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As Filed Pursuant to Rule 424(b)(3)
Registration No. 333-27865
No. 333-27865-01
PROSPECTUS
INTERPOOL CAPITAL TRUST
Offer to Exchange
9 7/8% Series B Capital Securities
(Liquidation Amount $1,000 per Capital Security)
for any and all outstanding 9 7/8% Series A Capital Securities
(Liquidation Amount $1,000 per Capital Security)
Unconditionally Guaranteed, as described herein, by
#IP logo#INTERPOOL, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
TUESDAY, SEPTEMBER 2, 1997, UNLESS EXTENDED BY INTERPOOL CAPITAL TRUST. As more
fully described herein under "The Exchange Offer -- Expiration Date; Extensions;
Amendment," the time the Exchange Offer expires (including extensions, if any,
by the Trust) is referred to as the "Expiration Date."
Interpool Capital Trust, a trust formed under the laws of the state of
Delaware (the "Trust"), is hereby offering (the "Exchange Offer"), upon the
terms and subject to the conditions set forth in this prospectus (the
"Prospectus") and the accompanying letter of transmittal (the "Letter of
Transmittal"), to exchange $1,000 Liquidation Amount of its 9 7/8% Series B
Capital Securities (the "Exchange Capital Securities"), which exchange has been
registered under the Securities Act of 1933, as amended (the "Securities Act")
pursuant to a registration statement of which this Prospectus is a part (the
"Registration Statement"), for each $1,000 liquidation amount of its outstanding
9 7/8% Series A Capital Securities (the "Private Capital Securities" and,
collectively with the Exchange Capital Securities, the "Capital Securities"), of
which $75,000,000 in aggregate principal amount was issued and sold on January
27, 1997 in a transaction exempt from registration under the Securities Act and
is outstanding on the date hereof. Pursuant to the Exchange Offer, Interpool,
Inc., a Delaware corporation ("Interpool" or the "Company"), is also offering to
exchange (i) its guarantee of payments of cash distributions and payments on
liquidation of the Trust or redemption of the Private Capital Securities (the
"Private Guarantee"), for a like guarantee in respect of the Exchange Capital
Securities (the "Exchange Guarantee") and (ii) all of its 9 7/8% Series B Junior
Subordinated Deferrable Interest Debentures (the "Exchange Junior Subordinated
Debentures') for a like principal amount of its 9 7/8% Series A Junior
Subordinated Deferrable Interest Debentures (the "Private Junior Subordinated
Debentures"), which Exchange Guarantee and Exchange Junior Subordinated
Debentures also have been registered under the Securities Act. The Private
Capital Securities, the Private Guarantee and the Private Junior Subordinated
Debentures are collectively referred to herein as the "Private Securities" and
the Exchange Capital Securities, the Exchange Guarantee and the Exchange Junior
Subordinated Debentures are collectively referred to herein as the "Exchange
Securities."
The form and terms of the Exchange Securities are substantially identical
in all respects (including principal amount, interest rate, maturity and
ranking) to the form and terms of the Private Securities, except that (i) the
Exchange Capital Securities will have been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof, (ii) the
Exchange Capital Securities will not contain the $100,000 minimum liquidation
amount transfer restriction, (iii) the Exchange Capital Securities will not
provide for payment of additional distributions thereon, (iv) the Exchange
Junior Subordinated Debentures will not contain the $100,000 minimum liquidation
amount transfer restriction, (v) the Exchange Junior Subordinated Debentures
will not provide for payment of liquidated damages thereon and (vi) holders of
the Exchange Capital Securities will not be entitled to certain rights of
holders of the Private Capital Securities under the Registration Rights
Agreement (as defined), which rights will terminate upon consummation of the
Exchange Offer. The Exchange Capital Securities will evidence the same
obligations as the Private Capital Securities and will be issued pursuant to,
and entitled to the benefits of, the Declaration and the Indenture (each as
defined) governing the Private Capital Securities. The Exchange Offer is being
made to satisfy the obligations of the Company under the Registration Rights
Agreement relating to the Private Capital Securities. See "The Exchange Offer"
and "Description of the Exchange Capital Securities." In the event that the
Exchange Offer is consummated, any Private Capital Securities which remain
outstanding after consummation of the Exchange Offer and the Exchange Capital
Securities will vote together as a single class for purposes of determining
whether holders of the requisite percentage in outstanding Liquidation Amount
thereof have taken certain actions or exercised certain rights under the Amended
and Restated Declaration of Trust.
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Holders of the Exchange Capital Securities will be entitled to receive
cumulative cash distributions arising from the payment of interest on the
Exchange Junior Subordinated Debentures, accruing from February 15, 1997 and
payable semi-annually in arrears on February 15 and August 15 of each year,
commencing February 15, 1998, at the annual rate of 9 7/8% of the Liquidation
Amount of $1,000 per Exchange Capital Security ("Distributions"). So long as no
Debenture Event of Default (as defined herein) has occurred and is continuing,
the Company will have the right to defer payments of interest on the Exchange
Junior Subordinated Debentures at any time and from time to time for a period
not exceeding 10 consecutive semi-annual periods with respect to each deferral
period (each, an "Extension Period"), provided that no Extension Period may
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due, the Company may elect
to begin a new Extension Period, subject to the requirements set forth herein.
If and for so long as interest payments on the Exchange Junior Subordinated
Debentures are so deferred, Distributions on the Exchange Capital Securities
will also be deferred and the Company will not be permitted, subject to certain
exceptions described herein, to declare or pay any cash distributions with
respect to the Company's capital stock (which includes common and preferred
stock) or to make any payment with respect to debt securities of the Company
that rank pari passu with or junior to the Exchange Junior Subordinated
Debentures. During an Extension Period, interest on the Exchange Junior
Subordinated Debentures will continue to accrue (and the amount of Distributions
to which holders of the Trust Securities are entitled will continue to
accumulate) at the rate of 9 7/8% per annum, compounded semi-annually, and
holders of Trust Securities will be required to accrue interest income for
United States federal income tax purposes even though such holders have not yet
received cash payments attributable to such interest income. See "Description of
Junior Subordinated Debentures -- Option to Extend Interest Payment Date" and
"Certain Federal Income Tax Considerations -- Interest Income and Original Issue
Discount."
The Company will, through the Exchange Guarantee, the Common Guarantee, the
Declaration, the Exchange Junior Subordinated Debentures and the Indenture (each
as defined herein), taken together, fully, irrevocably and unconditionally
guarantee all of the Trust's obligations under the Trust Securities. See
"Relationship Among the Capital Securities, the Junior Subordinated Debentures
and the Guarantee -- Full and Unconditional Guarantee." The Exchange Guarantee
and the Common Guarantee will guarantee payments of Distributions and payments
on liquidation or redemption of the Trust Securities, but in either case only to
the extent that the Trust holds funds on hand legally available therefor and has
failed to make such payments, as described herein. See "Description of Exchange
Guarantee." If the Company fails to make a required payment on the Exchange
Junior Subordinated Debentures, the Trust will not have sufficient funds to make
the related payments, including Distributions, on the Trust Securities. The
Exchange Guarantee and the Common Guarantee will not cover any payment when the
Trust does not have sufficient funds on hand legally available therefor. In such
event, a holder of Exchange Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights in respect of such payment.
See "Description of Junior Subordinated Debentures -- Enforcement of Certain
Rights by Holders of Capital Securities." The obligations of the Company under
the Exchange Guarantee, the Common Guarantee and the Exchange Junior
Subordinated Debentures will be unsecured and rank subordinate and junior in
right of payment to all Senior Indebtedness (as defined under "Description of
Junior Subordinated Debentures -- Subordination"). At December 31, 1996, the
Company's Senior Indebtedness totaled $602.7 million.
