentures will have the right
under the Indenture to declare the principal of and interest on the
Convertible Debentures to be immediately due and payable. The Company and the
Trust are each required to file annually with the Institutional Trustee an
officers' certificate as to its compliance with all conditions and covenants
under the Declaration.
After the date for any distribution of Convertible Debentures upon
dissolution of the Trust, (i) the Preferred Securities will no longer be
deemed to be outstanding, (ii) the depositary or its nominee, as the record
holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Convertible Debentures to be
delivered upon such distribution and (iii) any certificates representing
Preferred Securities not held by the depositary or its nominee will be deemed
to represent Convertible Debentures having an aggregate principal amount equal
to the aggregate stated liquidation amount of, with an interest rate identical
to the Distribution rate of, and accrued and unpaid interest equal to accrued
and unpaid Distributions on, such Preferred Securities until such certificates
are presented to the Company or its agent for transfer or reissuance.
27
<PAGE>
Registration Rights
The Company, the Trust and the Initial Purchasers entered into a
Registration Rights Agreement dated November 25, 1997 (the "Registration
Rights Agreement") pursuant to which the Company and the Trust agreed to file
with the Commission, on or prior to March 19, 1998 (the "Required Filing
Date"), a shelf registration statement (the "Shelf Registration Statement") on
Form S-1 or Form S-3 to cover resales of Transfer Restricted Securities (as
defined below) by the holders thereof. The Company further agreed to use its
best efforts to cause such Shelf Registration Statement to be declared
effective by the Commission as soon as practicable following the filing
thereof, but in any case no later than June 17, 1998 (the "Required
Effectiveness Date") and to maintain the effectiveness thereof until two years
after the date of the Original Offering Date or such earlier date as of which
all the Transfer Restricted Securities have been sold pursuant to the Shelf
Registration Statement. Notwithstanding the foregoing, the Company is
permitted to prohibit offers and sales of Transfer Restricted Securities
pursuant to the Shelf Registration Statement under certain circumstances and
subject to certain conditions (any period during which offers and sales are
prohibited being referred to as a "Suspension Period"). "Transfer Restricted
Securities" means each Preferred Security and any underlying Convertible
Debenture or Common Stock until the date on which such Preferred Security or
underlying Convertible Debenture or Common Stock (i) has been effectively
registered under the Securities Act and disposed of pursuant to the Shelf
Registration Statement, (ii) is distributed to the public pursuant to Rule 144
under the Securities Act or (iii) may be sold or transferred pursuant to Rule
144(k) under the Securities Act (or any similar provisions then in force).
If (i) the Shelf Registration Statement is not filed with the Commission
prior to the Required Filing Date, (ii) the Shelf Registration Statement has
not been declared effective by the Commission under the Securities Act on or
prior to the Required Effectiveness Date or (iii) a Suspension Period is in
effect then, in any such case referred to in clause (i), (ii) or (iii), a
"Registration Default" shall have occurred. During such period as a
Registration Default shall occur and until either the Shelf Registration
Statement is declared effective or the Suspension Period is terminated, as the
case may be, the Company will pay to each holder of Transfer Restricted
Securities as liquidated damages ("Liquidated Damages") an amount equal to an
additional one-quarter of one percent (25 basis points) per quarter, payable
in arrears, with the first quarterly payment due on the first interest or
Distribution date following the date on which such Liquidated Damages begin to
accrue in respect of any Preferred Security that is a Transfer Restricted
Security owned by such holder.
Holders of Transfer Restricted Securities are required, among other things,
to make certain representations to the Company and the Trust (as described in
the Registration Rights Agreement) in connection with the Shelf Registration
Statement pursuant to which such holder proposes to offer and sell Transfer
Restricted Securities. The Company will provide to each holder of Transfer
Restricted Securities copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such Holder when the Shelf Registration
Statement has become effective and take certain other actions as are required
to permit unrestricted resales of the Transfer Restricted Securities. A holder
that proposes to sell Transfer Restricted Securities pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registrations Rights Agreement that are applicable to such a
holder (including indemnification and contribution rights and obligations).
The summary herein of certain provisions of the Registration Rights Agreement
is subject to, and is qualified in its entirety by reference to, all the
provisions of the Registration Rights Agreement. The Company will provide a
copy of the Registration Rights Agreement upon request.
The Registration Statement of which this Prospectus forms a part constitutes
the Shelf Registration Statement under the Registration Rights Agreement. The
Company filed the Registration Statement on March 18, 1998. Because the
Registration Statement had not been declared effective on or prior to June 17,
1998 as required under the Registration Rights Agreement, a Registration
Default occurred thereunder and, consequently, the Company has been required
to pay to each holder of Transfer Restricted Securities Liquidated Damages in
accordance with the provisions of the Registration Rights Agreement. The
Registration Statement was not
28
<PAGE>
declared effective on or prior to June 17, 1998 because the Commission was
reviewing certain periodic reports previously filed by the Company. The
Commission has now completed its review and the existing Registration Default
will be cured on the date on which the Registration Statement is declared
effective.
Voting Rights
Except as described in this Prospectus and except as provided under the
Trust Act and the Trust Indenture Act and as otherwise required by law and the
Declaration, the holders of the Preferred Securities have no voting rights.
Subject to the requirement of the Institutional Trustee's obtaining a tax
opinion in certain circumstances set forth in the following paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Institutional Trustee, or to
direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration, including the right to direct the Institutional
Trustee, as holder of the Convertible Debentures, to (i) exercise the remedies
available to the Institutional Trustee under the Indenture with respect to the
Convertible Debentures, (ii) waive any past Indenture Event of Default and its
consequences that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Convertible
Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Convertible Debentures
where such consent shall be required; provided, however, that where a consent
or action under the Indenture would require the consent or act of the holders
of more than a majority in principal amount of Convertible Debentures (a
"Super Majority") affected thereby, only the holders of at least such Super
Majority in aggregate liquidation amount of the Preferred Securities may
direct the Institutional Trustee to give such consent or take such action. If
the Institutional Trustee fails to enforce its rights under the Convertible
Debentures, any record holder of Preferred Securities may, to the fullest
extent permitted by law, directly institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of
the Company to pay interest or principal on the Convertible Debentures on the
date such interest or principal is otherwise payable (or in the case of
redemption on the redemption date), the Company acknowledges that a holder of
Preferred Securities may then institute a Direct Action for enforcement of
payment to such holder of the principal of or interest on the Convertible
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Convertible Debentures. The Institutional Trustee shall,
within 90 days, notify all holders of the Preferred Securities of any notice
of default received from the Indenture Trustee with respect to the Convertible
Debentures. Such notice shall state that such Indenture Event of Default also
constitutes a Declaration Event of Default. Except with respect to directing
the time, method and place of conducting a proceeding for a remedy available
to the Institutional Trustee, the Institutional Trustee, as holder of the
Convertible Debentures, shall be under no obligation to take any action in
accordance with the direction of the holders of Preferred Securities under
clauses (i), (ii) or (iii) of the preceding paragraph unless the Institutional
Trustee has obtained an opinion of independent tax counsel experienced in such
matters to the effect that as a result of such action, the Trust will not fail
to be classified as a grantor trust for United States federal income tax
purposes. The holders of a majority in aggregate outstanding principal amount
of Convertible Debentures may annul any declaration of acceleration under the
Indenture and waive any default if the default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee.
In the case of the Convertible Debentures held by the Institutional Trustee on
behalf of the Trust, a waiver of any default shall not be effective until a
majority in liquidation amount of the Trust Securities shall have consented to
such waiver; provided, however, that if the Indenture requires the consent of
a Super Majority, such waiver shall be effective only if the holders of at
least the proportion in liquidation amount of the Trust Securities that the
relevant Super Majority represents of the aggregate principal amount of the
Convertible Debentures outstanding so consent.
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In the event the consent of the Institutional Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the written direction of the holders of the Trust
Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a majority in liquidation amount of the Trust Securities voting
together as a single class; provided, however, that where any amendment,
modification or termination under the Indenture would require the consent of a
Super Majority, the Institutional Trustee may only give such consent at the
direction of the holders of at least the proportion in aggregate stated
liquidation amount of the Trust Securities which the relevant Super Majority
represents of the aggregate principal amount of the Convertible Debentures
outstanding. The Institutional Trustee shall be under no obligation to take
any such action in accordance with the direction of the holders of the Trust
Securities unless the Institutional Trustee has obtained an opinion of a
nationally recognized independent tax counsel experienced in such matters to
the effect that for United States federal income tax purposes the Trust will
not be classified as other than a grantor trust.
A waiver of an Indenture Event of Default constitutes a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth the following information:
(i) the date of such meeting or the date by which such action is to be taken;
(ii) a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which written
consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or distribute
Convertible Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred
Securities were not outstanding.
The procedures by which holders of Preferred Securities represented by the
Global Certificates may exercise their voting rights are described below. See
"--Book-Entry-Only Issuance--The Depository Trust Company."
Holders of the Preferred Securities have no right to appoint or remove any
of the Trustees, who may be appointed, removed or replaced solely by the
Company as the indirect or direct holder of the Common Securities.
Modification of the Declaration
The Declaration may be modified and amended if approved by the Regular
Trustees (and, in certain circumstances, the Institutional Trustee and/or the
Delaware Trustee), except that if any proposed amendment provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the holders of
the Trust Securities, whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding-up or termination of the Trust
other than pursuant to the terms of the Declaration, then the holders of the
Trust Securities voting together as a single class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of holders of at least a majority in
liquidation amount of the Trust Securities affected thereby; provided, that if
any amendment or proposal referred to in clause (i) above would adversely
affect only the Preferred Securities or the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
majority in liquidation amount of such class of Trust Securities.
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Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for United States federal income tax purposes as other than a
grantor trust, (ii) reduce or otherwise adversely affect the powers of the
Institutional Trustee or (iii) cause the Trust to be deemed an "investment
company" that is required to be registered under the 1940 Act.
Merger, Consolidation or Amalgamation of the Trust
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below or as otherwise set forth in the Declaration. The Trust may,
with the consent of the Regular Trustees and without the consent of the
holders of the Trust Securities, the Institutional Trustee or the Delaware
Trustee, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets substantially as an
entirety to, a trust organized as such under the laws of any State provided,
however, that (i) if the Trust is not the survivor, such successor entity
either (x) expressly assumes all of the obligations of the Trust under the
Trust Securities or (y) 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 with respect to Distributions, assets and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly acknowledges
a trustee of such successor entity possessing the same powers and duties as
the Institutional Trustee, in its capacity as the holder of the Convertible
Debentures, (iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on the NNM, any national securities exchange or another organization
on which the Preferred Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (vi) such successor entity has a purpose
substantially identical to that of the Trust, (vii) the Company guarantees the
obligations of such successor entity under the Successor Securities to the
same extent as provided by the Guarantees and (viii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Company has received an opinion of a nationally recognized independent counsel
to the Trust and experienced in such matters to the effect that: (A) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease will not adversely affect the rights, preferences and privileges of the
holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity) and (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor such successor entity will
be required to register as an "investment company" under the 1940 Act.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in liquidation amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by, or convey, transfer or
lease its properties and assets substantially as an entirety to, any other
entity or permit any other entity to consolidate, amalgamate, merge with or
into, or replace it, if, in the opinion of a nationally recognized independent
tax counsel experienced in such matters, such consolidation, amalgamation,
merger, replacement, conveyance, transfer or lease, would cause the Trust or
the successor entity to be classified as other than a grantor trust for United
States federal income tax purposes. In addition, so long as any Preferred
Securities remain outstanding and are not held entirely by the Company, the
Trust may not voluntarily liquidate, dissolve, wind-up or terminate except as
described above under "--Special Event Redemption or Distribution."
Book-Entry-Only Issuance--The Depository Trust Company
The Preferred Securities were issued in fully registered form. Except as
provided below, Preferred Securities held by "qualified institutional buyers,"
as defined in Rule 144A under the Securities Act ("QIBs"), are currently
evidenced by one or more global certificates representing Preferred Securities
(collectively, the "Restricted Global Certificate"), which has been deposited
with DTC and registered in the name of Cede & Co. ("Cede") as DTC's nominee.
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Preferred Securities held by persons who acquired such Preferred Securities
in compliance with Regulation S under the Securities Act ("Non-U.S. persons")
are currently evidenced by one or more global certificates (collectively, the
"Regulation S Global Certificate" and together with the Restricted Global
Certificate, the "Global Certificates" or each individually, a "Global
Certificate"), which has been registered in the name of a nominee of DTC for
the accounts of the Euroclear System ("Euroclear") or Cedel Bank, societe
anonyme ("Cedel").
A QIB may hold its interest in the Restricted Global Certificate directly
through DTC if such QIB is a participant in DTC, or indirectly through
organizations that are participants in DTC ("Participants"). The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in the Preferred Securities as represented by
the Restricted Global Certificate.
Beneficial interests in the Restricted Global Certificate may be transferred
to a person who takes delivery in the form of an interest in the Regulation S
Global Certificate only upon receipt by the Institutional Trustee of a written
certification from the transferor to the effect that such transfer is being
made in accordance with Regulation S or Rule 144A under the Securities Act and
that the interest transferred will be held immediately thereafter through
Euroclear or Cedel. Any beneficial interest in one of the Global Certificates
will, upon transfer, cease to be an interest in such Global Certificate and
become an interest in such other Global Certificate and, accordingly,
thereafter will be subject to all transfer restrictions and other procedures
applicable to beneficial interest in such other Global Certificate for as long
as it remains such an interest.
Investors may hold their interests in the Regulation S Global Certificate
through Euroclear or Cedel, if they are participants in such systems, or
indirectly through organizations that are participants in such systems.
Investors also may hold such interests through organizations other than
Euroclear or Cedel that are Participants in DTC. Euroclear and Cedel will hold
interests in the Regulation S Global Certificate on behalf of their
participants through customers' securities accounts in their respective names
on the books of DTC. All interests in a Global Certificate, including those
held through Euroclear or Cedel, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear and Cedel also may
be subject to the procedures and requirements of such systems.
QIBs and Non-U.S. persons that are not Participants may beneficially own
interests in a Global Certificate held by DTC only through Participants,
including Euroclear and Cedel, or certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). So long as the nominee of DTC is the registered owner of a
Global Certificate, such nominee will be considered for all purposes the sole
holder of the Global Certificate. Except as provided below, owners of
beneficial interests in a Global Certificate will not be entitled to have
certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive form and will not be
considered holders thereof.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in Preferred Securities represented by a Global
Certificate to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interest, may be affected by the lack of a physical certificate evidencing
such interest.
DTC has advised the Company and the Trust as follows: DTC is a limited-
purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC holds securities that
its Participants deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical
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movement of securities certificates. Participants in DTC include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. The rules applicable to DTC and
its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Preferred Securities
on DTC's records. The ownership interest of each actual purchaser of each
Preferred Security ("Beneficial Owner") is in turn recorded on the
Participants' and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Participants or Indirect Participants through which the Beneficial Owners
purchased Preferred Securities. Transfers of ownership interests in the
Preferred Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued. Accordingly, each Beneficial Owner must
rely on the procedures of DTC to exercise any rights under the Preferred
Securities.
Transfers between Participants will be effected in accordance with DTC's
procedures and will be settled in same-day funds. Transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between Participants, on the one hand, and Euroclear
participants or Cedel participants, on the other hand, will be effected in DTC
in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or Cedel, as the case may
be, by the counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such
system. Euroclear or Cedel, as the case may be, will, if the transaction meets
its settlement requirements, deliver instructions to its respective depositary
to take action to effect final settlement on its behalf by delivering or
receiving interests in the Preferred Securities in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants
may not deliver instructions directly to the depositaries for Euroclear or
Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Preferred Security from a
Participant in DTC will be credited, and any such crediting will be reported
to the relevant Euroclear participant or Cedel participant, during the
securities settlement processing day (which must be a business day for
Euroclear and Cedel, as the case may be) immediately following the DTC
settlement date. Cash received in Euroclear or Cedel as a result of sales of
interests in a Preferred Security by or through a Euroclear or Cedel
participant to a Participant in DTC will be received with value on the DTC
settlement date, but will be available in the relevant Euroclear or Cedel cash
account only as of the business day for Euroclear or Cedel following the DTC
settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Preferred Securities (including the presentation of
Preferred Securities for exchange as described below) only at the direction of
one or more Participants to whose account the DTC interests in the Global
Certificates are credited and only in respect of such portion of the aggregate
liquidation amount of Preferred Securities as to which such Participant or
Participants has or have given such direction.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
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Conversion and redemption notices shall be sent to DTC. If less than all of
the Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Participant in such Preferred Securities in accordance with
its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, DTC will not itself consent or vote with
respect to the Preferred Securities. Under its usual procedures, DTC would
mail an omnibus proxy to the Trust as soon as possible after the record date.
The omnibus proxy assigns DTC's consenting or voting rights to those
Participants to whose accounts the Preferred Securities are credited on the
record date (identified in a listing attached to the omnibus proxy).
Distributions on the Preferred Securities in the form of Global Certificates
will be made to DTC. DTC's practice is to credit Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by Participants and Indirect
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the account
of customers in bearer form or registered in "street name," and such payments
will be the responsibility of such Participants and not of DTC, the Trust or
the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributions to DTC is the
responsibility of the Trust, disbursement of such payments to Participants is
the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Participants and Indirect Participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC,
DTC is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Company, the
Trust nor any Trustee will have any responsibility for the performance by DTC
or its Participants or Indirect Participants under the rules and procedures
governing DTC. DTC may discontinue providing its services as securities
depositary with respect to the Preferred Securities at any time by giving
reasonable notice to the Trust. Under such circumstances, in the event that a
successor securities depositary is not obtained, Preferred Securities in the
form of physical certificates will be delivered in exchange for beneficial
interests in each Global Certificate. Additionally, the Trust (with the
consent of the Company) may decide to discontinue use of the system of book-
entry transfers through DTC (or a successor depositary) with respect to the
Preferred Securities. In that event, certificates for the Preferred Securities
will be printed and delivered. In each of the above circumstances, the Company
will appoint a paying agent with respect to the Preferred Securities.
The information in this Section concerning DTC, Cedel, Euroclear and DTC's
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.
Information Concerning the Institutional Trustee
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities and after the curing of any default that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after such a default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her
own affairs. Subject to such provisions, the Institutional Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. Notwithstanding the foregoing, the holders of
Preferred Securities will not be required to offer such indemnity in the event
such holders, by exercising their voting rights, direct the Institutional
Trustee to take any action following a Declaration Event of Default. The
Institutional Trustee also serves as Delaware Trustee and as trustee under the
Guarantee and the Indenture.
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Payment
Payments in respect of the Preferred Securities represented by the Global
Certificates will be made to DTC, which will credit the relevant accounts at
DTC on the applicable Distribution Dates or, in the case of certificated
Preferred Securities, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register.
Registrar, Transfer Agent, Paying Agent and Conversion Agent
The Institutional Trustee acts as Registrar, Transfer Agent, Paying Agent
and Conversion Agent for the Preferred Securities. The Paying Agent initially
is the Institutional Trustee, which is presently located in Wilmington,
Delaware. The Paying Agent is permitted to resign as Paying Agent upon 30
days' written notice to the Trustees. In the event that the Institutional
Trustee will no longer be the Paying Agent, the Regular Trustees shall appoint
a successor to act as Paying Agent (which shall be a bank or trust company).
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other government charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
Governing Law
The Declaration and the Preferred Securities are governed by, and construed
in accordance with, the internal laws of the State of Delaware.
Miscellaneous
The Regular Trustees are authorized and directed to operate the Trust in
such a way that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or characterized as other than a
grantor trust for United States federal income tax purposes. In this
connection, the Company and the Regular Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust or the
Declaration that each of the Company and the Regular Trustees determine in
their discretion to be necessary or desirable for such purposes as long as
such action does not materially adversely affect the interests of the holders
of the Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a description of the specific terms of the Convertible
Debentures in which the Trust has invested the proceeds from the initial
issuance and sale of the Trust Securities. The Convertible Debentures have
been qualified under the Trust Indenture Act. The following description does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Indenture, dated as of November 25, 1997 (the
"Indenture") between the Company and Wilmington Trust Company, as trustee (the
"Indenture Trustee"). Certain capitalized terms used herein are defined in the
Indenture.
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Special Event, Convertible Debentures may be distributed
to the holders of the Trust Securities in liquidation of the Trust. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution."
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General
The Convertible Debentures were issued as unsecured debt under the
Indenture. The Convertible Debentures were limited in aggregate principal
amount to approximately $257.7 million, such amount being the sum of the
aggregate stated liquidation amount of the Preferred Securities and the
capital contributed by the Company in exchange for the Common Securities.
The Convertible Debentures are not subject to a sinking fund provision. The
entire principal amount of the Convertible Debentures will mature and become
due and payable, together with any accrued and unpaid interest thereon,
including Compound Interest and Additional Interest, if any, on November 15,
2027.
If Convertible Debentures are distributed to holders of Preferred Securities
in liquidation of such holder's interest in the Trust, such Convertible
Debentures will initially be issued in the form of one or more Global
Securities (as defined below). As described herein under certain limited
circumstances, Convertible Debentures may be issued in certificated form in
exchange for a Global Security. In the event that Convertible Debentures are
issued in certificated form, such Convertible Debentures will be in
denominations of $50 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on Convertible Debentures
issued as a Global Security will be made to DTC, a successor depositary or, in
the event that no depositary is used, to a paying agent for the Convertible
Debentures. In the event Convertible Debentures are issued in certificated
form, principal and interest will be payable, the transfer of the Convertible
Debentures will be registrable and Convertible Debentures will be exchangeable
for Convertible Debentures of other denominations of a like aggregate
principal amount at the corporate trust office of the Indenture Trustee in
New York, New York; provided, however, that payment of interest may be made at
the option of the Company by check mailed to the address of the persons
entitled thereto.
There are no covenants or provisions in the Indenture that afford holders of
Convertible Debentures protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect such holders.
Subordination
The Indenture provides that the Convertible Debentures are subordinate and
junior in right of payment to all existing and future Senior Indebtedness of
the Company. No payment of principal of (including redemption payments),
premium, if any, or interest (including Additional Interest and Compound
Interest) on, the Convertible Debentures may be made if (i) any Senior
Indebtedness of the Company has not been paid when due and any applicable
grace period with respect to such default has ended and such default has not
been cured or waived, or ceased to exist or (ii) the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default. At
December 31, 1998, Senior Indebtedness of the Company aggregated approximately
$907.2 million. Upon any distribution of assets of the Company to creditors
upon any dissolution, winding-up, liquidation or reorganization, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all principal, premium, if any, and interest due or to become due
on, all Senior Indebtedness of the Company must be paid in full before the
holders of the Convertible Debentures are entitled to receive or retain any
payment. Upon satisfaction of all claims related to all Senior Indebtedness of
the Company then outstanding, the rights of the holders of the Convertible
Debentures will be subrogated to the rights of the holders of Senior
Indebtedness of the Company to receive payments or distributions applicable to
Senior Indebtedness until all amounts owing on the Convertible Debentures are
paid in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) every obligation of
the Company for money borrowed and (B) every obligation of the Company
evidenced by securities, notes, debentures, bonds or other similar instruments
including obligations incurred in connection with the acquisition of property,
assets or businesses, (ii) all capital lease obligations of the Company, (iii)
all obligations of the Company issued or assumed as the deferred purchase
price of property, all conditional sale obligations of the Company and all
obligations of the Company under any title retention
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agreement (but excluding trade accounts payable arising in the ordinary course
of business), (iv) all obligations of the Company for the reimbursement of any
letter of credit, banker's acceptance, security purchase facility or similar
credit transaction issued for the account of the Company, (v) all obligations
of the Company in respect of derivative products, including interest rate
swap, cap or other similar agreements, interest rate future or option
contracts, currency swap agreements, currency future or option contracts and
other similar agreements, (vi) all obligations of the type referred to in
clauses (i) through (v) above of other persons for the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise, and (vii)
all obligations of the type referred to in clauses (i) through (vi) above of
other persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by the Company), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Convertible Debentures and (2) any indebtedness between or among the Company
and its affiliates, including all other debt securities and guarantees in
respect of those debt securities issued to (a) the Trust or a trustee of the
Trust and (b) any other trust, or a trustee of such trust, partnership or
other entity affiliated with the Company that is a financing vehicle of the
Company (a "financing entity") in connection with the issuance by such
financing entity of preferred securities or other securities that rank pari
passu with, or junior to, the Preferred Securities. Such Senior Indebtedness
shall continue to be Senior Indebtedness and be entitled to the benefits of
the subordination provisions irrespective of any amendment, modification or
waiver of any term of such Senior Indebtedness.
In addition, because a significant portion of the Company's operations is
conducted through its subsidiaries and the subsidiaries have not guaranteed
the payment of and interest on the Convertible Debentures, all liabilities of
such subsidiaries, including trade payables (which aggregated approximately
$455.3 million at December 31, 1998), are effectively senior to the
Convertible Debentures.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company.
Optional Redemption
The Company has the right to redeem the Convertible Debentures, in whole or
in part, from time to time, on or after November 25, 2000 upon not less than
30 nor more than 60 days' notice, at the following Redemption Prices
(expressed as a percentage of the principal amount of the Convertible
Debentures), if redeemed during the twelve-month period commencing November 25
in the year indicated:
<TABLE>
<CAPTION>
Original
Year Redemption Price
---- ----------------
<S> <C>
2000...................................................... 102.60%
2001...................................................... 101.30
</TABLE>
and 100% if redeemed on or after November 25, 2002.
plus, in each case, accrued and unpaid interest, including Additional Interest
and Compound Interest, if any, to, but not including, the date set for
redemption.
The Company may also redeem the Convertible Debentures, in whole or in part,
at any time in certain circumstances upon the occurrence of a Tax Event as
described under "Description of the Preferred Securities-Special Event
Redemption or Distribution" at a redemption price equal to 100% of the
principal amount to be redeemed plus accrued and unpaid interest, including
Additional Interest and Compound Interest, if any, to the date set for
redemption (subject to the rights of holders of record on the relevant record
date to receive interest due on an Interest Payment Date (as defined below)
that is on or prior to the redemption date).
If a partial redemption of the Preferred Securities resulting from a partial
redemption of the Convertible Debentures would result in the delisting of the
Preferred Securities, the Company may only redeem Convertible Debentures in
whole.
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<PAGE>
Interest
Each Convertible Debenture bears interest at the rate of 6.50% per annum
from the original date of issuance, payable quarterly in arrears on February
15, May 15, August 15 and November 15 (each, an "Interest Payment Date"),
commencing February 15, 1998 to the person in whose name such Convertible
Debenture is registered, subject to certain exceptions, at the close of
business on the Business Day next preceding such Interest Payment Date. In the
event the Convertible Debentures shall not continue to remain in book-entry
only form, the Company shall have the right to select record dates, which
shall be more than 14 days but less than 60 days prior to the Interest Payment
Date.
The amount of interest payable for any period is computed on the basis of a
360-day year of twelve 30-day months. The amount of interest payable for any
period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed. In the
event that any date on which interest is payable on the Convertible Debentures
is not a Business Day, then payment of the interest payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, then such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
Option to Extend Interest Payment Periods
So long as no Indenture Event of Default has occurred and is continuing, the
Company has the right at any time, and from time to time, during the term of
the Convertible Debentures, to defer payments of interest by extending the
interest payment period for a period not exceeding 20 consecutive quarters
with respect to each Extension Period; provided, that no Extension Period may
extend beyond the maturity of the Convertible Debentures, and at the end of
which Extension Period the Company shall pay all interest then accrued and
unpaid (including any Additional Interest) together with interest thereon
compounded quarterly at the rate specified for the Convertible Debentures to
the extent permitted by applicable law ("Compound Interest"); provided,
further, that during any such Extension Period, (a) the Company shall not
declare or pay dividends on, or make any distribution or liquidation payment
with respect to, or redeem, purchase or acquire any of its capital stock
(other than (i) purchases or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security requiring the Company to purchase shares
of the Common Stock, (ii) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged, (iv) purchases or
acquisitions of shares of the Company's Common Stock to be used in connection
with acquisitions of the Company's Common Stock by stockholders pursuant to a
dividend reinvestment plan, or (v) stock dividends paid by the Company where
the dividend stock is the same stock as that on which the dividend is paid),
(b) the Company shall not make any payment of interest on or principal of (or
premium, if any, on) or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company which rank pari passu with or
junior to the Convertible Debentures and (c) the Company shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantees). Prior to the termination of any such Extension Period, the
Company may further defer payments of interest by extending the interest
payment period; provided, however, that such Extension Period together with
all previous and further extensions thereof may not exceed 20 consecutive
quarters; and provided further that no Extension Period may extend beyond the
maturity of the Convertible Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may commence a new
Extension Period, subject to the terms set forth in this section. No interest
shall be due and payable during an Extension Period. There could be multiple
Extension Periods of varying lengths throughout the terms of the Convertible
Debentures. The Company has no current intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Convertible Debentures. If the Institutional Trustee shall be the sole holder
of the Convertible Debentures, the Company shall give the Regular
38
<PAGE>
Trustees, the Indenture Trustee and the Institutional Trustee written notice
of its selection of such Extension Period at least one Business Day prior to
the earlier of (i) the date the Distributions on the Preferred Securities
would be payable, if not for such Extension Period or (ii) the date the
Regular Trustees are required to give notice to any applicable self-regulatory
organization or to holders of the Preferred Securities of the record date or
the date such Distribution would be payable if not for such Extension Period,
but in any event not less than one Business Day prior to such record date. The
Regular Trustees shall give notice of the Company's selection of such
Extension Period to the holders of the Preferred Securities. If the
Institutional Trustee shall not be the sole holder of the Convertible
Debentures, the Company shall give the holders of the Convertible Debentures
and the Indenture Trustee written notice of its selection of such Extension
Period at least ten Business Days prior to the earlier of (i) the next
succeeding Interest Payment Date or (ii) the date upon which the Company is
required to give notice to any applicable self-regulatory organization or to
holders of the Convertible Debentures on the record or payment date of such
related interest payment.