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated Maturity
Date upon repayment of the Exchange Junior Subordinated Debentures at a
redemption price equal to the principal amount of, plus accrued and unpaid
interest on, the Exchange Junior Subordinated Debentures (the "Maturity
Redemption Price"), (ii) in whole but not in part, at any time prior to February
15, 2007, contemporaneously with the optional prepayment by the Company of the
Exchange Junior Subordinated Debentures, upon the occurrence and continuation of
a Special Event (as defined herein) at a redemption price equal to the Special
Event Prepayment Price (as defined herein) (the "Special Event Redemption
Price"), and (iii) in whole or in part, on or after February 15, 2007,
contemporaneously with the optional prepayment by the Company of the Exchange
Junior Subordinated Debentures, at a redemption price equal to the Optional
Prepayment Price (as defined herein) (the "Optional Redemption Price"). Any of
the Maturity Redemption Price, the Special Event Redemption Price and the
Optional Redemption Price may be referred to herein as the "Redemption Price."
See "Description of Exchange Capital Securities -- Redemption."
The Exchange Junior Subordinated Debentures will be prepayable prior to the
Stated Maturity Date at the option of the Company (i) on or after February 15,
2007, in whole or in part, at a prepayment price (the "Optional Prepayment
Price") equal to 104.9375% of the principal amount thereof on February 15, 2007,
declining ratably on each February 15 thereafter to 100% on or after February
15, 2017, plus accrued interest
ii
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thereon to the date of prepayment, or (ii) at any time prior to February 15,
2007, in whole but not in part, upon the occurrence and continuation of a
Special Event, at a prepayment price (the "Special Event Prepayment Price")
equal to the greater of (a) 100% of the principal amount thereof or (b) the sum,
as determined by a Quotation Agent (as defined herein), of the present values of
the principal amount and premium payable with respect to an optional redemption
of the Exchange Junior Subordinated Debentures on February 15, 2007, together
with scheduled payments of interest on the Exchange Junior Subordinated
Debentures accruing from the prepayment date to and including February 15, 2007,
discounted to the prepayment date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined herein), plus, in either case (a) or (b) above, accrued interest thereon
to the date of prepayment. Either of the Optional Prepayment Price or the
Special Event Prepayment Price may be referred to herein as the "Prepayment
Price." See "Description of Exchange Junior Subordinated Debentures -- Optional
Prepayment" and "-- Special Event Prepayment."
The Company will have the right at any time to terminate the Trust and
cause a Like Amount of the Exchange Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the Trust,
subject to the Company having received an opinion of counsel to the effect that
such distribution will not be a taxable event to holders of Exchange Capital
Securities. Unless the Exchange Junior Subordinated Debentures are distributed
to the holders of the Trust Securities, in the event of a liquidation of the
Trust as described herein, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, the holders of the Exchange Capital
Securities generally will be entitled to receive a Liquidation Amount of $1,000
per Exchange Capital Security plus accumulated and unpaid Distributions thereon
to the date of payment. See "Description of Exchange Capital
Securities -- Liquidation of the Trust and Distribution of Exchange Junior
Subordinated Debentures" and "Certain Federal Income Tax
Considerations -- Distribution of Junior Subordinated Debentures to Holders of
Capital Securities."
The Private Capital Securities were originally issued and sold in reliance
upon the exemption provided in Section 4(2) of the Securities Act and Rule 144A
of the Securities Act. Accordingly, the Private Capital Securities may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States or to a U.S. person unless registered under the Securities Act or
unless an applicable exemption from the registration requirements of the
Securities Act is available. Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to third parties, the Trust and
the Company believe that the Exchange Capital Securities issued pursuant to the
Exchange Offer in exchange for Private Capital Securities may be offered for
resale, resold and otherwise transferred by a holder thereof (other than (i) an
"affiliate" of the Trust or the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Private Capital Securities
directly from the Trust or the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (iii) a broker-dealer who
acquired Private Capital Securities as a result of market making or other
trading activities), without compliance with the registration and prospectus
delivery requirements of the Securities Act; provided that the holder is
acquiring Exchange Capital Securities in the ordinary course of its business and
is not participating, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Capital Securities. Holders of
Private Capital Securities wishing to accept the Exchange Offer must represent
to the Trust and the Company, as required by the Registration Rights Agreement,
that such conditions have been met. The Trust and the Company believe that none
of the registered holders of the Private Capital Securities is an affiliate (as
such term is defined in Rule 405 under the Securities Act) of the Trust or the
Company.
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Private Capital Securities must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Capital
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Capital Securities received
in exchange for Private Capital Securities, where such Private Capital
Securities were acquired by such broker-dealer as a result of market-making or
other trading activities. The Trust has agreed to make this Prospectus (as it
may be amended or supplemented) available to any broker-dealer, upon request,
for use in connection with any such resale, for a period of one year after the
Registration Statement is declared effective by the Commission or until such
earlier date on which all the Exchange Capital Securities are freely tradeable.
However, any broker-dealer who acquired the Private Capital Securities directly
from the Trust or the Company may not fulfill its prospectus delivery
requirements with this Prospectus, but must comply with the registration and
prospectus delivery requirements of the Securities Act. See "The Exchange
Offer -- Resale of the Exchange Capital Securities" and "Plan of Distribution."
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Neither the Trust nor the Company will receive any proceeds from, and both
have agreed to bear the expenses of, the Exchange Offer. No underwriter is being
used in connection with the Exchange Offer. See "The Exchange Offer -- Resale of
the Exchange Capital Securities."
Prior to the Exchange Offer, there has been no public market for the
Capital Securities. The Company has not determined whether the Exchange Capital
Securities will be listed on any securities exchange. There can be no assurance
that an active market for the Exchange Capital Securities will develop. To the
extent that a market for the Exchange Capital Securities does develop the market
value of the Exchange Capital Securities will depend on market conditions (such
as yields on alternative investments), general economic conditions, the
Company's financial condition and certain other factors. Such conditions might
cause the Exchange Capital Securities, to the extent they are traded, to trade
at a significant discount from face value. In addition, any Private Capital
Securities not tendered and accepted in the Exchange Offer will remain
outstanding. To the extent that the Private Capital Securities are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, and
tendered but unaccepted, Private Capital Securities could be adversely affected.
Following consummation of the Exchange Offer, the holders of Private Capital
Securities will continue to be subject to the existing restrictions on transfer
thereof and neither the Trust nor the Company will have any further obligation
to such holders to provide for the registration under the Securities Act of the
Private Capital Securities except under certain limited circumstances. See "The
Exchange Offer -- Termination of Certain Rights."