Additional Interest
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, the Company will pay as additional interest ("Additional
Interest") on the Convertible Debentures such additional amounts as shall be
required so that the net amounts received and retained by the Trust after
paying any such taxes, duties, assessments or governmental charges will be not
less than the amounts the Trust would have received had no such taxes, duties,
assessments or governmental charges been imposed.
Conversion of the Convertible Debentures
The Convertible Debentures are convertible into Common Stock at the option
of the holders of the Convertible Debentures at any time prior to 5:00 P.M.
(Eastern time) on the Business Day immediately preceding the date of repayment
of such Convertible Debentures, whether at maturity or upon redemption (or, in
the case of Convertible Debentures called for redemption, the close of
business or the Business Day prior to the Redemption Date), at the Initial
Conversion Price subject to the conversion price adjustments described under
"Description of the Preferred Securities--Conversion Rights." The Trust has
agreed not to convert Convertible Debentures held by it except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of
Preferred Securities. Upon surrender of a Preferred Security to the Conversion
Agent for conversion, the Trust will distribute Convertible Debentures to the
Conversion Agent on behalf of the holder of the Preferred Securities so
converted, whereupon the Conversion Agent will convert such Convertible
Debentures to Common Stock on behalf of such holder. The Company's delivery to
the holders of the Convertible Debentures (through the Conversion Agent) of
the fixed number of shares of Common Stock into which the Convertible
Debentures are convertible (together with the cash payment, if any, in lieu of
fractional shares) will be deemed to satisfy the Company's obligation to pay
the principal amount of the Convertible Debentures so converted, and the
accrued and unpaid interest thereon attributable to the period from the last
date to which interest has been paid or duly provided for; provided, however,
that if any Convertible Debenture is converted after a record date for payment
of interest, the interest payable on the related interest payment date with
respect to such Convertible Debenture shall be paid to the Trust (which will
distribute such interest to the converting holder of such Preferred Security
on the record date) or other holder of Convertible Debentures, as the case may
be, despite such conversion; provided, further that if any Convertible
Debenture is delivered for conversion during an Extension Period by a holder
after receiving a notice of redemption from the Institutional Trustee, the
Company shall be required to pay to the Trust all accrued and unpaid interest,
if any, on such Convertible Debenture through the date of conversion, which
amount shall be simultaneously distributed to the holders of the Preferred
Securities in respect of which such Convertible Debentures were delivered. See
"--Optional Redemption," "Description of the Preferred Securities--Conversion
Rights" and "Description of the Preferred Securities--Mandatory Redemption."
39
<PAGE>
Certain Covenants
In the Indenture, so long as any Convertible Debentures are outstanding, if
(i) there shall have occurred and be continuing any event that with the giving
of notice or the lapse of time or both, would constitute an Indenture Event of
Default, or (ii) the Company shall be in default with respect to its payment
of any obligations under the Guarantee, or (iii) the Company has exercised its
option to defer interest payments on the Convertible Debentures by extending
the interest payment period and such period, or any extension thereof, shall
be continuing, then (a) the Company shall not declare or pay dividends on, or
make any distribution or liquidation payment with respect to, or redeem,
purchase or acquire any of its capital stock (other than (i) purchases or
acquisitions of shares of Common Stock in connection with the satisfaction by
the Company of its obligations under any employee benefit plans or the
satisfaction by the Company of its obligations pursuant to any contract or
security requiring the Company to purchase shares of the Common Stock, (ii) as
a result of a reclassification of the Company's capital stock or the exchange
or conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital stock, (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iv) purchases or acquisitions of shares of the Common
Stock to be used in connection with acquisitions of the Common Stock by
shareholders pursuant to a dividend reinvestment plan, or (v) stock dividends
paid by the Company where the dividend stock is the same stock as that on
which the dividend is paid), (b) the Company shall not make any payment of
interest on or principal of (or premium, if any, on) or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company that
rank pari passu with or junior to the Convertible Debentures and (c) the
Company shall not make any guarantee payments with respect to the foregoing
(other than pursuant to the Guarantees).
The Company has covenanted (i) to maintain, directly or indirectly, 100%
ownership of the Common Securities of the Trust; provided, however, that any
permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Common Securities, (ii) as issuer of the
Convertible Debentures, not to voluntarily terminate, wind-up or liquidate the
Trust, except in connection with (a) a distribution of Convertible Debentures
to the holders of the Trust Securities in liquidation of the Trust or (b)
certain mergers, consolidations or amalgamations permitted by the Declaration,
(iii) to use its reasonable efforts (a) to cause the Convertible Debentures to
continue to be classified as indebtedness of the Company for United States
federal income tax purposes, and (b) to cause the Trust to otherwise continue
to be classified as a grantor trust for United States federal income tax
purposes.
Consolidation, Merger and Sale of Assets
The Indenture provides that the Company will not consolidate with or merge
into any other corporation or convey, transfer or lease its properties and
assets substantially as an entirety unless (a) if the Company is not the
survivor, the successor is a corporation organized under the laws of a State
of the United States and expressly assumes the due and punctual payment of the
principal of (and premium, if any) and interest on all Convertible Debentures
issued under the Indenture and the performance or observance of every other
covenant of the Indenture on the part of the Company, (b) immediately
thereafter no Indenture Event of Default and no event which, after notice or
lapse of time, or both, would become an Indenture Event of Default, shall have
occurred and be continuing and (c) the Company shall have delivered to the
Indenture Trustee an officers' certificate and an opinion of counsel, each
stating that such transaction and any supplemental indenture required pursuant
to such transaction, comply with the terms of the Indenture and that all
conditions precedent provided for therein relating to such transaction have
been complied with. Upon any such consolidation, merger, conveyance or
transfer, the successor corporation shall succeed to and be substituted for
the Company under the Indenture and thereafter the predecessor corporation
shall be relieved of all obligations and covenants under the Indenture and the
Convertible Debentures.
Indenture Events of Default
The Indenture provides that any one or more of the following described
events that has occurred and is continuing constitutes an Indenture Event of
Default with respect to the Convertible Debentures: (i) failure for 30 days to
pay interest on the Convertible Debentures, including any Additional Interest
and Compound Interest
40
<PAGE>
in respect thereof, when due; provided, however, that a valid extension of an
interest payment period will not constitute a default in the payment of
interest (including any Additional Interest and Compound Interest) for this
purpose; or (ii) failure to pay principal of or premium, if any, on the
Convertible Debentures when due whether at maturity, upon redemption, by
declaration or otherwise; or (iii) failure to observe or perform, or breach
of, in any material respect, any other covenant or agreement contained in the
Indenture that shall not have been remedied for a period of 90 days after
notice to the Company by the Indenture Trustee or by the holders of not less
than 25% in aggregate outstanding principal amount of the Convertible
Debentures; or (iv) failure by the Company to deliver shares of Common Stock
upon an election by a holder of Preferred Securities to convert such Preferred
Securities; or (v) the dissolution, winding-up or termination of the Trust,
except in connection with (A) the distribution of Convertible Debentures to
the holders of Preferred Securities in liquidation of the Trust upon the
redemption of all outstanding Preferred Securities and (B) certain mergers,
consolidations or amalgamations permitted by the Declaration; or (vi) certain
events of bankruptcy, insolvency or reorganization of the Company.
The Indenture provides that the Indenture Trustee may withhold notice to the
holders of the Convertible Debentures (except notice relating to any default
in the payment of principal, premium, if any, or interest on, the Convertible
Debentures) if the Indenture Trustee considers it in the interest of such
holders to do so.
The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Convertible Debentures may declare the
principal of and interest on the Convertible Debentures due and payable
immediately on the occurrence of an Indenture Event of Default; provided,
however, that, after such acceleration, but before a judgment or decree based
on acceleration, the holders of a majority in aggregate principal amount of
outstanding Convertible Debentures may, under certain circumstances, rescind
and annul such acceleration if all Indenture Events of Default, other than the
nonpayment of accelerated principal, have been cured or waived as provided in
the Indenture. For information as to waiver of defaults, see "--Modifications
and Amendments of the Indenture."
Notwithstanding the foregoing, if an Indenture Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the Convertible Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), the Company acknowledges that, in such event, a holder of
Preferred Securities may then institute a Direct Action for payment on or
after the respective due date specified in the Convertible Debentures. The
Company may not amend the Indenture to remove the foregoing right to bring a
Direct Action without the prior written consent of all the holders of
Preferred Securities. Notwithstanding any payment made to such holder of
Preferred Securities by the Company in connection with a Direct Action, the
Company shall remain obligated to pay the principal of (premium, if any, on)
or interest on the Convertible Debentures held by the Trust or the
Institutional Trustee, and the Company shall be subrogated to the rights of
the holder of such Preferred Securities with respect to payments on the
Preferred Securities to the extent of any payment made by the Company to such
holder in any Direct Action. The holders of Preferred Securities will not be
able to exercise directly any other remedy available to the holders of the
Convertible Debentures.
The holders of not less than a majority in principal amount of the
outstanding Convertible Debentures may on behalf of the holders of all the
Convertible Debentures waive any past default and its consequences except (a)
a default in payment of the principal of (or premium, if any) or interest
(including Additional Interest and Compound Interest) on any Convertible
Debentures and (b) a default in respect of a covenant or provision of the
Indenture that cannot be amended or modified without the consent of the holder
of each Convertible Debenture; provided, however, that if the Convertible
Debentures are held by the Trust or a trustee of the Trust, such waiver or
modification to such waiver shall not be effective until the holders of a
majority in liquidation amount of Trust Securities shall have consented to
such waiver or modification to such waiver; and provided, further, that if the
consent of the holder of each outstanding Convertible Debenture is required,
such waiver shall not be effective until each holder of the Trust Securities
shall have consented to such waiver.
A default under any other indebtedness of the Company would not constitute
an Indenture Event of Default.
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<PAGE>
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, in case an Indenture Event of Default shall occur and be
continuing, the Indenture Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request or direction of any
holders of Convertible Debentures, unless such holders shall have offered to
the Indenture Trustee reasonable indemnity against expenses and liabilities.
Subject to such provisions for the indemnification of the Indenture Trustee
and subject to any rule of law, the holders of a majority in aggregate
principal amount of the Convertible Debentures then outstanding will have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Indenture Trustee, or exercising any trust or
power conferred on the Indenture Trustee.
No holder of any Convertible Debenture has any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
(i) such holder shall have previously given to the Indenture Trustee written
notice of a continuing Indenture Event of Default, (ii) if the Trust is not
the sole holder of Convertible Debentures, the holders of not less than 25% in
aggregate principal amount of the Convertible Debentures then outstanding
shall also have made a written request to the Indenture Trustee, (iii) such
holder has offered reasonable indemnity to the Indenture Trustee to institute
such proceeding as Indenture Trustee, (iv) the Indenture Trustee shall have
failed to institute such proceeding within 60 days of such notice, and (v) the
Indenture Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Convertible Debentures a
direction inconsistent with such request. However, such limitations do not
apply to a suit instituted by a holder of a Convertible Debenture for
enforcement of payment of the principal of or interest on such Convertible
Debenture on or after the respective due dates set forth in such Convertible
Debenture.
The Indenture requires the Company to file annually with the Indenture
Trustee and the Institutional Trustee a certificate as to the absence of
certain defaults and whether or not the Company is in compliance with all the
conditions and covenants under the Indenture.
Modifications and Amendments of the Indenture
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding Convertible Debentures, to
modify the Indenture or the rights of the holders of Convertible Debentures;
provided, however, that no such modification shall, without the consent of the
holder of each outstanding Convertible Debenture affected thereby, (i) change
the stated maturity of the Convertible Debentures or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or make the principal of, or interest or premium, if any, on the
Convertible Debentures payable in any coin or currency other than that
provided in the Convertible Debentures, or impair or affect the right of any
holder of Convertible Debentures to institute suit for the payment thereof or
the right of prepayment, if any, at the option of the holder, or adversely
affect the right to convert Convertible Debentures or the subordination
provisions of the Indenture in a manner adverse to the holders of Convertible
Debentures, (ii) reduce the percentage in aggregate principal amount of
outstanding Convertible Debentures, for which the consent of the holders is
required for any such modification or (iii) modify any provision of the
Indenture with respect to (A) modification of the Indenture or (B) waiver of
defaults except under certain limited circumstances. If Convertible Debentures
are held by the Trust or a trustee thereof, a supplemental indenture requiring
such consent will not be effective until the holders of a majority in
liquidation amount of the Trust Securities shall have consented to such
supplemental indenture; provided, that if the consent of the holders of each
outstanding Convertible Debenture is required, such supplemental indenture
shall not be effective until each holder of the Trust Securities shall have
consented to such supplemental indenture. As a result of these pass-through
voting rights with respect to modifications to the Indenture, no modification
thereto shall be effective until the holders of a majority in liquidation
amount of the Trust Securities consent to such modification and no
modification described in clauses (i) or (ii) shall be effective without the
consent of each holder of Preferred Securities and each holder of Common
Securities.
In addition, the Company and the Indenture Trustee may execute, without the
consent of any holder of Convertible Debentures, any supplemental indenture to
cure any ambiguities, comply with the Trust Indenture Act and for certain
other customary purposes.
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<PAGE>
Satisfaction and Discharge
The Indenture provides that when, among other things, all Convertible
Debentures not previously delivered to the Indenture Trustee for cancellation
(i) have become due and payable or (ii) will become due and payable at their
stated maturity within one year, and the Company deposits or causes to be
deposited with the Indenture Trustee trust funds, in trust, for the purpose
of, and in an amount sufficient for, payment and discharge of the entire
indebtedness on the Convertible Debentures not previously delivered to the
Indenture Trustee for cancellation, for the principal (and premium, if any)
and interest and any Compound Interest and Additional Interest to the date of
the deposit or to the maturity of the Convertible Debentures 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.
Book-Entry and Settlement
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust
as a result of the occurrence of a Special Event, the Convertible Debentures
will be issued in the same form as the Preferred Securities that such
Convertible Debentures replace. Any Preferred Securities evidenced by a Global
Certificate will be replaced by Convertible Debentures in the form of one or
more global certificates (each, a "Global Security") registered in the name of
the depositary or its nominee. Except under the limited circumstances
described below under "--Discontinuance of the Depositary's Services,"
Convertible Debentures represented by a Global Security will not be
exchangeable for, and will not otherwise be issuable as, Convertible
Debentures in definitive form. The Global Securities described above may not
be transferred except by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the
depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take delivery of such securities in definitive form. Such laws may impair the
ability to transfer beneficial interests in such a Global Security.
Except as described below under "--Discontinuance of the Depositary's
Services," owners of beneficial interests in such a Global Security will not
be entitled to receive physical delivery of Convertible Debentures in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no Global Security representing Convertible
Debentures shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the depositary or its
nominee or to a successor depositary or its nominee. Accordingly, each
beneficial owner must rely on the procedures of the depositary or if such
person is not a Participant, on the procedures of the Participant through
which such person owns its interest to exercise any rights of a holder under
the Indenture.
The Depositary
If Convertible Debentures are distributed to holders of Preferred Securities
in liquidation of such holders' interest in the Trust, DTC will act as
securities depositary for the Convertible Debentures. For a description of DTC
and the specific terms of the depositary arrangements, see "Description of the
Preferred Securities--Book-Entry-Only Issuance--The Depository Trust Company."
As of the date of this Prospectus, the description herein of DTC's book-entry
system and DTC's practices as they relate to purchases, transfers, notices and
payments with respect to the Preferred Securities in the form of Global
Certificates apply in all material respects to any debt obligations
represented by one or more Global Securities held by DTC. The Company may
appoint a successor to DTC or any successor depositary in the event DTC or
such successor depositary is unable or unwilling to continue as a depositary
for the Global Securities.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global
Security for such Convertible Debentures or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
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<PAGE>
Discontinuance of the Depositary's Services
Each Global Security shall be exchangeable for a Convertible Debenture
registered in the names of persons other than the depositary or its nominee
only, if (i) the depositary notifies the Company that it is unwilling or
unable to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed, (iii) the Company, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Indenture Event of Default with respect to
such Convertible Debentures. Any Global Security that is exchangeable pursuant
to the preceding sentence shall be exchangeable for Convertible Debentures
registered in such names as the depositary shall direct. It is expected that
such instructions will be based upon directions received by the depositary
from its Participants with respect to ownership of beneficial interests in
such Global Security.
Governing Law
The Indenture and the Convertible Debentures are governed by, and construed
in accordance with, the internal laws of the State of New York.
Information Concerning the Indenture Trustee
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default,
shall exercise the same degree of care as a prudent individual would exercise
in the conduct of his or her own affairs. Subject to such provision, the
Indenture Trustee is under no obligation to exercise any of the rights or
powers vested in it by the Indenture at the request or direction of any holder
of Convertible Debentures, unless offered reasonable security or indemnity by
such holder against the costs, expenses and liabilities that might be incurred
thereby. The Indenture Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its
duties if the Indenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it. The Indenture Trustee also serves
as the Institutional Trustee and Delaware Trustee under the Declaration and
the Guarantee Trustee under the Guarantee.
Miscellaneous
The Indenture provides that the Company will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Convertible
Debentures, (ii) the organization, maintenance and dissolution of the Trust,
(iii) the retention of the Trustees and (iv) the enforcement by the
Institutional Trustee of the rights of the holders of the Preferred
Securities. The payment of such fees and expenses is fully and unconditionally
guaranteed by the Company.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of the material terms and provisions of the
Guarantee that has been executed and delivered by the Company for the benefit
of the holders of Preferred Securities. The summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the Guarantee. The Guarantee incorporates by
reference the terms of the Trust Indenture Act. The Guarantee has been
qualified under the Trust Indenture Act. Wilmington Trust Company, as the
Guarantee Trustee, holds the Guarantee for the benefit of the holders of the
Preferred Securities. Any references in this Prospectus to the "Guarantees"
shall mean both the Guarantee and the guarantee with respect to the Common
Securities.
General
Pursuant to and to the extent set forth in the Guarantee, the Company has
agreed, irrevocably and unconditionally, to pay in full to the holders of the
Preferred Securities (except to the extent paid by the Trust), as and when
due, regardless of any defense, right of set-off or counterclaim which the
Trust may have or assert,
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the following payments (the "Guarantee Payments"), without duplication: (i)
any accrued and unpaid Distributions that are required to be paid on the
Preferred Securities, to the extent the Trust has funds available therefor,
(ii) the Redemption Price with respect to any Preferred Securities called for
redemption by the Trust, to the extent the Trust has funds available therefor,
and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Trust (other than in connection with the distribution of
Convertible Debentures to the holders of Preferred Securities or the
redemption of all the Preferred Securities), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid Distributions on the
Preferred Securities to the date of payment and (b) the amount of assets of
the Trust remaining available for distribution to holders of Preferred
Securities upon the liquidation of the Trust. The Company's obligation to make
a Guarantee Payment may be satisfied by direct payment of the required amount
by the Company to the holders of Preferred Securities or by causing the Trust
to pay such amounts to such holders.
The Guarantee is a guarantee on a subordinated basis with respect to the
Preferred Securities from the time of issuance of such Preferred Securities
but does not apply to any payment of Distributions or Redemption Price, or to
payments upon the dissolution, winding-up or termination of the Trust, except
to the extent the Trust shall have funds available therefor. If the Company
does not make interest payments on the Convertible Debentures, the Trust will
not pay Distributions on the Preferred Securities and will not have funds
available therefor. See "Description of the Convertible Debentures." The
Guarantee, when taken together with the Company's obligations under the
Convertible Debentures, the Indenture and the Declaration, including its
obligations to pay costs, expenses, debts and liabilities of the Trust (other
than with respect to the Trust Securities), provides a full and unconditional
guarantee on a subordinated basis by the Company of payments due on the
Preferred Securities.
The Company has also agreed, irrevocably and unconditionally, to guarantee
the obligations of the Trust with respect to the Common Securities to the same
extent as the Guarantee for the Preferred Securities, except that upon an
Indenture Event of Default, holders of Preferred Securities shall have
priority over holders of Common Securities with respect to distributions and
payments on liquidation, redemption or otherwise.
Certain Covenants of the Company
In the Guarantee, the Company has covenanted that so long as any Preferred
Securities remain outstanding, if (i) the Company has exercised its option to
defer interest payments on the Convertible Debentures by extending the
interest payment period and such extension shall be continuing, (ii) the
Company shall be in default with respect to its payment or other obligations
under the Guarantee or (iii) there shall have occurred and be continuing any
event that, with the giving of notice or the lapse of time or both, would
constitute an Indenture Event of Default or a Declaration Event of Default,
then the Company shall not (a) declare or pay dividends on, or make a
distribution or liquidation payment with respect to, or redeem, purchase or
acquire any of its capital stock (other than (i) purchases or acquisitions of
shares of Common Stock in connection with the satisfaction by the Company of
its obligations under any employee benefit plans or the satisfaction by the
Company of its obligations pursuant to any contract or security requiring the
Company to purchase shares of Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of the Company's capital stock, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted
or exchanged, (iv) purchases or acquisitions of shares of the Company's Common
Stock to be used in connection with acquisitions of the Company's Common Stock
by shareholders pursuant to a dividend reinvestment plan or (v) stock
dividends paid by the Company where the dividend stock is the same stock as
that on which the dividend is paid), (b) make any payment of interest on or
principal of (or premium, if any, on) or repay, repurchase or redeem any debt
securities of the Company (including guarantees) that rank pari passu with or
junior to the Convertible Debentures, or (c) make any guarantee payments with
respect to the foregoing (other than pursuant to the Guarantees).
As part of the Guarantee, the Company has agreed that it will honor all
obligations described therein relating to the conversion of the Preferred
Securities into Common Stock as described in "Description of the Preferred
Securities--Conversion Rights."
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Modification of the Guarantee; Assignment
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required),
the Guarantee may be amended only with the prior approval of the holders of at
least a majority in aggregate liquidation amount of all the outstanding
Preferred Securities. 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 Preferred
Securities then outstanding. Except in connection with any permitted merger or
consolidation of the Company with or into another entity or any permitted
sale, transfer or lease of the Company's assets to another entity as described
under "Description of the Convertible Debentures--Consolidation, Merger and
Sale of Assets," the Company may not assign its rights or delegate its
obligations under the Guarantee without the prior approval of the holders of
at least a majority of the aggregate stated liquidation amount of the
Preferred Securities then outstanding. All guarantees and agreements contained
in the Guarantee shall bind the permitted successors, assigns and transferees
of the Company and shall inure to the benefit of the holders of the Preferred
Securities then outstanding.
Events of Default
An Event of Default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee in respect of
the Guarantee or to direct the exercise of any trust or power conferred upon
the Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to
enforce the Guarantee Trustee's rights under the Guarantee, any holder of
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee
or any other person or entity. A holder of Preferred Securities may also
directly institute a legal proceeding against the Company to enforce such
holder's right to receive payment under the Guarantee without first (i)
directing the Guarantee Trustee to enforce the terms of the Guarantee or (ii)
instituting a legal proceeding against the Trust or any other person or
entity.
The Company is required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Guarantee and as to any default in such performance.
Information Concerning the Institutional Trustee
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after default, shall exercise
the same degree of care as a prudent individual would exercise in the conduct
of his or her own affairs. Subject to such provisions, the Institutional
Trustee is under no obligation to exercise any of the powers vested in it by
the Declaration at the request of any holder of Preferred Securities unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities that might be incurred thereby. The holders of Preferred
Securities are not required to offer such indemnity in the event such holders,
by exercising their voting rights, direct the Institutional Trustee to take
any action following a Declaration Event of Default.
Termination of the Guarantee
The Guarantee will terminate as to the Preferred Securities upon (i) full
payment of the Redemption Price of all Preferred Securities; (ii) distribution
of the Convertible Debentures held by the Trust to the holders of the
Preferred Securities; (iii) full payment of the amounts payable in accordance
with the Declaration upon liquidation of the Trust; or (iv) distribution of
Common Stock to the holders in respect of conversion of the holders' Preferred
Securities into Common Stock. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sum paid under such Preferred
Securities or the Guarantee.
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Status of the Guarantee
The Guarantee constitutes an unsecured obligation of the Company and ranks
(i) subordinate and junior to all other liabilities of the Company except any
liabilities that may be pari passu expressly by their terms, (ii) pari passu
with the most senior preferred or preference stock, if any, issued from time
to time by the Company, including the Series A Preference Shares issued to
Siemens Aktiengesellschaft ("Siemens") in connection with the Siemens
Investment (as defined herein) and with any guarantee now or hereafter entered
into by the Company in respect of any preferred or preference stock or
preferred securities of any affiliate of the Company and (iii) senior to the
Common Stock. The terms of the Preferred Securities provide that each holder
of Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee. See "Description of Capital
Stock--Siemens Investment."
The Guarantee constitutes a guarantee of payment and not of collection (that
is, the guaranteed party may directly institute a legal proceeding against the
Company to enforce its rights under a Guarantee without instituting a legal
proceeding against any other person or entity).
Governing Law
The Guarantee is governed by, and construed in accordance with, the internal
laws of the State of New York.
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets
of the Trust, to invest the proceeds from such issuance and sale in the
Convertible Debentures and to engage in only those other activities that are
necessary or incidental to the issuance of the Trust Securities and investment
in the Convertible Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Debentures, such payments will be sufficient to cover
Distributions and payments due on the Trust Securities because of the
following factors: (i) the aggregate principal amount of Convertible
Debentures will be equal to the sum of the aggregate stated liquidation amount
of the Trust Securities; (ii) the interest rate and the interest and other
payment dates on the Convertible Debentures will match the Distribution rate
and Distribution and other payment dates for the Preferred Securities; (iii)
pursuant to the Indenture, the Company shall pay all, and the Trust shall not
be obligated to pay, directly or indirectly, any, costs, expenses, debts and
liabilities of the Trust other than with respect to the Trust Securities; and
(iv) the Declaration further provides that the Trustees will not cause or
permit the Trust to, among other things, engage in any activity that is not
consistent with the purposes of the Trust.
Payments of Distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by the Company as and to the extent set forth
under "Description of the Guarantee." If the Company does not make interest
payments on the Convertible Debentures purchased by the Trust, it is expected
that the Trust will not have sufficient funds to pay Distributions on the
Preferred Securities. The Guarantee is a guarantee on a subordinated basis
with respect to the Preferred Securities from the time of its issuance but
does not apply to any payment of Distributions unless and until the Trust has
sufficient funds for the payment of such Distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal on the Convertible Debentures held by the
Trust as its sole asset. The Guarantee, when taken together with the Company's
obligations under the Convertible Debentures and the Indenture and its
obligations under the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), provides a full and unconditional guarantee of amounts on
the Preferred Securities.
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If the Company fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using
the procedures described in "Description of the Preferred Securities--Voting
Rights" and "--Book-Entry-Only Issuance--The Depository Trust Company," may
direct the Institutional Trustee to enforce its rights under the Convertible
Debentures. If the Institutional Trustee fails to enforce its rights under the
Convertible Debentures, to the fullest extent permitted by law, any holder of
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. If a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities may institute a Direct Action for payment on or after the
respective due date specified in the Convertible Debentures. In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities under the Declaration to the extent of any
payment made by the Company to such holder of Preferred Securities in such
Direct Action. The Company, under the Guarantee, acknowledges that the
Guarantee Trustee shall enforce the Guarantee on behalf of the holders of the
Preferred Securities. If the Company fails to make payments under the
Guarantee, the Guarantee provides a mechanism whereby the holders of the
Preferred Securities may direct the Guarantee Trustee to enforce its rights
thereunder. If the Guarantee Trustee fails to enforce the Guarantee, any
holder of Preferred Securities may directly institute a legal proceeding
against the Company to enforce the Guarantee Trustee's rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee, or any other person or entity.
The Company and the Trust believe that the above mechanisms and obligations,
taken together, are equivalent to a full and unconditional guarantee by the
Company of payments due on the Preferred Securities. See "Description of
Guarantee--General."
DESCRIPTION OF CAPITAL STOCK
As of March 8, 1999, there were outstanding an aggregate of 36,840,305
shares of Common Stock held of record by 857 stockholders, and 1 Series A
Preference Share held of record by one stockholder.
Common Stock
The Company is authorized to issue up to 75,000,000 shares of Common Stock,
par value $.01 per share. Holders of Common Stock are entitled to one vote for
each share held on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Accordingly, holders of a majority of the
shares of Common Stock entitled to vote in any election of directors may elect
all of the directors standing for election. Holders of Common Stock are
entitled to receive ratably such dividends if, as and when declared by the
Board of Directors out of assets legally available therefor, subject to any
preferential dividend rights of outstanding Preferred Stock and restrictions
set forth in the Company's existing loan agreements and restrictions, if any,
imposed by other indebtedness outstanding from time to time, including any new
loan agreement that may be entered into after this Offering. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company remaining
available after the satisfaction of all debts and other liabilities and the
payment of the liquidation preference of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights, nor are they entitled to the benefits of any sinking fund
provisions. The outstanding shares of Common Stock are fully paid and
nonassessable. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.