As used herein, (i) the "Indenture" means the Indenture, dated as of
January 27, 1997, as amended and supplemented from time to time, between the
Company and IBJ Schroder Bank & Trust Company, as trustee (the "Debenture
Trustee"), relating to the Private Junior Subordinated Debentures and the
Exchange Junior Subordinated Debentures, (ii) the "Declaration" means the
Amended and Restated Declaration of Trust relating to the Trust among the
Company, as Sponsor, IBJ Schroder Bank & Trust Company, as Property Trustee (the
"Property Trustee"), Delaware Trust Capital Management, Inc., as Delaware
Trustee (the "Delaware Trustee"), and the Regular Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees"), (iii) the "Exchange Guarantee" means the Guarantee Agreement
relating to the Exchange Capital Securities between the Company and IBJ Schroder
Bank & Trust Company, as guarantee trustee (the "Guarantee Trustee") and (iv)
the "Common Guarantee" means the Guarantee Agreement relating to the Common
Securities between the Company and IBJ Schroder Bank & Trust Company, as
guarantee trustee. In addition, as the context may require, (i) "Capital
Securities" include the Private Capital Securities and the Exchange Capital
Securities, (ii) "Trust Securities" include the Capital Securities and the
Common Securities, (iii) "Junior Subordinated Debentures" includes the Private
Junior Subordinated Debentures and the Exchange Junior Subordinated Debentures,
and (iii) "Guarantee" includes the Private Guarantee and the Exchange Guarantee.
The Trust will accept for exchange any and all validly tendered Private
Capital Securities not withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date. Tenders of Private Capital Securities may be withdrawn at any
time prior to 5:00 p.m. on the Expiration Date. The Exchange Offer is not
conditioned on any minimum aggregate principal amount of Private Capital
Securities being tendered or accepted for exchange; provided, however, Private
Capital Securities may be tendered only in whole or in part having an aggregate
Liquidation Amount of not less than $100,000 (100 Private Capital Securities) or
any integral multiple of $1,000 Liquidation Amount (one Private Capital
Security) in excess thereof. The Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer -- Conditions."
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 August 4, 1997
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THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE TRUST OR THE COMPANY
ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE CAPITAL SECURITIES IN
ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT
BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE TRUST OR THE COMPANY. THE INFORMATION CONTAINED HEREIN IS AS OF THE DATE
HEREOF AND SUBJECT TO CHANGE, COMPLETION OR AMENDMENT WITHOUT NOTICE. NEITHER
THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL AT ANY
TIME NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
IN MAKING AN INVESTMENT DECISION REGARDING THE SECURITIES OFFERED HEREBY,
PROSPECTIVE INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY, THE
TRUST AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.
THE OFFERING IS BEING MADE ON THE BASIS OF THIS PROSPECTUS. ANY DECISION TO
EXCHANGE SECURITIES IN THE EXCHANGE OFFER MUST BE BASED ON THE INFORMATION
CONTAINED HEREIN.
Except as described herein, the Exchange Capital Securities will be
represented by global Exchange Capital Securities in fully registered form,
deposited with a custodian for and registered in the name of a nominee of The
Depository Trust Company ("DTC"). Beneficial interests in such Exchange Capital
Securities will be shown on, and transfers thereof will be effected through,
records maintained by DTC and its participants. Beneficial interests in such
Exchange Capital Securities will trade in DTC's Same-Day Funds Settlement System
and secondary market trading activity in such interests will therefore settle in
immediately available funds.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information............................................................... 1
Incorporation of Certain Documents by Reference..................................... 2
Forward Looking Statements.......................................................... 2
Prospectus Summary.................................................................. 3
Risk Factors........................................................................ 9
The Company......................................................................... 15
Recent Developments................................................................. 16
Use of Proceeds..................................................................... 16
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Stock Dividends......................................................... 16
Capitalization...................................................................... 18
Accounting Treatment................................................................ 18
Selected Financial Data............................................................. 19
Interpool Capital Trust............................................................. 21
The Exchange Offer.................................................................. 21
Description of Exchange Securities.................................................. 30
Description of Private Securities................................................... 51
Relationship Among the Exchange Capital Securities, the Exchange Junior Subordinated
Debentures and the Exchange Guarantee............................................. 51
Certain Federal Income Tax Considerations........................................... 53
ERISA Considerations................................................................ 57
Plan of Distribution................................................................ 57
Legal Matters....................................................................... 58
Experts............................................................................. 58
</TABLE>
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AVAILABLE INFORMATION
Interpool, Inc. ("Interpool" or the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices located at Seven
World Trade Center, New York, New York 10048, and Suite 1400, Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Such materials can also be inspected at the New York Stock Exchange, 20 Broad
Street, New York, New York 10005. The Commission maintains an Internet web site
that contains reports, proxy and information statements and other information
regarding Issuers who file electronically with the Commission. The address of
that site is http://www.sec.gov.
No separate financial statements of the Trust have been included herein.
The Company and the Trust do not consider that such financial statements would
be material to holders of the Capital Securities because the Trust is a
newly-formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any
activities other than holding as trust assets the Junior Subordinated Debenture,
issuing the Trust Securities and engaging in incidental activities. See
"Interpool Capital Trust," "Description of Exchange Capital Securities,"
"Description of Exchange Junior Subordinated Debentures" and "Description of
Exchange Guarantee." In addition, the Company does not expect that the Trust
will file reports, proxy statements and other information under the Exchange Act
with the Commission.
The Company and the Trust have filed with the Commission a Registration
Statement on Form S-4 (together with all amendments, exhibits, annexes and
schedules thereto, the "Registration Statement") pursuant to the Securities Act,
and the rules and regulations promulgated thereunder, with respect to the
securities being offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company, the Trust and the securities
offered hereby, reference is made to the Registration Statement, including the
exhibits filed as a part thereof and otherwise incorporated therein. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are necessarily summaries of the material elements of such
contract, agreement or document, and with respect to each contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to such exhibit for a more complete description of the matter involved.
Each such statement shall be deemed qualified in its entirety by such reference.
Copies of the Registration Statement and the exhibits may be inspected, without
charge, at the offices of the Commission, or obtained at prescribed rates from
the Public Reference Section of the Commission at the address set forth above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company
pursuant to the Exchange Act are incorporated by reference in this Prospectus
and made a part hereof:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997; and
(c) the Company's Proxy Statement dated April 17, 1997 in connection
with the Company's Annual Meeting of Stockholders in 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the Offering shall be deemed to be incorporated by reference
herein 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 is also incorporated or deemed to be
incorporated by reference herein modifies, supersedes or replaces 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 any person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents which have been incorporated by reference in this
Prospectus, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the documents so incorporated. Any
such request should be directed to Interpool, Inc., 211 College Road East,
Princeton, New Jersey, 08540, Attention: Investor Relations. Telephone requests
may be directed to (609) 452-8900.
FORWARD LOOKING STATEMENTS
This Prospectus, including certain information incorporated by reference
herein, contains certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in such forward-looking
statements, including in particular the risks and uncertainties described under
"Risk Factors." See also "The Company," "Summary Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (incorporated by reference). Prospective investors are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere or incorporated by reference in this Prospectus. Unless the context
otherwise requires, all references herein to the "Trust" are to Interpool
Capital Trust and all references herein to the "Company" or "Interpool" include
Interpool, Inc. and its subsidiaries.
THE COMPANY
Interpool is one of the world's leading lessors of intermodal dry freight
standard containers and is the second largest lessor of intermodal container
chassis in the United States. At December 31, 1996, the Company's container
fleet totaled approximately 301,000 twenty-foot equivalent units ("TEUs"), the
industry standard measure of dimension for containers used in international
trade, and its chassis fleet totaled approximately 57,000 chassis. The Company
leases its containers and chassis to over 200 customers, including nearly all of
the world's 20 largest international container shipping lines.