Warrants
Pursuant to a Warrant Agreement between NationsBank, N.A. ("NationsBank")
and the Company dated October 30, 1997, as amended March 2, 1998 (the "Warrant
Agreement"), in connection with that certain loan
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agreement dated as of October 30, 1997 by and among the Company and certain
subsidiaries as borrowers, NationsBank as agent and lender, and the lenders
party thereto from time to time (the "Loan Agreement"), the Company issued to
NationsBank a warrant (the "NB Warrant") exercisable for 250,000 shares of
Common Stock of the Company (the "Warrant Shares") at an exercise price of
$23.125 per share. The Warrant Agreement and the NB Warrant expire on October
30, 2000. NationsBank may elect that the Warrant Shares be included in certain
registration statements filed by the Company under the Securities Act and also
has certain demand registration rights with respect to the Warrant Shares
until October 30, 2002.
In connection with the Company's June 1995 acquisition of VTI Hamlin OY
("VTI"), a Finnish company that designs and manufactures silicon capacitive
micro-machined accelerometers and angular rate and differential and absolute
pressure sensors, the Company issued to the former stockholders of VTI
warrants to purchase an aggregate of 100,000 shares of Common Stock for a
purchase price of $25.75 per share. These warrants are exercisable between
July 1, 1998 and June 30, 2000. The Company granted certain demand and
incidental registration rights with respect to the shares of Common Stock
issuable upon the exercise of these warrants.
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock, par value $.001 per share. The Board of Directors is authorized,
subject to any limitations prescribed by law, without further stockholder
approval, to issue such shares of Preferred Stock in one or more series. Each
such series of Preferred Stock shall have such rights, preferences, privileges
and restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be determined by
the Board of Directors.
The purpose of authorizing the Board of Directors to issue Preferred Stock
and determine its rights and preferences is to eliminate delays associated
with a stockholder vote on specific issuances. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue any additional shares of
Preferred Stock.
Siemens Investment
Stock Purchase Agreement. On October 30, 1997, pursuant to a Stock Purchase
Agreement dated October 14, 1997 (the "Stock Purchase Agreement") between the
Company and Siemens Aktiengesellschaft ("Siemens"), Siemens acquired 4,883,227
Series A Preference Shares for an aggregate purchase price of $115.0 million
(the "Siemens Investment"). Pursuant to the Stock Purchase Agreement, the
Company made certain customary representations and warranties concerning its
business, agreed to certain post-closing covenants, including an agreement to
provide Siemens with substantially equivalent rights to those granted in the
future to any stockholder acquiring an equal or smaller percentage of voting
interest in the Company as Siemens, agreed to indemnify Siemens for breaches
of representations and warranties for a period of up to 18 months, agreed to
indemnify Siemens for breaches of covenants and granted Siemens certain anti-
dilution rights. The indemnification obligations of the Company are subject to
a $1.5 million deductible and a cap of $30.0 million.
Series A Preference Shares. Each Series A Preference Share represents one
one-thousandth ( 1/1000) of a share of 1997 Series A Convertible Non-Voting
Preferred Stock of the Company and, subject to adjustment, is convertible into
one share of Common Stock. Except for voting rights required by law, and
except for the right to elect as a class one director of the Company during
the period that begins on the date when any Series A Preference Shares are
converted into Common Stock and ends on the date of the termination of the
Stockholders Agreement (as defined below), the holders of shares of Series A
Preference Shares have no voting rights. All other rights of the holders of
Series A Preference Shares, including rights upon liquidation or dissolution
of the Company, are identical to the rights of the holders of Common Stock and
are shared ratably on an as-converted basis. On January 20, 1998, Siemens
converted 4,883,226 of its Series A Preference Shares into 4,883,226 shares of
Common Stock. As of the date of this Prospectus, Siemens is the record holder
of one Series A Preference Share.
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Stockholders Agreement. In connection with the Siemens Investment, the
Company entered into a Stockholders Agreement (the "Stockholders Agreement")
with Siemens, Allen K. Breed, Johnnie Cordell Breed, AB, L.P. and JB, L.P.
(collectively, the "Breed Holders"). See "Principal Stockholders." The
Stockholders Agreement obligates the Breed Holders to vote their shares and
take other necessary and appropriate corporate action to elect a designee of
Siemens to the Board of Directors of the Company at any time the right of the
holders of Series A Preference Shares to elect a member of the Board of
Directors is not in effect and to ensure that the Siemens director is a member
of the Audit Committee of the Board of Directors. The Stockholders Agreement
also (i) grants Siemens rights of first offer for up to five years with
respect to certain future issuances of Common Stock or securities convertible
into Common Stock by the Company (subject to certain exceptions), (ii) allows
Siemens to participate in certain sales of Common Stock by the Breed Holders,
(iii) grants the Company and the Breed Holders rights of first offer for up to
three years with respect to any sales by Siemens or its affiliates (subject to
certain exceptions), (iv) prohibits Siemens for three years from acquiring
certain securities of the Company (subject to certain exceptions), (v) grants
Siemens rights of first offer for up to three years with respect to transfers
of certain securities by the Breed Holders (subject to certain exceptions) and
(vi) grants the Siemens director special consent rights with respect to
certain business activities of the Company, including the conduct by the
Company of any business in the field of electronic components for automotive
safety restraint systems, other than through the joint venture the Company and
Siemens agreed to form in December 1997 (the "Siemens Joint Venture") or as
currently conducted by designated subsidiaries of the Company. The
Stockholders Agreement terminates upon the earlier to occur of the date on
which Siemens and certain of its affiliates first collectively beneficially
own less than the number of shares of Common Stock issued or issuable pursuant
to the conversion of the shares of Series A Preference Shares acquired by
Siemens pursuant to the Stock Purchase Agreement or the delivery of a "First
Make-Whole Notice" (as defined in the Make-Whole Agreement).
Registration Rights Agreement. In connection with the Siemens Investment,
the Company entered into a Registration Rights Agreement with Siemens (the
"Siemens Registration Rights Agreement"). Pursuant to the Siemens Registration
Rights Agreement, Siemens shall have the right, after June 1, 1998 and before
the tenth anniversary of the date of the Siemens Registration Rights
Agreement, to require the Company to file up to three registration statements
under the Securities Act to register any shares of Common Stock or Series A
Preference Shares owned by Siemens for sale to the public, subject to certain
limitations. The Company is required to pay all expenses (other than discounts
and commissions) in connection with such demand registrations. In addition, if
the Company elects to register securities under the Securities Act for its
account or for the account of other stockholders, Siemens shall have the right
to register its shares under any such registration statement, subject to
certain limitations.
Delaware Law and Certain Charter Provisions
The Company is subject to Section 203 of the Delaware General Corporation
Law, which prohibits a publicly held Delaware corporation from consummating a
"business combination," except under certain circumstances, with an
"interested stockholder" for a period of three years after the date such
person became an "interested stockholder" unless (i) before such person became
an interested stockholder, the board of directors of the corporation approved
the transaction in which the interested stockholder became an interested
stockholder or approved the business combination; (ii) upon consummation of
the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares held by directors who are also officers of the
corporation and certain shares held by employee stock plans); or (iii)
following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder. An "interested
stockholder" generally is defined as a person who, together with affiliates
and associates, owns (or, within the prior three years, owned) 15% or more of
a corporation's outstanding voting stock. A "business combination" includes
mergers, asset sales and certain other transactions resulting in a financial
benefit to an interested stockholder.
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Transfer Agent and Registrar
The transfer agent and registrar for the Company's Common Stock is First
Chicago Trust Company of New York.
UNITED STATES FEDERAL INCOME TAXATION
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH HEREIN IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PREFERRED SECURITIES AND COMMON STOCK, 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.
General
In the opinion of King & Spalding, special tax counsel to the Company and
the Trust ("Tax Counsel"), the following summary accurately describes the
material United States federal income tax consequences of the purchase,
ownership, disposition and conversion of Preferred Securities and Common
Stock. This summary does not deal with special classes of holders such as
banks, thrift institutions, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or
currencies, tax-exempt investors, or persons that will hold the Preferred
Securities or Common Stock as part of a straddle, hedge or conversion
transaction, or as other than a capital asset. This summary also does not
address tax consequences to persons that have a functional currency other than
the U.S. Dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of Preferred Securities or Common Stock. Further, it
does not include any description of any alternative minimum tax consequences
or the tax laws of any state or local government or of any foreign government
that may be applicable to the Preferred Securities or Common Stock. This
summary and the opinion of Tax Counsel are based on the Code, United States
Treasury Regulations thereunder ("Treasury Regulations") and administrative
and judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
As used herein, the term "U.S. Holder" means any beneficial owner of
Preferred Securities or Common Stock that is, for United States federal income
tax purposes, (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in or under the laws of the
United States, any state thereof, or the District of Columbia (other than a
partnership that is not treated as a United States person under any applicable
Treasury Regulations), (iii) an estate the income of which is subject to
United States federal income taxation regardless of its source, or (iv) a
trust if (A) a court within the United States is able to exercise primary
supervision over the administration of the trust and (B) one or more United
States persons have the authority to control all substantial decisions of the
trust. Notwithstanding the preceding sentence, to the extent provided in
Treasury Regulations, certain trusts in existence on August 20, 1996 and
treated as United States persons prior to such date that elect to continue to
be treated as United States persons also will be U.S. Holders. As used herein,
the term "Non-U.S. Holder" means a beneficial owner of Preferred Securities or
Common Stock that is not a U.S. Holder.
Classification of the Convertible Debentures
Tax Counsel has rendered an opinion to the effect that under current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, the Convertible Debentures to be held by the Trust
are classified for United States federal income tax purposes as indebtedness
of the Company. Such opinion is not binding on the Internal Revenue Service
("IRS") and, accordingly, no complete assurance can be given that the IRS will
not challenge the classification of the Convertible Debentures as debt, or if
the classification were challenged, that such a challenge would not be
successful. The remainder of this discussion assumes that the Convertible
Debentures are classified as indebtedness of the Company for United States
federal income tax purposes.
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Classification of the Trust
Tax Counsel also has rendered its opinion to the effect that, under current
law and assuming full compliance with the terms of the Declaration and the
Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Trust is classified for United
States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Because of the Trust's classification,
each holder of Preferred Securities generally will be considered the owner of
an undivided interest in the Convertible Debentures and, as discussed below,
each holder will be required to include in gross income its allocable share of
interest (or OID) paid or accrued on the Convertible Debentures.
Interest Income and Original Issue Discount
Because the Company has the option, under the terms of the Convertible
Debentures, to defer payments of interest by extending interest payment
periods for up to 20 consecutive quarters, and the likelihood of the Company's
exercise of this option is not remote, the Convertible Debentures were issued
with OID. As a result, U.S. Holders of Preferred Securities will be required
to include in income their allocable share of the interest income earned by
the Trust from the Convertible Debentures on an economic accrual basis over
the period of time the Preferred Securities (and underlying allocable share of
the Convertible Debentures) are held, regardless of their method of accounting
and whether interest has been paid on the Convertible Debentures or
distributions are made on the Preferred Securities. The amount of OID that
accrues in any taxable period will be approximately equal to the amount of
stated interest payments called for under the terms of the Convertible
Debentures. Actual distributions of stated interest will not be separately
reported as taxable income. Any OID included in income will increase the U.S.
Holder's tax basis in the Preferred Securities and the U.S. Holder's actual
receipt of interest payments will reduce such basis.
If the Company were to exercise its option to defer payments of stated
interest on the Convertible Debentures, U.S. Holders of the Preferred
Securities would continue to accrue OID income even though the Company would
not be making any actual cash payments during the Extension Period.
Because income on the Preferred Securities will constitute interest for
federal income tax purposes, corporate U.S. Holders of Preferred Securities
will not be entitled to a dividends received deduction with respect to any
income recognized with respect to the Preferred Securities.
Acquisition Premium; Premium
A U.S. Holder who purchases a Preferred Security will be considered to have
purchased the underlying Convertible Debenture at an "acquisition premium" if
such U.S. Holder's adjusted basis in the Preferred Security immediately after
the purchase is (i) greater than the "adjusted issue price" of the underlying
Convertible Debenture as of the purchase date and (ii) less than or equal to
the sum of all amounts payable on the underlying Convertible Debenture after
the purchase date. The "adjusted issue price" of a Convertible Debenture
equals its issue price (i.e., the first price at which a substantial amount of
the Convertible Debentures were sold, excluding sales to bond houses, brokers
or other persons acting in the capacity of an underwriter or selling agent),
plus the amount of OID allocable to all prior periods, and minus the amount of
any prior payments on the Convertible Debenture. Under the acquisition premium
rules, the amount of OID which such U.S. Holder must include in its gross
income for any taxable year (or portion thereof in which the U.S. Holder holds
the Preferred Securities) will be reduced (but not below zero) by the portion
of the acquisition premium properly allocable to the period.
A U.S. Holder who purchases a Preferred Security will be considered to have
purchased the underlying Convertible Debenture at a "premium" if such U.S.
Holder's adjusted basis in the Preferred Security immediately after the
purchase is greater than the sum of all amounts payable on the underlying
Convertible Debenture after the purchase date. A U.S. Holder that purchases a
Preferred Security at a "premium" will not include any OID in gross income.
52
<PAGE>
Market Discount
A U.S. Holder who purchases a Preferred Security will be considered to have
purchased the underlying Convertible Debenture at a "market discount" if such
U.S. Holder's adjusted basis in the Preferred Security immediately after the
purchase is less than the adjusted issue price of the underlying Convertible
Debenture as of the purchase date, unless such market discount is less than a
specified de minimis amount (generally 1/4 of 1 percent of the adjusted issue
price of the Convertible Debenture as of the purchase date multiplied by its
weighted average maturity as of such date).
Under the market discount rules, a U.S. Holder will be required to treat any
gain realized on the sale, exchange, retirement or other disposition of the
Preferred Securities as ordinary income to the extent of the lesser of (i) the
amount of such realized gain or (ii) the market discount which has not
previously been included in income and is treated as having accrued on the
underlying Convertible Debentures at the time of such disposition. Market
discount will be considered to accrue ratably during the period from the date
of acquisition to the maturity date of the Convertible Debentures, unless the
U.S. Holder elects to accrue market discount on a constant yield basis. Once
made, such an election is irrevocable.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry Preferred Securities with market discount until the maturity
of the Convertible Debentures or certain earlier dispositions, because a
current deduction is only allowed to the extent the interest expense exceeds
the portion of market discount allocable to the days during the taxable year
in which the Preferred Securities were held by the taxpayer. A U.S. Holder may
elect to include market discount in income currently as it accrues (on either
a ratable or constant yield basis), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition of the
Preferred Securities and the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for federal income tax purposes. Such an election will apply to all
debt instruments with market discount acquired by the holder on or after the
first day of the taxable year to which such election applies and may be
revoked only with the consent of the IRS.
Receipt of Convertible Debentures or Cash upon Liquidation of the Trust
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Special Event Redemption or Distribution," the
Convertible Debentures may be distributed to holders in exchange for the
Preferred Securities and in liquidation of the Trust. Under current law, such
a distribution, for United States federal income tax purposes, would be
treated as a non-taxable event to each holder, and each holder would receive
an aggregate tax basis in the Convertible Debentures equal to such holder's
aggregate tax basis in its Preferred Securities. A holder's holding period in
the Convertible Debentures so received in liquidation of the Trust would
include the period during which the Preferred Securities were held by such
holder.
Under certain circumstances described under "Description of the Preferred
Securities--Special Event Redemption or Distribution," the Convertible
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Preferred Securities. Such a
redemption of the Convertible Debentures would, for United States federal
income tax purposes, constitute a taxable disposition of the redeemed
Preferred Securities, and a holder could recognize gain or loss as if it sold
such redeemed Preferred Securities for cash. See "--Sales of Preferred
Securities."
Sales of Preferred Securities
A U.S. Holder that sells Preferred Securities will recognize gain or loss
equal to the difference between its adjusted tax basis in the Preferred
Securities and the amount realized on the sale of such Preferred Securities.
For purposes of determining gain or loss, a U.S. Holder's adjusted tax basis
in Preferred Securities generally will equal the cost of the Preferred
Securities to such Holder, increased by any OID included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income), and decreased by the amount of any payment received with
respect to such Preferred Securities. Subject to the discussion below
53
<PAGE>
about accrued and unpaid interest, such gain or loss generally will be a
capital gain or loss. In the case of a U.S. Holder that is treated as an
individual or as an estate or trust, the tax rate applicable to such a capital
gain will depend, among other things, upon the U.S. Holder's holding period
for the Preferred Securities that are sold.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the
underlying Convertible Debentures. A U.S. Holder who disposes of Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Convertible Debentures
through the date of disposition in income as ordinary income (i.e., OID) and
to add such amount to his or her adjusted tax basis in his or her pro rata
share of the underlying Convertible Debentures deemed disposed of. To the
extent the selling price is less than the U.S. Holder's adjusted tax basis
(which will include, in the form of OID, all accrued but unpaid interest), a
U.S. Holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
Conversion of Preferred Securities
A U.S. Holder generally will not recognize income, gain or loss upon the
conversion of its Preferred Securities into Common Stock, except to the extent
of ordinary income recognized with respect to accrued and unpaid interest on
the Convertible Debentures at that time. A U.S. Holder also will recognize
gain upon the receipt of cash in lieu of a fractional share of Common Stock
equal to the amount of cash received less the U.S. Holder's tax basis in such
fractional share. A U.S. Holder's tax basis in the Common Stock received upon
exchange and conversion should generally be equal to the U.S. Holder's tax
basis in the Preferred Securities exchanged, less the basis allocated to any
fractional share for which cash is received. Such U.S. Holder's holding period
in the Common Stock received upon exchange and conversion should generally
begin on the date the holder acquired the Preferred Securities exchanged.
Dividends
The amount of any distribution by the Company in respect of the Common Stock
will be equal to the amount of cash and the fair market value, on the date of
distribution, of any property distributed. Generally, distributions will be
treated as a dividend, subject to tax as ordinary income, to the extent of the
Company's current or accumulated earnings and profits, then as a tax-free
return of capital to the extent of a U.S. Holder's tax basis in the Common
Stock and thereafter as gain from the sale of exchange of such stock.
In general, a dividend distribution to a corporate U.S. Holder will qualify
for the 70% dividends received deduction if the U.S. Holder owns less than 20%
of the voting power and value of the Company's stock (other than any non-
voting, non-convertible, non-participating preferred stock). A corporate U.S.
Holder that owns 20% or more of the voting power and value of the Company's
stock (other than any non-voting, non-convertible, non-participating preferred
stock) generally will qualify for an 80% dividends received deduction. The
dividends received deduction is subject, however, to certain holding period,
taxable income and other limitations.
Sale of Common Stock
Upon the sale or exchange of Common Stock, a U.S. Holder generally will
recognize capital gain or loss equal to the difference between (i) the amount
of cash and the fair market value of any property received upon the sale or
exchange and (ii) such U.S. Holder's adjusted tax basis in the Common Stock.
In the case of a U.S. Holder other than a corporation, the tax rate applicable
to such a capital gain will depend, among other things, upon the U.S. Holder's
holding period for the Common Stock that is sold. A U.S. Holder's basis and
holding period in Common Stock received upon conversion of the Preferred
Securities are determined as discussed above under "--Conversion of Preferred
Securities."
Adjustment of Conversion Price
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Preferred Securities as having received a constructive distribution
from the Company in the event the conversion ratio of the Convertible
Debentures were adjusted if (i) as a result of such adjustment, the
proportionate interest (measured
54
<PAGE>
by the quantum of Common Stock into or for which the Convertible Debentures
are convertible or exchangeable) of the holders of the Preferred Securities in
the assets or earnings and profits of the Company were increased, and (ii) the
adjustment was not made pursuant to a bona fide, reasonable anti-dilution
formula. An adjustment in the conversion ratio would not be considered made
pursuant to such a formula if the adjustment was made to compensate for
certain taxable distributions with respect to the Common Stock. Thus, under
certain circumstances, a reduction in the conversion price for the holders may
result in deemed dividend income to U.S. Holders to the extent of the current
or accumulated earnings and profits of the Company. U.S. Holders of the
Preferred Securities would be required to include their allocable share of
such deemed dividend income in gross income but would not receive any cash
related thereto.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to income earned
on Preferred Securities, payments of dividends on Common Stock, and payments
of the proceeds of the sale of Preferred Securities or Common Stock. Such
income and payment of proceeds may be subject to a "backup" withholding tax of
31% unless the holder complies with certain identification and certification
requirements. Any withheld amounts will be allowed as a credit against the
holder's United States federal income tax, provided the required information
is provided to the IRS on a timely basis.
Non-U.S. Holders
The rules governing United States federal income taxation of a beneficial
owner of Preferred Securities or Common Stock that, for United States federal
income tax purposes, is a Non-U.S. Holder are complex and no attempt will be
made herein to provide more than a summary of such rules. NON-U.S. HOLDERS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT OF FEDERAL,
STATE, LOCAL AND FOREIGN INCOME TAX LAWS WITH REGARD TO AN INVESTMENT IN THE
PREFERRED SECURITIES AND COMMON STOCK, INCLUDING ANY REPORTING REQUIREMENTS.
Payment of Interest
Generally, interest income (or OID) of a Non-U.S. Holder that is not
effectively connected with a United States trade or business will be subject
to a withholding tax at a 30% rate (or, if applicable, a lower tax rate
specified by a treaty). However, OID earned on the Convertible Debentures by a
Non-U.S. Holder will qualify for the "portfolio interest exemption" and
therefore will not be subject to United States federal income tax or
withholding tax, provided that such interest income is not effectively
connected with a United States trade or business of the Non-U.S. Holder and
provided that (i) the Non-U.S. Holder does not actually or constructively own
(pursuant to the conversion feature of the Preferred Securities or otherwise)
10% or more of the combined voting power of all classes of stock of the
Company entitled to vote, (ii) the Non-U.S. Holder is not a controlled foreign
corporation related to the Company actually or constructively through stock
ownership, and (iii) either (a) the Non-U.S. Holder provides a Form W-8 (or a
suitable substitute form including Form W-8 BEN) signed under penalties of
perjury that includes its name and address and certifies as to its Non-U.S.
status, or (b) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business provides a statement to the Company or its agent under
penalties of perjury in which it certifies that a Form W-8 (or a suitable
substitute including Form W-8 BEN) has been received by it from the Non-U.S.
Holder or qualifying intermediary and furnishes the Company or its agent with
a copy thereof.
New Treasury Regulations, which provide alternative methods for satisfying
the certification requirements described in clause (iii) above, will be
effective for payments made after December 31, 1999, subject to certain
transition rules. Non-U.S. Holders should consult their own tax advisors about
these new rules.
Except to the extent that an applicable treaty otherwise provides, a Non-
U.S. Holder generally will be taxed in the same manner as a U.S. Holder with
respect to interest (or OID) if the interest (or OID) income is
55
<PAGE>
effectively connected with a United States trade or business of the Non-U.S.
Holder. Effectively connected interest (or OID) received or accrued by a
corporate Non-U.S. Holder may also, under certain circumstances, be subject to
an additional "branch profits tax" at a 30% rate (or, if applicable, a lower
tax rate specified by a treaty). Even though such effectively connected
interest (or OID) is subject to income tax, and may be subject to the branch
profits tax, it is not subject to withholding tax if the holder delivers a
properly executed IRS Form 4224 (or its successor, Form W-8ECI) to the payor.
Sale, Exchange or Redemption of Preferred Securities
A Non-U.S. Holder of Preferred Securities generally will not be subject to
United States federal income tax or withholding tax on any gain realized on
the sale, exchange or redemption of the Preferred Securities (including the
receipt of cash in lieu of fractional shares upon conversion of Preferred
Securities into Common Stock) unless (1) the gain is effectively connected
with a United States trade or business of the Non-U.S. Holder, (2) in the case
of a Non-U.S. Holder who is an individual, such holder is present in the
United States for a period or periods aggregating 183 days or more during the
taxable year of the disposition, and either such holder has a "tax home" in
the United States or the disposition is attributable to an office or other
fixed place of business maintained by such holder in the United States, or (3)
the holder is subject to tax pursuant to the provisions of the Code applicable
to certain United States expatriates.
Conversion of the Preferred Securities
In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of Preferred Securities into Common Stock by a
Non-U.S. Holder except with respect to the receipt of cash in lieu of
fractional shares by Non-U.S. Holders upon conversion of Preferred Securities
where one of the conditions described above under "--Sale, Exchange or
Redemption of Preferred Securities" is satisfied.
Sale or Exchange of Common Stock
A Non-U.S. Holder generally will not be subject to United States federal
income tax or withholding tax on the sale or exchange of Common Stock unless
one of the conditions described above under "--Sale, Exchange or Redemption of
Preferred Securities" is satisfied.
Dividends
Distributions by the Company with respect to the Common Stock that are
treated as dividends paid (or deemed paid), as described above under "--
Dividends" to a Non-U.S. Holder (excluding dividends that are effectively
connected with the conduct of a trade or business in the United States by such
holder and are taxable as described below) will be subject to United States
federal withholding tax at a 30% rate (or a lower rate provided under any
applicable tax treaty). Except to the extent that an applicable tax treaty
otherwise provides, a Non-U.S. Holder will be taxed in the same manner as a
U.S. Holder on dividends paid (or deemed paid) that are effectively connected
with the conduct of a trade or business in the United States by the Non-U.S.
Holder. If such Non-U.S. Holder is a foreign corporation, it may also be
subject to a United States branch profits tax on such effectively connected
income at a 30% rate or such lower rate as may be specified by an applicable
tax treaty. Even though such effectively connected dividends are subject to
income tax, and may be subject to the branch profits tax, they will not be
subject to U.S. withholding tax if the holder delivers a properly executed IRS
Form 4224 (or its successor, Form W-8ECI) to the payor.
Under current Treasury Regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for purposes of the withholding
discussed above and for purposes of determining the applicability of a tax
treaty rate. Under new Treasury Regulations, however, Non-U.S. Holders of
Common Stock who wish to claim the benefit of an applicable treaty rate will
be required to satisfy certain certification requirements. The new Treasury
Regulations are effective for payments made after December 31, 1999.
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<PAGE>
Death of a Non-U.S. Holder
Preferred Securities held by an individual who is not a citizen or resident
of the United States at the time of death will not be includable in the
decedent's gross estate for United States federal estate tax purposes,
provided that such holder or beneficial owner did not at the time of death
actually or constructively own 10% or more of the combined voting power of all
classes of stock of the Company entitled to vote, and provided that, at the
time of death, payments with respect to such Preferred Securities would not
have been effectively connected with the conduct by such Non-U.S. Holder of a
trade or business within the United States.
Common Stock actually or beneficially held (other than through a foreign
corporation) by a Non-U.S. Holder at the time of his or her death (or
previously transferred subject to certain retained rights or powers) will be
subject to United States federal estate tax unless otherwise provided by an
applicable estate tax treaty.
Information Reporting and Backup Withholding Tax
United States information reporting requirements and backup withholding tax
will not apply to payments on Preferred Securities to a Non-U.S. Holder if the
statement described in "--Payment of Interest" is duly provided by such
holder, provided that the payor does not have actual knowledge that the holder
is a United States person.
Information reporting requirements and backup withholding tax will not apply
to any payment of the proceeds of the sale of Preferred Securities, or any
payment of the proceeds of the sale of Common Stock effected outside the
United States by a foreign office of a "broker" (as defined in applicable
Treasury Regulations), unless such broker (i) is a United States person, (ii)
is a foreign person that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States or (iii)
is a controlled foreign corporation for United States federal income tax
purposes. Payment of the proceeds of any such sale effected outside the United
States by a foreign office of any broker that is described in (i), (ii) or
(iii) of the preceding sentence will not be subject to backup withholding tax,
but will be subject to information reporting requirements unless such broker
has documentary evidence in its records that the beneficial owner is a Non-
U.S. Holder and certain other conditions are met, or the beneficial owner
otherwise establishes an exemption. Payment of the proceeds of any such sale
to or through the United States office of a broker is subject to information
reporting and backup withholding requirements unless the beneficial owner of
the Preferred Securities provides the statement described in "--Payment of
Interest" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on Common Stock
held by a Non-U.S. Holder generally will not be subject to the information
reporting and backup withholding requirements described in this section.
However, under new Treasury Regulations, dividend payments will be subject to
information reporting and backup withholding unless applicable certification
requirements are satisfied. These new Treasury Regulations apply to dividend
payments made after December 31, 1999.
United States Real Property Holding Corporations
The discussion of the United States taxation of Non-U.S. Holders of
Preferred Securities and Common Stock assumes that the Company is at no time a
United States real property holding corporation within the meaning of Section
897(c) of the Code. If the Company were a United States real property holding
corporation, gain realized on the sale of the Common Stock by a Non-U.S.
Holder who owns 5 percent or more of the Common Stock, or gain realized on the
sale of Preferred Securities by a Non-U.S. Holder whose Preferred Securities
have a value greater than 5 percent of the Common Stock on the date the
Preferred Securities are acquired, generally would be subject to United States
federal income tax. Under present law, the Company would not be a United
States real property holding corporation so long as (a) the fair market value
of its United States real property interests is less than (b) 50% of the sum
of the fair market value of its United States real property interests, its
interests in real property located outside the United States, and its other
assets which are used or held or use in a trade or business. The Company
believes that it is not, and has not been at any time during the last five
years, a United States real property holding corporation and does not expect
to become such a corporation.
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<PAGE>
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP, AND
DISPOSITION OF THE PREFERRED SECURITIES AND THE COMMON STOCK, 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 WITH
POSSIBLE RETROACTIVE EFFECTS.