The Company focuses on leasing dry freight standard containers and
container chassis on a long-term basis in order to achieve high utilization of
its equipment and stable and predictable earnings. From 1991 through 1994, the
combined utilization rate of the Company's container and chassis fleets averaged
at least 90%. At the end of 1995 and 1996, the combined utilization rate of the
Company's container and chassis fleets was approximately 97%. Substantially all
of the Company's newly acquired equipment is leased on a long-term basis, and
approximately 91% of its total equipment fleet is currently leased on this
basis. The remainder of the Company's equipment is leased under short-term
agreements to satisfy customers' peak or seasonal requirements, generally at
higher rates than under long-term leases. The Company concentrates on dry
freight standard containers and chassis because such equipment may be more
readily remarketed upon expiration of a lease than specialized equipment. In
financing its equipment acquisitions, the Company generally seeks to meet debt
service requirements from the leasing revenue generated by its equipment.
The Company conducts its container and chassis leasing business through two
subsidiaries, Interpool Limited and Trac Lease, Inc. ("Trac Lease"). Certain
other United States equipment leasing activities are conducted through Interpool
itself. The Company and its predecessors have been involved in the leasing of
containers and chassis since 1968.
The Company leases containers throughout the world, with particular
emphasis on the Pacific Rim. The Company leases chassis to customers for use in
the United States. The Company maintains contact with its customers through a
worldwide network of offices, agents and sales representatives. The Company
believes one of the key factors in its ability to compete effectively has been
the long-standing relationships management has established with most of the
world's large shipping lines. In addition, Interpool relies on its strong credit
rating and low financing costs to maintain its competitive position.
INTERPOOL CAPITAL TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust executed by the Company, as Sponsor, Delaware
Trust Capital Management, Inc., as Delaware Trustee, and the three individual
Regular Trustees named therein, and (ii) the filing of a certificate of trust
with the Delaware Secretary of State on November 25, 1996. The Trust's business
and affairs will be conducted pursuant to an amended and restated declaration of
trust by the Issuer Trustees: IBJ Schroder Bank & Trust Company, as Property
Trustee, Delaware Trust Capital Management, Inc., as Delaware Trustee, and the
three individual Regular Trustees, who are employees or officers of the Company.
The Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures issued by the Company, (iii) making
Distributions to holders of the Trust Securities and (iv) engaging in only those
other activities necessary, advisable or incidental thereto. Under no
circumstances may the Trust undertake or engage in any business activities. The
Junior Subordinated Debentures will be the sole assets of the Trust, and
payments under the Junior Subordinated Debentures will be the sole revenues of
the Trust. All of the Common Securities will be owned by the Company.
3
<PAGE> 9
THE EXCHANGE OFFER
The Exchange Offer......... The Trust and the Company are hereby offering to
exchange $1,000 liquidation amount of Exchange
Capital Securities for each $1,000 liquidation
amount of Private Capital Securities that are
properly tendered and accepted. Private Capital
Securities may be tendered for exchange in whole of
in part in a Liquidation Amount of $100,000 (100
Capital Securities) or any integral multiple of
$1,000 (one Capital Security) in excess thereof.
The Trust and the Company will issue Exchange
Capital Securities on or promptly after the
Expiration Date. As of the date hereof, $75,000,000
aggregate principal amount of Private Capital
Securities are outstanding. See "The Exchange
Offer -- Purpose of the Exchange Offer."
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Trust and the Company believe
that the Exchange Capital Securities issued
pursuant to the Exchange Offer in exchange for
Private Capital Securities may be offered for
resale, resold and otherwise transferred by a
holder thereof (other than (i) an "affiliate" of
the Trust or the Company within the meaning of Rule
405 under the Securities Act, (ii) a broker-dealer
who acquired Private Capital Securities directly
from the Trust or the Company to resell pursuant to
Rule 144A or any other available exemption under
the Securities Act or (iii) a broker-dealer who
acquired Private Capital Securities as a result of
market making or other trading activities), without
compliance with the registration and prospectus
delivery requirements of the Securities Act;
provided that the holder is acquiring Exchange
Capital Securities in the ordinary course of its
business and is not participating, and has no
arrangement or understanding with any person to
participate, in the distribution of the Exchange
Capital Securities. Holders of Private Capital
Securities wishing to accept the Exchange Offer
must represent to the Trust and the Company, as
required by the Registration Rights Agreement, that
such conditions have been met. The Trust and the
Company believe that none of the registered holders
of the Private Capital Securities is an affiliate
(as such term is defined in Rule 405 under the
Securities Act) of the Trust or the Company.
Each broker-dealer that receives Exchange Capital
Securities for its own account in exchange for
Private Capital Securities must acknowledge that it
will deliver a prospectus in connection with any
resale of such Exchange Capital Securities. The
Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales
of Exchange Capital Securities received in exchange
for Private Capital Securities, where such Private
Capital Securities were acquired by such
broker-dealer as a result of market-making or other
trading activities. The Trust and the Company have
agreed to make this Prospectus (as it may be
amended or supplemented) available to any
broker-dealer, upon request, for use in connection
with any such resale, for a period of one year
after the Registration Statement is declared
effective by the Commission or until such earlier
date on which all the Exchange Capital Securities
are freely tradeable. However, any broker-dealer
who acquired the Private Capital Securities
directly from the Trust or the Company other than
as a result of market-making activities
4
<PAGE> 10
or ordinary trading activities may not fulfill its
prospectus delivery requirements with this
Prospectus, but must comply with the registration
and prospectus delivery requirements of the
Securities Act. See "The Exchange Offer -- Resale
of the Exchange Capital Securities."
Registration Rights
Agreement.................. The Private Capital Securities were sold by the
Trust on January 27, 1997 to Merrill Lynch & Co.
Inc., Oppenheimer & Co., Inc. and Smith Barney Inc.
(the "Initial Purchasers") pursuant to a Purchase
Agreement, dated January 22, 1997, by and between
the Trust and the Initial Purchasers (the "Purchase
Agreement") at a purchase price of $1,000 per
Capital Security. Pursuant to the Purchase
Agreement, the Trust, the Company and the Initial
Purchasers entered into a Registration Rights
Agreement, dated as of January 27, 1997 (the
"Registration Rights Agreement"), which grants the
holders of the Private Capital Securities certain
exchange and registration rights. The Exchange
Offer is intended to satisfy such rights, which
will terminate upon the consummation of the
Exchange Offer except under certain limited
circumstances. See "The Exchange
Offer -- Termination of Certain Rights."
Holders of Private Capital Securities who do not
tender their Private Capital Securities in the
Exchange Offer will continue to hold such Private
Capital Securities and will be entitled to all the
rights and limitations applicable thereto under the
Declaration. All untendered, and tendered but not
unaccepted Private Capital Securities will continue
to be subject to the restrictions on transfer
provided for in the Private Capital Securities and
the Declaration. To the extent that Private Capital
Securities are tendered and accepted in the
Exchange Offer, the trading market, if any, for the
Private Capital Securities could be adversely
affected.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on September 2, 1997, unless the
Exchange Offer is extended by the Trust and the
Company, in their sole discretion, in which case
the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer -- Expiration
Date; Extensions; Amendments."
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions that may be waived by the Company and
the Trust. The Exchange Offer is not conditioned
upon any minimum Liquidation Amount of Private
Capital Securities being tendered for exchange. See
"The Exchange Offer -- Conditions."