SELLING HOLDERS
The Convertible Preferred Securities were originally issued by the Trust and
sold by Prudential Securities Incorporated and Furman Selz LLC (the "Initial
Purchasers") in transactions exempt from the registration requirements of the
Securities Act, to persons reasonably believed by such Initial Purchasers to
be "qualified institutional buyers" (as defined in Rule 144A of the Securities
Act), or outside the United States to Non-U.S. persons in reliance on
Regulation S under the Securities Act. The Selling Holders may from time to
time offer and sell pursuant to this Prospectus any or all of the Preferred
Securities, the Convertible Debentures, the Common Stock issued upon
conversion of the Preferred Securities and the associated Guarantee. The term
"Selling Holder" includes the holders listed below and the beneficial owners
of the Preferred Securities and their transferees, pledgees, donees or other
successors.
The Offered Securities have been registered pursuant to the Registration
Rights Agreement which provides that the Company use its best efforts to keep
the Registration Statement effective until two years after the Original
Offering Date or such earlier date as of which all the Transfer Restricted
Securities have been sold pursuant to the Registration Statement.
The following table sets forth information, as of February 2, 1999, with
respect to the Selling Holders the respective number of Preferred Securities
beneficially owned by each Selling Holder and the Common Stock issuable upon
conversion thereof that may be offered pursuant to this Prospectus. Such
information has been obtained from the Selling Holders. Except as otherwise
indicated, to the knowledge of the Company, all persons listed below have sole
voting and investment power with respect to their securities.
<TABLE>
<CAPTION>
Preferred Preferred
Securities Securities
Beneficially Offered
Selling Holder Owned Hereby
- -------------- ------------ ----------
<S> <C> <C>
AAM/Zazove Institutional Income Fund, L.P.............. 74,200 74,200
ABN-AMRO Incorporated.................................. 1 1
Aliant Communications Small Cap........................ 3,000 3,000
American Home Assurance Company........................ 60,000 60,000
American Investors Life Insurance Company, Inc. ....... 100,000 100,000
Amerus--Converts....................................... 35,000 35,000
Armco Small Cap........................................ 5,500 5,500
Brahma--Converts....................................... 11,500 11,500
The Budd Company Small Cap............................. 5,600 5,600
Capital Arbitrage Fund................................. 84,400 84,400
Century National Insurance Company..................... 21,000 21,000
Chrysler Insurance Company--Total Return............... 600 600
The Cincinnati Insurance Company....................... 170,000 170,000
The Cincinnati Life Insurance Company.................. 100,000 100,000
ConAgra................................................ 19,800 19,800
Consolidated Edison.................................... 45,000 45,000
Deephaven Market Neutral Trading Limited............... 74,293 74,293
Deephaven Market Neutral Trading L.P. ................. 60,807 60,807
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Preferred Preferred
Securities Securities
Beneficially Offered
Selling Holder Owned Hereby
- -------------- ------------ ----------
<S> <C> <C>
Deephaven Opportunity Trading Fund L.P. .............. 62,500 62,500
Deeprock & Co......................................... 18,000 18,000
Deutsche Bank A.G. ................................... 744,599 744,599
Diversified Arbitrage Fund............................ 18,300 18,300
Donaldson, Lufkin & Jenrette Securities............... 9,000 9,000
Employers Reinsurance Corp. .......................... 70,000 70,000
Financial Benefit Life-Converts....................... 10,000 10,000
First Mercury Insurance Company--Total Return......... 1,000 1,000
General Motors Investment Management Corp. ........... 375,000 375,000
General Motors Employees Domestic Group Pension
Trust................................................ 35,000 35,000
General Motors GRAA................................... 42,000 42,000
Georgia Pacific Small Cap............................. 25,600 25,600
Goldman, Sachs & Co. ................................. 204,600 204,600
Harris Insight Funds, Inc. ........................... 15,000 15,000
Health Midwest Corporate Pool......................... 10,600 10,600
Health Midwest Erisa Pool............................. 3,800 3,800
Heartland Value Plus Fund, a series of Heartland
Group, Inc. ......................................... 115,000 115,000
Highbridge International LLC.......................... 112,800 112,800
Houston Municipal Employees Pension Small Cap......... 50,900 50,900
The Income Fund of America, Inc. ..................... 500,000 500,000
Ingersoll-Rand........................................ 28,000 28,000
J.L. Schiffman & Co., Inc. ........................... 54,000 54,000
J.P. Morgan & Co., Inc. .............................. 120,000 120,000
JNL Balanced Fund..................................... 400 400
KA Investments LDC.................................... 115,000 115,000
Masonic Homes Endowment............................... 17,000 17,000
Masonic Homes General Fund............................ 24,000 24,000
Monumental Life Insurance Company--Stock TRAC
(TEAMSTERS I)........................................ 24,000 24,000
Monumental Life Insurance Company
(Teamsters--Camden Non-Enhanced)..................... 24,000 24,000
Morgan Stanley Dean Witter Variable Income Builder
Fund................................................. 12,000 12,000
Morgan Stanley Dean Witter Income Builder Fund........ 94,000 94,000
Morgan Stanley Dean Witter Convertible Securities
Trust................................................ 120,000 120,000
Motors Insurance Corp. ............................... 70,000 70,000
National Union Fire Insurance Company of Pittsburgh... 78,200 78,200
Nationwide Balanced Fund.............................. 2,500 2,500
NCR Pension Trust..................................... 35,900 35,900
NFL Reciprocal Trust.................................. 6,500 6,500
Qualex Small Cap...................................... 6,400 6,400
Regence Blue Cross/Blue Shield of Washington.......... 11,600 11,600
Regence Blue Cross/Blue Shield of Utah................ 2,200 2,200
Regence Blue Cross/Blue Shield of Oregon.............. 7,000 7,000
Regence Blue Cross/Blue Shield of Idaho............... 4,200 4,200
Reliastar Capital Fund................................ 1,700 1,700
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
Preferred Preferred
Securities Securities
Beneficially Offered
Selling Holder Owned Hereby
- -------------- ------------ ----------
<S> <C> <C>
Salomon Brothers Variable Total Return Fund............ 400 400
Salomon Brothers Variable Capital Fund................. 2,700 2,700
Salomon Brothers Total Return Fund..................... 20,000 20,000
Salomon Brothers Fund.................................. 100,000 100,000
Salomon Brothers Capital Fund.......................... 160,000 160,000
San Joaquin County Employees Retirement Association.... 48,400 48,400
SMALLCAP World Fund, Inc. ............................. 125,000 125,000
SoundShore Holdings Ltd. .............................. 26,000 26,000
SoundShore Opportunity Holdings Fund Ltd. ............. 10,000 10,000
SPX Corporation Master................................. 21,600 21,600
Third Avenue High Yield Fund........................... 7,000 7,000
TQA Arbitrage Fund, L.P. .............................. 10,000 10,000
Tribeca Investments LLC................................ 225,000 225,000
Westfield Life Insurance Company....................... 7,000 7,000
The Zazove Convertible Fund, L.P. ..................... 30,000 30,000
Any Other Holder of Preferred Securities
or Future Transferee from any such Holder............. 53,900 53,900
--------- ---------
Total.............................................. 5,000,000 5,000,000
========= =========
</TABLE>
None of the Selling Holders has, or within the past three years has had, any
position, office or other material relationship with the Trust or the Company
or any of their predecessors or affiliates. Because the Selling Holders may,
pursuant to this Prospectus, offer all or some portion of the Preferred
Securities, the Convertible Debentures or the Common Stock issuable upon
conversion of the Preferred Securities, no estimate can be given as to the
amount of the Preferred Securities, Convertible Debentures or Common Stock
issuable upon conversion of Preferred Securities that will be held by the
Selling Holders upon termination of any such sales. In addition, the Selling
Holders identified above may have sold, transferred or otherwise disposed of
all or a portion of their Preferred Securities since the date on which they
provided the information regarding their Preferred Securities included herein
in transactions exempt from the registration requirements of the Securities
Act. See "Plan of Distribution."
60
<PAGE>
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to
time offer the Offered Securities to or through underwriters, broker/dealers
or agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders and any
underwriters, broker/dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the meaning of
the Securities Act, and any profit on the sale of such securities and any
discounts, commissions, concessions or other compensation received by any such
underwriter, broker/dealer or agent may be deemed to be underwriting discounts
and commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted
at the time of sale, (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or in the over-the-counter
market or (iv) through the writing and exercise of options. At the time a
particular offering of the Offered Securities is made, a Prospectus
Supplement, if required, will be distributed, which will set forth the names
of the Selling Holders, aggregate amount and type of Offered Securities being
offered and the terms of the offering, including the name or names of any
underwriters, broker/dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed to paid broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they
have been registered or qualified for sale in such jurisdictions or any
exemption from registration or qualification is available and is complied
with.
The Selling Holders will be subject to applicable provisions of the Exchange
Act and rules and regulations thereunder, which provisions may limit the
timing of purchases and sales of any of the Offered Securities by the Selling
Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, the Company shall pay all
expenses of the registration of the Offered Securities including, without
limitation, all registration and filing fees and expenses and fees and
expenses of compliance with federal securities or state blue sky laws;
provided, however, that the Selling Holders will pay all broker's commissions
and underwriting discounts and commissions, if any. The Selling Holders will
be indemnified by the Company and the Trust, jointly and severally, against
certain civil liabilities, including certain liabilities under the Securities
Act or otherwise, or will be entitled to contribution in connection therewith.
The Company and the Trust will be indemnified by the Selling Holders severally
against certain civil liabilities, including certain liabilities under the
Securities Act or otherwise, or will be entitled to contribution in connection
therewith.
61
<PAGE>
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Convertible Debentures, the Guarantee and the Common Stock
issuable upon the conversion of the Preferred Securities will be passed upon
for the Company by King & Spalding. Certain matters of Delaware law relating
to the validity of the Preferred Securities will be passed upon on behalf of
the Trust by Richards, Layton & Finger, P.A., special Delaware counsel to the
Trust. Certain United States income taxation matters have been passed upon for
the Company and the Trust by King & Spalding.
EXPERTS
The consolidated financial statements of Breed Technologies, Inc. and
subsidiaries at June 30, 1998 and 1997 and for each of the three years in the
period ended June 30, 1998, appearing in the Company's Annual Report on Form
10-K/A for the year ended June 30, 1998 and incorporated by reference
elsewhere herein have been audited by Ernst & Young LLP, independent certified
public accountants, as set forth in their report thereon incorporated by
reference herein which, as to 1997, is based in part on the report of KPMG
S.p.A., independent auditors. The financial statements referred to above are
incorporated by reference herein in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
The combined financial statements of Safety Restraint Systems, a division of
AlliedSignal Inc., as of December 31, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996 incorporated by reference in this
Prospectus from the Company's Current Report on Form 8-K/A filed on January
13, 1998 have been so incorporated in reliance on the report (which contains
an explanatory paragraph relating to Safety Restraint Systems' transactions
and relationships with AlliedSignal Inc.) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
62
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$250,000,000
BTI Capital Trust
5,000,000 6.50% Convertible Trust
Preferred Securities
(Liquidation amount $50 per Convertible Trust Preferred Security)
guaranteed to the extent set forth herein by, and
convertible into Common Stock of,
BREED Technologies, Inc.
----------------------------
Prospectus
----------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................... $ 73,750
Legal fees and expenses............................................... 125,000
Accounting fees and expenses.......................................... 50,000
Printing and engraving expenses....................................... 75,000
Miscellaneous expenses................................................ 11,250
--------
Total............................................................... $335,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors of the Company under certain conditions and subject
to certain limitations. Section 145 of the Delaware General Corporation law
also provides that a corporation has the power to purchase and maintain
insurance on behalf of its officers and directors against any liability
asserted against such person and incurred by him or her in such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liability under the
provisions of Section 145 of the Delaware General Corporation Law.
Pursuant to Article 8 of the of the Company's Second Restated Certificate of
Incorporation (the "Restated Certificate"), the Company will indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that such person is or was, or has
agreed to become, a director or officer of the Company, or is or was serving,
or has agreed to serve, at the Company's request, in a similar capacity with
another enterprise. The Company will indemnify such officers and directors in
an action by or in the right of the Company to procure a judgment in its favor
under the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
Company. Where an officer or director is successful on the merits or otherwise
in the defense of any action referred to above, the Company must indemnify him
or her against the expenses (including attorneys' fees) which he or she
actually and reasonably incurred in connection therewith.
In the event that the Company does not assume the defense of any action,
suit or proceeding, the Company will, in advance of the final disposition of
any such action, pay the expenses (including attorneys' fees) incurred by any
officer or director in defending such action, provided that the director or
officer undertakes to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the Company as authorized
by Article 8 of the Restated Certificate.
The indemnification provided by the Restated Certificate is not deemed to be
exclusive of any other rights to which an officer or director may be entitled
under any law, agreement, vote or otherwise, and inures to the benefit of the
estate, heirs, executors and administrators of the officer or director.
The Company is authorized to enter into agreements with its officers and
directors providing indemnification rights different from those provided in
the Restated Certificate, and may grant indemnification rights to other
employees or agents of, or other persons serving, the Company. The Company is
also permitted to purchase directors' and officers' liability insurance.
Article 8 of the Restated Certificate also provides that if the Delaware
General Corporation Law is amended after the adoption of the Restated
Certificate, the Company will indemnify its officers and directors to the
fullest extent permitted by applicable law in effect from time to time.
The foregoing statements are subject to the detailed provisions of Article 8
of the Restated Certificate.
II-1
<PAGE>
The Declaration of Trust of BTI Capital Trust, filed as Exhibit 4.2 to this
Registration Statement, limits the liability of the Trustee to the Trust and
certain persons and provides for the indemnification by the Trust or the
Company of the Trustees, their officers, directors and employees and certain
other persons.
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
2.1 -- Stock Purchase Agreement--MOMO S.p.A. and G. Holding S.r.l., dated
March 29, 1996, and Stock Purchase Agreement--LANEBROOK LTD., dated
March 29, 1996 (incorporated herein by reference to Exhibits 2.1 and
2.2 to the Company's Current Report on Form 8-K/A filed on June 28,
1996).
2.2 -- Master Agreement, dated July 1, 1996, related to the "Gallino
Group" acquisition (incorporated herein by reference to Exhibit 2.5
to the Company's Annual Report on Form 10-K filed on September 29,
1997).
2.3 -- Amended and Restated Purchase Agreement, dated as of October 25,
1996, among UT Automotive, Inc., United Technologies Automotive
Systems, Inc., United Technologies Automotive Systems de Mexico A.A.
de C.V., IPCO, Inc. and Breed Technologies, Inc. (incorporated
herein by reference to Exhibit 2 to the Company's Current Report on
Form 8-K/A filed on March 25, 1997).
2.4 -- Stock Purchase Agreement, dated January 3, 1997, as amended
February 25, 1997, between the Company and BTI Investments, Inc.
(incorporated herein by reference to Exhibit 2 to the Company's
Current Report on Form 8-K filed on March 10, 1997).
2.5 -- Asset Purchase Agreement, dated as of August 27, 1997, among
AlliedSignal Inc. (and certain subsidiaries identified in the
Agreement) and the Company (and certain subsidiaries identified in
the Agreement) (incorporated herein by reference to Exhibit 2 to the
Company's Current Report on Form 8-K filed on November 14, 1997).
2.6 -- Amendment, dated October 3, 1997, to the Asset Purchase Agreement,
dated as of August 27, 1997, by and between AlliedSignal Inc., a
Delaware corporation, the Company and the other parties thereto
(incorporated herein by reference to Exhibit 2 to the Company's
Current Report on Form 8-K filed on November 14, 1997).
4.1* -- Amended and Restated Declaration of Trust dated as of November 25,
1997 between Breed Technologies, Inc., as Sponsor, Wilmington Trust
Company, as Delaware Trustee and Institutional Trustee, and Charles
J. Speranzella, Jr., Fred J. Musone, and Frank J. Gnisci, as Regular
Trustees.
4.2* -- Indenture dated as of November 25, 1997 between Breed Technologies,
Inc. and Wilmington Trust Company, as Indenture Trustee.
4.3* -- Form of Preferred Security.
4.4* -- Form of Convertible Debentures.
4.5* -- Common Securities Guarantee Agreement dated as of November 25, 1997
by Breed Technologies, Inc., as Guarantor.
4.6* -- Preferred Securities Guarantee Agreement dated as of November 25,
1997 between Breed Technologies, Inc., as Guarantor, and Wilmington
Trust Company, as Preferred Guarantee Trustee.
4.7* -- Amendment No. 1 to Warrant Agreement dated March 2, 1998 between
Breed Technologies, Inc. and NationsBank, N.A.
4.8* -- Indenture dated as of April 28, 1998, among Breed Technologies,
Inc., the Subsidiary Guarantors named therein and IBJ Schroder Bank
& Trust Company, as Trustee.
4.9* -- Amended and Restated Credit Agreement dated as of April 28, 1998,
by and among Breed Technologies, Inc., certain subsidiaries of Breed
Technologies, Inc. designated as Borrowers therein, NationsBank,
National Association and certain other financial institutions named
therein as Lenders, and NationsBank, National Association, as Agent
for the Lenders.
4.10* --Registration Rights Agreement dated November 25, 1997 by and among
Breed Technologies, Inc., BTI Capital Trust, and Prudential
Securities Incorporated and Furman Selz LLC.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
4.11 -- Specimen Certificate of Common Stock of the Company
(incorporated herein by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-1 (File No. 33-
51868)).
4.12 -- Registration Rights Agreement, dated April 28, 1998, among
the Company, NationsBanc Montgomery Securities, LLC and
Prudential Securities Incorporated (incorporated herein by
reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-4 (File No. 333-57671)).
5.1* -- Opinion of King & Spalding as to the legality of the
Convertible Debentures, the Breed Technologies, Inc. Common
Stock issuable on the conversion of the Preferred Securities
and the Preferred Securities Guarantee (including the Consent
of such Counsel).
5.2* -- Opinion of Richards, Layton & Finger, P.A. as to the legality
of the Preferred Securities to be issued by BTI Capital Trust
(including the consent of such Counsel).
8.1 -- Tax Opinion of King & Spalding.
12.1 -- Computation of the Ratio of Earnings to Fixed Charges.
12.2 -- Computation of the Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
23.1 -- Consent of Ernst & Young LLP.
23.2* -- Consent of PricewaterhouseCoopers LLP.
23.3 -- Consent of KPMG S.p.A.
23.5* -- Consent of King & Spalding (included in Exhibit 5.1).
23.6* -- Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2).
23.7 -- Consent of King & Spalding (included in Exhibit 8.1).
24.1* -- Power of Attorney (previously filed with signature pages to
the Registration Statement).
25.1* -- Statement of Eligibility of Indenture Trustee under the
Indenture.
25.2* -- Statement of Eligibility of Institutional Trustee under the
Amended and Restated Declaration of Trust of BTI Capital
Trust.
25.3* -- Statement of Eligibility of Preferred Guarantee Trustee under
the Preferred Securities Guarantee of Breed Technologies, Inc.
for the benefit of the holders of Preferred Securities of BTI
Capital Trust.
</TABLE>
- --------
* Previously filed
Item 17. Undertakings
Each of the undersigned registrants (the "Registrants") hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by any Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of any Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by any Registrant of
expenses incurred or paid by a director, officer or controlling person of
such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 3
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Lakeland, State of Florida, on March
8, 1999.
BREED TECHNOLOGIES, INC.
By:
/s/ Johnnie Cordell Breed
__________________________________
Johnnie Cordell Breed
Chairman of the Board and Chief
Executive Officer
BTI CAPITAL TRUST
By:
/s/ Charles J. Speranzella, Jr.
__________________________________
Charles J. Speranzella, Jr.
Regular Trustee
By:
/s/ Robert M. Rapone
__________________________________
Robert M. Rapone
Regular Trustee
By:
/s/ Stuart D. Boyd
__________________________________
Stuart D. Boyd
Regular Trustee
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities with Breed Technologies, Inc. and on the date
indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
* Chairman of the
- ------------------------------------ Board and Chief March 8, 1999
Johnnie Cordell Breed Executive Officer
* Vice Chairman and
- ------------------------------------ Director March 8, 1999
Charles J. Speranzella, Jr.
* President, Chief
- ------------------------------------ Operating Officer March 8, 1999
Fred J. Musone and Director
*
- ------------------------------------ Chief Financial March 8, 1999
Officer
Jack F. Gallagher
* Director
- ------------------------------------ March 8, 1999
Larry W. McCurdy
* Director
- ------------------------------------ March 8, 1999
Robert W. Shower
* Director
- ------------------------------------ March 8, 1999
Alberto Negro
* Director
- ------------------------------------ March 8, 1999
Dr.-Ing. Franz Wressnigg
*By:
/s/ Lizanne Guptill
________________________________
Lizanne Guptill
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
EXHIBIT 8.1
KING & SPALDING
191 Peachtree Street
Atlanta, Georgia 30303-1763
March 5, 1999
Breed Technologies, Inc.
BTI Capital Trust
5300 Old Tampa Highway
Lakeland, Florida 33807
Ladies and Gentlemen:
We have acted as special tax counsel to Breed Technologies, Inc. (the
"Company") and to BTI Capital Trust (the "Trust") in connection with the
registration under the Securities Act of 1933, as amended (the "1933 Act"), of
the 6.50% Convertible Trust Preferred Securities (the "Preferred Securities").
The Preferred Securities represent preferred undivided beneficial interests in
the assets of the Trust, consisting of 6.50% Convertible Subordinated
Debentures due 2027 (the "Convertible Debentures"). The Preferred Securities
and the Convertible Debentures have been described in that certain Prospectus
(the "Prospectus"), which is included in the Registration Statement on Form S-
3 (File No. 333-48231), as amended (the "Registration Statement"), filed with
the Securities and Exchange Commission (the "Commission"). In connection
therewith, you have requested our opinion with respect to the status of the
Convertible Debentures and the Trust for United States federal income tax
purposes and the accuracy of the discussion included in the Prospectus under
the heading "United States Federal Income Taxation." All capitalized terms
used herein without definition shall have the same meaning as in the
Prospectus.
FACTS AND ASSUMPTIONS RELIED UPON
In rendering the opinion expressed herein, we have examined such documents
as we have deemed appropriate, including (but not limited to) the Registration
Statement, the Prospectus and all exhibits thereto. In our examination of
documents, we have assumed, with your consent, that all documents submitted to
us are authentic originals or, if submitted as photocopies or telecopies, that
they faithfully reproduce the originals thereof, that all such documents have
been or will be duly executed to the extent required, that all representations
and statements set forth in such documents are true and correct, and that all
obligations imposed by any such document on the parties thereto are
enforceable and have been or will be performed or satisfied in accordance with
their terms.
OPINION
Based upon and subject to the foregoing, we are of the following opinion:
(1) The Convertible Debentures will be classified as indebtedness of the
Company for United States federal income tax purposes.
(2) The Trust will be classified as a grantor trust and will not be treated
as an association taxable as a corporation for United States federal income
tax purposes. As a result, each beneficial owner of Preferred Securities (a
"Securityholder") will be required to include in its gross income its pro rata
share of the interest income, including original issue discount, paid or
accrued with respect to the Convertible Debentures, whether or not cash is
actually distributed to the Securityholder.
<PAGE>
(3) The discussion contained in that portion of the Prospectus under the
caption "United States Federal Income Taxation" constitutes, in all material
respects, a fair and accurate summary of the principal United States federal
income tax consequences of the purchase, ownership, disposition, and
conversion of Preferred Securities under current law.
The opinion expressed herein is given as of the date hereof and is based on
the Internal Revenue Code of 1986, as amended, the United States Treasury
Regulations promulgated thereunder, current administrative positions of the
United States Internal Revenue Service, and existing judicial decisions, any
of which could be changed at any time, possibly on a retroactive basis. Any
such change could adversely affect the opinion rendered herein and the tax
consequences to the Trust and to the holders of Preferred Securities. In
addition, our opinion cannot be relied upon if any of the facts contained in
the documents that we have examined, or if any of the assumptions that we have
made, is or later becomes inaccurate.
Finally, our opinion is limited to the tax matters specifically covered
thereby, and we have not been asked to address, nor have we addressed, any
other tax consequences relating to the Trust, the Convertible Debentures or
the Preferred Securities.
We hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus. In giving such consent, we do not thereby admit
that we are in the category of persons whose consent is required under Section
7 of the 1933 Act.
Very truly yours,
/s/ King & Spalding
-------------------------
King & Spalding
<PAGE>
Exhibit 12.1
Breed Technologies, Inc.
Ratio of Earnings to Fixed Charges
(In millions, except ratios)
<TABLE>
<CAPTION>
Six Months
Fiscal Year Ended June 30, Ended
---------------------------------- ------------
Pro Forma
Fiscal Year Ended
June 30, December 31,
1994 1995 1996 1997 1998 1998 1998
----- ------ ------ ----- ------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Computation:
Pre-tax earnings
(losses) from
continuing
operations............ $73.0 $110.1 $ 98.3 $29.7 $(408.8) $(416.5) $(52.4)
Add: fixed charges..... 1.4 1.2 3.0 29.4 89.4 86.4 44.5
Subtract: capitalized
interest.............. -- -- -- (0.1) (0.1) -- --
----- ------ ------ ----- ------- ------- ------
Total earnings as
adjusted............... $74.4 $111.3 $101.3 $59.0 $(319.5) $(330.1) $ (7.9)
===== ====== ====== ===== ======= ======= ======
Fixed Charges Computa-
tion:
Interest expensed...... $ 1.1 $ 0.8 $ 2.7 $26.8 $ 68.9 $ 79.5 $ 40.9
Capitalized interest... -- -- -- 0.1 0.1 -- --
Amortization of de-
ferred financing
costs................. -- -- -- 0.7 16.8 3.3 1.8
Estimated interest
factor on operating
leases................ 0.3 0.4 0.3 1.8 3.6 3.6 1.8
----- ------ ------ ----- ------- ------- ------
Total fixed charges..... $ 1.4 $ 1.2 $ 3.0 $29.4 $ 89.4 $ 86.4 $ 44.5
===== ====== ====== ===== ======= ======= ======
Ratio of earnings to
fixed charges.......... 53.1 92.7 33.8 2.0 -- -- --
===== ====== ====== ===== ======= ======= ======
Insufficiency of
earnings to cover fixed
charges................ $(408.9) $(416.5) $(52.4)
======= ======= ======
</TABLE>
<PAGE>
Exhibit 12.2
Breed Technologies, Inc.
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
(In millions, except ratios)
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, Pro Forma
-------------------------------- Fiscal Year Ended Six Months Ended
1994 1995 1996 1997 1998 June 30, 1998 December 31, 1998
----- ------ ----- ----- ------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax earnings (loss)
from continuing
operations............. $73.0 $110.1 $98.3 $29.7 $(408.8) $(416.5) $(52.4)
Subtract: Dividends on
redeemable preferred
stock deducted in
determining pre-tax
earnings (loss) before
extraordinary item .... -- -- -- -- (10.0) (16.3) (8.7)
Add: Fixed charges...... 1.4 1.2 3.0 29.4 99.4 102.7 53.2
Subtract: Capitalized
interest............... -- -- -- (0.1) (0.1) -- --
----- ------ ----- ----- ------- ------- ------
Total earnings as
adjusted............... 74.4 111.3 101.3 59.0 $(319.5) $(330.1) $ (7.9)
===== ====== ===== ===== ======= ======= ======
Fixed Charges
Computation:
Interest expensed...... $ 1.1 $ 0.8 $ 2.7 $26.8 $ 68.9 $ 79.5 $ 40.9
Capitalized interest... -- -- -- 0.1 0.1 -- --
Amortization of
deferred financing
costs................. -- -- -- 0.7 16.8 3.3 1.8
Estimated interest
factor on operating
leases................ 0.3 0.4 0.3 1.8 3.6 3.6 1.8
Dividends on redeemable
preferred stock....... -- -- -- -- 10.0 16.3 8.7
----- ------ ----- ----- ------- ------- ------
Total fixed charges.... $ 1.4 $ 1.2 $ 3.0 $29.4 $ 99.4 $ 102.7 $ 53.2
===== ====== ===== ===== ======= ======= ======
Ratio of earnings to
combined fixed charges
and preferred stock
dividends.............. 53.1 92.7 33.8 2.0 -- -- --
===== ====== ===== ===== ======= ======= ======
Insufficiency of
earnings to cover
combined fixed
charges................ $(418.9) $(432.8) $(61.1)
======= ======= ======
</TABLE>
<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated September 23, 1998 in Amendment No. 3 to the
Registration Statement (Form S-3 Nos. 333-48231 and 333-48231-01) and related
Prospectus of Breed Technologies, Inc. for the registration of 10,986,500
shares of its Common Stock, its 6.5% Convertible Subordinated Debentures, and
the 6.50% Convertible Trust Preferred Securities of BTI Capital Trust.
/s/ Ernst & Young LLP
Tampa, Florida
March 4, 1999
<PAGE>
Exhibit 23.3
Consent of Certified Public Accountants
To: Breed Technologies, Inc.
We consent to the inclusion of our audit report dated 25 July 1997 on the
combined and consolidated financial statements of the Momo group as of and for
the year ended 30 June 1997 in the Registration Statement on Form S-3 and
related prospectus of Breed Technologies, Inc. (the "Company"), BTI Capital
Trust (the "Trust", and together with the Company, the "Registrants") for the
registration of the Registrants' Subordinated Debt Securities and Guaranteed
Preferred Securities, and the reference to our firm under the heading
"Experts" in the prospectus.
/s/ KPMG S.p.A.
KPMG S.p.A.
Milan, Italy
5 March 1999