Procedures for Tendering
Private Capital
Securities............... Each Holder of Private Capital Securities wishing
to accept the Exchange Offer must complete, sign
and date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with such Private Capital
Securities and any other required documentation to
IBJ Schroder Bank & Trust Company, as exchange
agent (the "Exchange Agent") at its address set
forth herein. By executing the Letter of
Transmittal, the holder will represent to and agree
with the Trust and the Company that, among other
things, (i) the Exchange Capital Securities to be
acquired by such holder of
5
<PAGE> 11
Private Capital Securities in connection with the
Exchange Offer are being acquired by such holder in
the ordinary course of its business, (ii) such
holder is not currently participating and has no
arrangement or understanding with any person to
participate in a distribution of the Exchange
Capital Securities, (iii) if such holder is a
broker-dealer registered under the Exchange Act or
is participating in the Exchange Offer for the
purposes of distributing the Exchange Capital
Securities, such holder will comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with a
secondary resale transaction of the Exchange
Capital Securities acquired by such person and
cannot rely on the position of the staff of the
Commission set forth in no-action letters (see "The
Exchange Offer -- Resale of Exchange Capital
Securities"), (iv) such holder understands that a
secondary resale transaction described in clause
(iii) above and any resales of Exchange Capital
Securities obtained by such holder in exchange for
Private Capital Securities acquired by such holder
directly from the Trust or the Company should be
covered by an effective registration statement
containing the selling securityholder information
required by Item 507 of Regulation S-K of the
Commission and (v) such holder is not an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Trust or the Company. If the
holder is a broker-dealer that will receive
Exchange Capital Securities for its own account in
exchange for Private Capital Securities that were
acquired as a result of market-making activities or
other trading activities, such holder will be
required to acknowledge in the Letter of
Transmittal that such holder will deliver a
prospectus in connection with any resale of such
Exchange Capital Securities; however, by so
acknowledging and by delivering a prospectus, such
holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities
Act. See "The Exchange Offer -- Procedures for
Tendering."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Private Capital
Securities are registered in the name of a broker,
commercial bank, trust company or other nominee and
who wishes to tender such Private Capital
Securities in the Exchange Offer should contact
such registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering such owner's Private
Capital Securities, either make appropriate
arrangements to register ownership of the Private
Capital Securities in such owner's name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may
take considerable time and may not be able to be
completed prior to the Expiration Date. See "The
Exchange Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures................. Holders of Private Capital Securities who wish to
tender their Private Capital Securities and whose
Private Capital Securities are not immediately
available or who cannot deliver their Private
Capital Securities, the Letter of Transmittal or
any other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Private Capital
Securities according to the guaranteed delivery
procedures set forth under "The Exchange
Offer -- Guaranteed Delivery Procedures."
6
<PAGE> 12
Acceptance of the Private
Securities and Delivery
of the
Exchange Capital
Securities............... Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Trust and the
Company will accept for exchange any and all
Private Capital Securities that are properly
tendered in the Exchange Offer prior to the
Expiration Date. The Exchange Capital Securities
issued pursuant to the Exchange Offer will be
delivered on the earliest practicable date
following the Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
Withdrawal Rights.......... Tenders of Private Capital Securities may be
withdrawn at any time prior to the Expiration Date.
See "The Exchange Offer -- Withdrawal of Tenders."
Certain Federal Income Tax
Considerations........... For a discussion of certain material federal income
tax considerations relating to the exchange of the
Exchange Capital Securities for the Private Capital
Securities, see "Certain Federal Income Tax
Considerations."
Exchange Agent............. IBJ Schroder Bank & Trust Company is serving as the
Exchange Agent in connection with the Exchange
Offer.
Use of Proceeds............ Neither the Trust not the Company will receive any
cash proceeds from the issuance of the Exchange
Capital Securities offered hereby. See "Use of
Proceeds."
Risk Factors............... Investors should carefully consider the risk
factors relating to the Company and the Exchange
Offer described on pages 9 through 14 of this
Prospectus.
TERMS OF THE EXCHANGE CAPITAL SECURITIES
The Exchange Offer applies to $75,000,000 aggregate principal amount of the
Private Capital Securities. The form and terms of the Exchange Capital
Securities are substantially identical in all respects (including principal
amount, interest rate, maturity and ranking) to the form and terms of the
Private Capital Securities, except that (i) the Exchange Capital Securities will
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof (ii) the Exchange Capital Securities
will not contain the $100,000 minimum liquidation amount transfer restriction,
(iii) the Exchange Capital Securities will not provide for payment of additional
distributions thereon, (iv) the Exchange Junior Subordinated Debentures will not
contain the $100,000 minimum liquidation amount transfer restriction, (v) the
Exchange Junior Subordinated Debentures will not provide for payment of
liquidated damages thereon and (vi) holders of the Exchange Capital Securities
will not be entitled to certain rights of holders of the Private Capital
Securities under the Registration Rights Agreement, which rights will terminate
upon consummation of the Exchange Offer. The Exchange Capital Securities will
evidence the same obligations as the Private Capital Securities and will be
issued pursuant to, and entitled to the benefits of, the Declaration and the
Indenture governing the Private Capital Securities. The Exchange Offer is being
made to satisfy the obligations of the Trust and the Company under the
Registration Rights Agreement relating to the Private Capital Securities. For
further information and for definitions of certain capitalized terms used below,
see "The Exchange Offer" and "Description of the Exchange Capital Securities."
Securities Offered......... 75,000 9 7/8% Exchange Capital Securities
(Liquidation Amount $1,000 per Capital Security).
Distribution Dates......... February 15 and August 15 of each year, commencing
February 15, 1998.
7
<PAGE> 13
Extension Periods.......... Distributions on Exchange Capital Securities will
be deferred for the duration of any Extension
Period elected by the Company with respect to the
payment of interest on the Junior Subordinated
Debentures. No Extension Period will exceed 10
consecutive semi-annual periods or extend beyond
the Stated Maturity Date. See "Description of
Exchange Junior Subordinated Debentures -- Option
to Extend Interest Payment Date" and "Certain
Federal Income Tax Considerations -- Interest
Income and Original Issue Discount."
Ranking.................... The Exchange Capital Securities will rank pari
passu, and payments thereon will be made pro rata,
with the Common Securities except as described
under "Description of Exchange Capital
Securities -- Subordination of Common Securities."
The Junior Subordinated Debentures will rank pari
passu with all other junior subordinated debentures
that may be issued by the Company ("Other
Debentures"), which will be issued and sold (if at
all) to other trusts that may be established by the
Company (if any), in each case similar to the Trust
("Other Trusts"), and will constitute unsecured
obligations of the Company and will rank
subordinate and junior in right of payment to all
Senior Indebtedness to the extent and in the manner
set forth in the Indenture. See "Description of
Exchange Junior Subordinated Debentures." The
Exchange Guarantee will rank pari passu with all
other guarantees (if any) that may be issued by the
Company with respect to capital securities or
preferred securities (if any) issued by Other
Trusts ("Other Guarantees") and will constitute an
unsecured obligation of the Company and will rank
subordinate and junior in right of payment to all
Senior Indebtedness to the extent and in the manner
set forth in the Exchange Guarantee. See
"Description of Exchange Guarantee." At December
31, 1996, the Company's Senior Indebtedness totaled
$602.7 million.
Redemption................. The Trust Securities will be subject to mandatory
redemption in a Like Amount, (i) in whole but not
in part, on the Stated Maturity Date upon repayment
of the Junior Subordinated Debentures, (ii) in
whole but not in part, at any time prior to
February 15, 2007, contemporaneously with the
optional prepayment of the Junior Subordinated
Debentures by the Company upon the occurrence and
continuation of a Special Event and (iii) in whole
or in part, on or after February 15, 2007,
contemporaneously with the optional prepayment by
the Company of the Junior Subordinated Debentures,
in each case at the applicable Redemption Price.
See "Description of Capital
Securities -- Redemption."
Ratings.................... The Capital Securities will be rated "BBB" by Fitch
Investors Service, L.P., "BBB-" by Duff & Phelps
Ratings Corporation, "BB+" by Standard & Poor's
Ratings Services and "ba2" by Moody's Investors
Service, Inc.
Absence of Market for the
Exchange Capital
Securities............... There is currently no market for the Exchange
Capital Securities. Although the Initial Purchasers
have informed the Trust and the Company that they
each currently intend to make a market in the
Exchange Capital Securities, the Initial Purchasers
are not obligated to do so, and any such market
making may be discontinued at any time without
notice. Accordingly, there can be no assurance as
to the development or liquidity of any market for
the Exchange Capital Securities. The Trust and the
Company have not yet determined whether they will
apply to list the Capital Securities on the New
York Stock Exchange. See "Plan of Distribution."
8
<PAGE> 14
RISK FACTORS
Prospective investors should carefully review the information contained
elsewhere in this Prospectus and should particularly consider the following
matters in connection with the Exchange Offer and the Exchange Capital
Securities offered hereby.
RISK FACTORS RELATING TO THE EXCHANGE CAPITAL SECURITIES
Ranking of Subordinated Obligations Under the Exchange Guarantee and
the Exchange Junior Subordinated Debentures
The obligations of the Company under the Exchange Guarantee issued by it
for the benefit of holders of Exchange Capital Securities, as well as under the
Junior Subordinated Debentures, will be unsecured, will rank subordinate and
junior in right of payment to all present and future Senior Indebtedness of the
Company and will rank pari passu with obligations to or rights of the Company's
other general unsecured creditors, except that, in the case of a bankruptcy or
insolvency proceeding, the Company's obligations under the Guarantee will rank
subordinate and junior in right of payment to all liabilities (other than Other
Guarantees) of the Company. As of December 31, 1996, Senior Indebtedness of the
Company aggregated $602.7 million. The Company's operations are largely
conducted by its subsidiaries. The right of the Company to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the Capital
Securities to benefit indirectly from such distribution) is subject to the prior
claims of creditors of that subsidiary, except to the extent that the Company
may itself be recognized as a creditor of that subsidiary. At December 31, 1996,
such subsidiaries had total indebtedness to third parties of $431.6 million
(over 95% of which was included in Senior Indebtedness of the Company at that
date). Accordingly, the Junior Subordinated Debentures, as well as the Company's
obligations under the Guarantee, will be effectively subordinated to all
existing and future liabilities of the Company's subsidiaries. There are no
terms in the Capital Securities, the Junior Subordinated Debentures or the
Guarantee that limit the Company's ability to incur additional indebtedness,
including indebtedness that ranks senior to or pari passu with the Junior
Subordinated Debentures and the Guarantee, or the ability of its subsidiaries to
incur additional indebtedness. See "Description of Exchange
Securities -- Description of the Guarantee -- Status of the Guarantee" and
"-- Description of Exchange Junior Subordinated Debentures -- Subordination."
The Trust's ability to make Distributions and other payments on the Capital
Securities is solely dependent upon the Company making interest and other
payments on the Junior Subordinated Debentures as and when required.
Accordingly, if the Company were not to make distributions or other payments on
the Junior Subordinated Debentures for any reason, including as a result of a
default or as a result of the Company's election to defer the payment of
interest on the Junior Subordinated Debentures by extending the interest period
on the Junior Subordinated Debentures, the Trust would lack available funds for
the payment of Distributions or amounts payable on redemption of the Capital
Securities or otherwise, and therefore would not make payments on the Trust
Securities.
Option to Extend Interest Payment Period; Tax Considerations
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company will have the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity Date. Upon any such deferral, semi-annual
Distributions on the Capital Securities by the Trust will be deferred (and the
amount of Distributions to which holders of the Capital Securities are entitled
will accumulate additional Distributions thereon at the rate of 9 7/8% per
annum, compounded semi-annually), from the relevant payment date for such
Distributions during any such Extension Period.
The Company may extend any existing Extension Period, provided that such
extension does not cause such Extension Period to exceed 10 consecutive
semi-annual periods or to extend beyond the Stated Maturity Date. Upon the
termination of any Extension Period and the payment of all interest then accrued
and unpaid on the Junior Subordinated Debentures (together with interest thereon
at the annual rate of 9 7/8%,
9
<PAGE> 15
compounded semi-annually, to the extent permitted by applicable law), the
Company may elect to begin a new Extension Period, subject to the above
requirements. There is no limitation on the number of times that the Company may
elect to begin an Extension Period. See "Description of Capital
Securities -- Distributions" and "Description of Junior Subordinated
Debentures -- Option to Extend Interest Payment Date."
Should the Company exercise its right to defer payments of interest on the
Junior Subordinated Debentures, each holder of Trust Securities will be required
to accrue income (as original issue discount ("OID")) in respect of the deferred
stated interest allocable to its Trust Securities for United States federal
income tax purposes, which will be allocated but not distributed to holders of
Trust Securities. As a result, during an Extension Period, each holder of
Capital Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash related
to such income from the Trust if the holder disposes of the Capital Securities
prior to the record date for the payment of Distributions thereafter. See
"Certain Federal Income Tax Considerations -- Interest Income and Original Issue
Discount" and "-- Disposition of Capital Securities."
Should the Company elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures, the market price of the Capital
Securities is likely to be affected. A holder that disposes of its Capital
Securities during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its Capital
Securities. In addition, the mere existence of the Company's right to defer
payments of interest on the Junior Subordinated Debentures may cause the market
price of the Capital Securities to be more volatile than the market prices of
other securities that are not subject to such deferrals.
Special Event Redemption or Distribution
Upon the occurrence and continuation of a Tax Event or an Investment
Company Act Event (each as defined herein and each, a "Special Event"), the
Company will have the right to prepay the Junior Subordinated Debentures in
whole (but not in part) prior to February 15, 2007 at the Special Event
Prepayment Price within 90 days following the occurrence of such Special Event
and therefore cause a mandatory redemption of the Capital Securities at the
Special Event Redemption Price. The Company also will have the right at any time
to terminate the Trust and, after satisfaction of claims of creditors as
provided by applicable law, to cause the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities, subject to certain
conditions. See "Description of Exchange Securities -- Description of Exchange
Capital Securities -- Redemption" and "-- Liquidation of the Trust and
Distribution of Exchange Junior Subordinated Debentures."
Possible Tax Law Changes Affecting the Capital Securities
President Clinton's fiscal 1998 budget proposal contained provisions which
if enacted would treat as equity for United States federal income tax purposes
instruments that have a maximum term of more than 15 years and that are not
shown as indebtedness on the balance sheet of the issuer. These provisions would
apply to instruments issued after the date of first committee action. Since the
exchange of Private Securities for the Exchange Securities should not be a
taxable event, it is not anticipated that the Junior Subordinated Debentures
would be treated as reissued and that such provisions, as currently proposed,
would apply to the Junior Subordinated Debentures. However, there can be no
assurance that any legislation implementing these provisions or that future
proposals or legislation will not adversely affect the ability of the Company to
deduct the interest payable on the Junior Subordinated Debentures. Such a change
in the tax law could give rise to a Tax Event (as defined under "Description of
Exchange Junior Subordinated Debentures -- Special Event Prepayment"), which
would permit the Company to cause a redemption of the Trust Securities at the
Special Event Redemption Price by electing to prepay the Junior Subordinated
Debentures at the Special Event Prepayment Price. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Redemption,"
"-- Description of Exchange Junior Subordinated Debentures -- Special Event
Prepayment" and "Certain Federal Income Tax Considerations -- Proposed Tax
Legislation."
10
<PAGE> 16
Possible Adverse Effect on Market Prices
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures distributed to the holders of Capital Securities
if a termination of the Trust were to occur. Accordingly, the Capital Securities
or the Junior Subordinated Debentures may trade at a discount from the price
that an investor paid to purchase the Capital Securities offered hereby. Because
holders of Capital Securities may receive Junior Subordinated Debentures in
liquidation of the Trust and because Distributions are otherwise limited to
payments on the Junior Subordinated Debentures, prospective purchasers of
Capital Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein. See "Description
of Exchange Securities -- Description of Exchange Junior Subordinated
Debentures."
Rights Under the Guarantee
IBJ Schroder Bank & Trust Company will act as Guarantee Trustee and will
hold the Guarantee for the benefit of the holders of the Capital Securities. IBJ
Schroder Bank & Trust Company will also act as Property Trustee and as Debenture
Trustee under the Indenture. Delaware Trust Capital Management, Inc. will act as
Delaware Trustee under the Declaration. The Guarantee will guarantee to the
holders of the Capital Securities the following payments, to the extent not paid
by the Trust: (i) any accumulated and unpaid Distributions required to be paid
on the Capital Securities, to the extent that the Trust has funds on hand
legally available therefor, (ii) the applicable Redemption Price with respect to
any Capital Securities called for redemption, to the extent that the Trust has
funds on hand legally available therefor, and (iii) upon a voluntary or
involuntary termination and liquidation of the Trust (unless the Junior
Subordinated Debentures are distributed to holders of the Capital Securities),
the lesser of (a) the aggregate of the Liquidation Amount and all accumulated
and unpaid Distributions to the date of payment, to the extent that the Trust
has funds on hand legally available therefor on such date and (b) the amount of
assets of the Trust remaining available for distribution to holders of the
Capital Securities upon a termination and liquidation of the Trust on such date.
The holders of a majority in Liquidation Amount of the Capital Securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee in respect of the Guarantee or
to direct the exercise of any trust power conferred upon the Guarantee Trustee.
Any holder of the Capital Securities may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. If the Company defaults on its obligation to pay amounts
payable under the Junior Subordinated Debentures, the Trust will not have
sufficient funds for the payment of Distributions or amounts payable on
redemption of the Capital Securities or otherwise, and, in such event, holders
of the Capital Securities will not be able to rely upon the Guarantee for
payment of such amounts. Instead, in the event a Debenture Event of Default
shall have occurred and be continuing and such event is attributable to the
failure of the Company to pay principal of or premium, if any, or interest on
the Junior Subordinated Debentures on the payment date on which such payment is
due and payable, then a holder of Capital Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or premium, if any, or interest on such Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Capital Securities of such holder (a "Direct Action").
Notwithstanding any payments made to a holder of Capital Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of and premium, if any, and interest on the Junior
Subordinated Debentures, and the Company shall be subrogated to the rights of
the holder of such Capital Securities with respect to payments on the Capital
Securities to the extent of any payments made by the Company to such holder in
any Direct Action. Except as described herein, holders of Capital Securities
will not be able to exercise directly any other remedy available to the holders
of the Junior Subordinated Debentures or to assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of Exchange
Securities -- Description of Exchange Junior Subordinated
Debentures -- Enforcement of Certain Rights by Holders of Exchange Capital
Securities" and "-- Debenture Events of Default" and "-- Description of Exchange
Guarantee." The Declaration will provide that each holder of Capital Securities
by acceptance thereof agrees to the provisions of the Indenture.
11
<PAGE> 17
Limited Voting Rights
Holders of Capital Securities generally will have limited voting rights
relating only to the modification of the terms of the Capital Securities, the
termination or liquidation of the Trust, and the exercise of the Trust's rights
as holder of the Junior Subordinated Debentures. Holders of Capital Securities
will not be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of, the Issuer Trustees, which voting rights are vested
exclusively in the holder of the Common Securities, except as described under
"Description of Exchange Securities -- Description of Exchange Capital
Securities -- Removal of Issuer Trustees." See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Voting Rights;
Amendment of the Declaration."
Consequences of a Failure to Exchange Private Capital Securities
The Private Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain other conditions and restrictions.
Private Capital Securities which remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Private Capital Securities which remain outstanding will not be entitled to any
rights to have such Private Capital Securities registered under the Securities
Act or to any similar rights under the Registration Rights Agreement (subject to
certain limited exceptions). The Company and the Trust do not intend to register
under the Securities Act any Private Capital Securities which remain outstanding
after consummation of the Exchange Offer (subject to such limited exceptions, if
applicable). To the extent that Private Capital Securities are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered Private
Capital Securities could be adversely affected.
The Exchange Capital Securities and any Private Capital Securities which
remain outstanding after consummation of the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage is outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Declaration. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Voting Rights;
Amendment of the Declaration."
The Private Capital Securities provide, among other things, that, if the
Exchange Offer has not been consummated within 45 days of July 25, 1997,
additional distributions will be payable on the Private Capital Securities at a
rate of 0.25% per annum until the Exchange Offer is consummated. Upon
consummation of the Exchange Offer, holders of Private Capital Securities will
not be entitled to any additional distributions thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Description of Private Capital Securities."
Absence of Public Market
The Private Capital Securities were issued to, and the Company believes
such securities are currently owned by, a relatively small number of beneficial
owners. The Private Capital Securities have not been registered under the
Securities Act and will be subject to restrictions on transferability if they
are not exchanged for the Exchange Capital Securities. Although the Exchange
Capital Securities may be resold or otherwise transferred by the holders (who
are not affiliates of the Company or the Trust) without compliance with the
registration requirements under the Securities Act, they will constitute a new
issue of securities with no established trading market. Private Capital
Securities may be transferred by the holders thereof only in blocks having a
Liquidation Amount of not less than $100,000 (100 Private Capital Securities).
Exchange Capital Securities may be transferred by the holders thereof in blocks
having a Liquidation Amount of $1,000 (one Exchange Capital Security) or
integral multiples thereof. The Company and the Trust have been advised by the
Initial Purchasers that the Initial Purchasers presently intend to make a market
in the Exchange Capital Securities. However, the Initial Purchasers are not
obligated to do so and any market-making activity with respect to the Exchange
Capital Securities may be discontinued at any time without notice. In addition,
12
<PAGE> 18
such market-making activity will be subject to the limits imposed by the
Securities Act and the Exchange Act and may be limited during the Exchange
Offer. Accordingly, no assurance can be given that an active public or other
market will develop for the Exchange Capital Securities or the Private Capital
Securities. If an active public market does not develop, the market price and
liquidity of the Exchange Capital Securities may be adversely affected.
If a public trading market develops for the Exchange Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the Company's results and the market for
similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the Exchange Capital Securities may trade at a discount.
Notwithstanding the registration of the Exchange Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Company or the Trust may publicly offer for sale or
resell the Exchange Capital Securities only in compliance with the provisions of
Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Private Capital Securities, where such Private Capital
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
See "Plan of Distribution."
Exchange Offer Procedure
Issuance of the Exchange Capital Securities in exchange for Private Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Trust of such Private Capital Securities, a properly completed
and duly executed Letter of Transmittal and all other required documents.
Therefore, holders of the Private Capital Securities desiring to tender such
Private Capital Securities in exchange for Exchange Capital Securities should
allow sufficient time to ensure timely delivery. Neither the Company nor the
Trust is under any duty to give notification of defects or irregularities with
respect to the tenders of Private Capital Securities for exchange.
RISK FACTORS RELATING TO THE COMPANY
Cyclicality of World Trade
The demand for the Company's containers and chassis primarily depends upon
levels of world trade of finished goods and component parts. Recessionary
business cycles, as well as political conditions, the status of trade agreements
and international conflicts, can have an impact on the operating results of the
Company. The demand for leased chassis also depends upon domestic economic
conditions and import-export volumes. In addition, operating costs such as
storage and repair and maintenance costs increase as utilization decreases. When
the volume of world trade decreases, the Company's business of leasing
containers and chassis may be adversely affected as the demand for such
equipment is reduced. Suppliers of leased containers and chassis, such as the
Company, are dependent upon decisions by shipping lines and other transportation
companies to lease rather than buy their equipment. Most of these factors are
outside the control of the Company. A substantial decline in world trade may
also adversely affect the Company's customers, leading to possible defaults and
the return of equipment prior to the end of a lease term. The Company expects
that the maritime container industry would be adversely affected during an
economic downturn.
Competition
The transportation equipment leasing industry is highly competitive. The
Company competes with numerous domestic and foreign leasing companies, some of
which are much larger than the Company, or are divisions of much larger
companies, and have larger equipment fleets and greater financial resources than
the Company. In addition, if the available supply of intermodal transportation
equipment were to increase significantly as a result of, among other factors,
new companies entering the business of leasing and selling such equipment, the
Company's competitive position could be adversely affected.
13
<PAGE> 19
Eligibility for Tax Benefits under U.S.-Barbados Tax Treaty
The Company currently receives certain tax benefits under an income tax
convention (the "Tax Convention") between the United States and Barbados, the
jurisdiction in which the Company's subsidiary Interpool Limited is
incorporated. There can be no assurance that at some future date the Tax
Convention will not be modified in a manner adverse to the Company or repealed
in its entirety, nor can there be any assurance that the Company will continue
to be eligible for such tax benefits.
Risk of Manufacturing in China
China is currently the largest container producing nation in the world and
the Company currently purchases a substantial majority of its containers from
manufacturers in China. In the event that it were to become more expensive for
the Company to procure containers in China or to transport these containers at a
low cost from China to the locations where needed by customers, either because
of increased tariffs imposed by the United States or other governments or for
any other reason, the Company would have to seek alternative sources of supply.
Although the Company believes it has strong relationships with many
manufacturers throughout the world, there can be no assurance that upon the
occurrence of such an event the Company would be able to make alternative
arrangements quickly to meet its equipment needs, nor can there be any assurance
that such alternative arrangements would not increase the costs to the Company.
Volatility of Residual Value of Equipment
Although the Company's operating results primarily depend upon equipment
leasing, the Company's profitability is also affected by the residual values
(either for sale or continued operation) of its containers and chassis upon
expiration of its leases. These values, which can vary substantially, depend
upon, among other factors, the maintenance standards observed by lessees, the
need for refurbishment, the ability of the Company to remarket equipment, the
cost of comparable new equipment, the availability of used equipment, rates of
inflation, market conditions, the costs of materials and labor and the
obsolescence of the equipment. Most of these factors are outside the control of
the Company.
Control of the Company
Currently, approximately 65% of the Company's common stock is owned,
directly or indirectly, in the aggregate by Warren L. Serenbetz, Martin Tuchman,
Raoul J. Witteveen and Arthur L. Burns, each of whom is a director of and/or
either an executive officer of or a consultant to the Company, and certain
members of their immediate families. Such individuals, either directly or
indirectly, have the ability to elect all of the members of the Board of
Directors of the Company and to control the outcome of all matters submitted to
a vote of the Company's stockholders. Messrs. Serenbetz, Tuchman, Witteveen and
Burns, as well as certain family members and affiliated entities, are parties to
a Stockholders Agreement that imposes certain restrictions on their ability to
dispose of their shares of the Company's common stock and requires them to vote
for the re-election of Messrs. Serenbetz, Tuchman, Witteveen and Burns as
directors of the Company. In addition, the Company's Restated Certificate of
Incorporation and Restated Bylaws contain provisions that may discourage
acquisition bids for the Company.
Dependence Upon Management
The Company's growth and continued profitability are dependent upon, among
other things, the abilities, experience and continued service of certain members
of its senior management, particularly Martin Tuchman, its Chairman and Chief
Executive Officer, and Raoul J. Witteveen, its President, Chief Operating
Officer and Chief Financial Officer. Each of Messrs. Tuchman and Witteveen
holds, either directly or indirectly, a substantial equity interest in the
Company and also is a director of the Company. There can be no assurance,
however, that the Company will be able to retain the services of either of
Messrs. Tuchman or Witteveen. The loss of either such individual could adversely
affect the Company's business and prospects.
14
<PAGE> 20
THE COMPANY
Interpool is one of the world's leading lessors of intermodal dry freight
standard containers and is the second largest lessor of intermodal container
chassis in the United States. At December 31, 1996, the Company's container
fleet totaled approximately 301,000 twenty-foot equivalent units ("TEUs"), the
industry standard measure of dimension for containers used in international
trade, and its chassis fleet totaled approximately 57,000 chassis. The Company
leases its containers and chassis to over 200 customers, including nearly all of
the world's 20 largest international container shipping lines.
The efficiencies and cost savings inherent in intermodal transportation of
containerized cargo have facilitated the dramatic growth of international trade.
Intermodal transportation permits movement of cargo in a standard steel
container by means of a combination of ship, rail and truck without unpacking
and repacking of the contents during transit. The world's dry freight standard
container fleet has grown from fewer than .4 million TEUs in 1970 to
approximately 8.7 million TEUs by mid-1996. During the twelve month period
ending in mid-1996 approximately 1.3 million TEUs were produced, of which 0.4
million have been estimated as replacements of older containers. Concurrently
with this growth of the world's container fleet, the domestic chassis fleet has
grown to accommodate the increased container traffic. Leasing companies have
played a significant role in the growth of intermodal transportation, supplying
approximately half of the world's container and chassis requirements.
The Company focuses on leasing dry freight standard containers and
container chassis on a long-term basis in order to achieve high utilization of
its equipment and stable and predictable earnings. From 1991 through 1994, the
combined utilization rate of the Company's container and chassis fleets averaged
at least 90%. At the end of 1995 and 1996, the combined utilization rate of the
Company's container and chassis fleets was approximately 97%. Substantially all
of the Company's newly acquired equipment is leased on a long-term basis, and
approximately 91% of its total equipment fleet is currently leased on this
basis. The remainder of the Company's equipment is leased under short-term
agreements to satisfy customers' peak or seasonal requirements, generally at
higher rates than under long-term leases. The Company concentrates on dry
freight standard containers and container chassis because such equipment may be
more readily remarketed upon expiration of a lease than specialized equipment.
In financing its equipment acquisitions, the Company generally seeks to meet
debt service requirements from the leasing revenue generated by its equipment.
The Company conducts its container and chassis leasing business through two
subsidiaries, Interpool Limited and Trac Lease, respectively. Certain other
United States equipment leasing activities are conducted through Interpool
itself.
The Company and its predecessors have been involved in the leasing of
containers and chassis since 1968. The Company leases containers throughout the
world, with particular emphasis on the Pacific Rim. The Company leases chassis
to customers for use in the United States. The Company maintains contact with
its customers through a worldwide network of offices, agents and sales
representatives. The Company believes one of the key factors in its ability to
compete effectively has been the long-standing relationships management has
established with most of the world's large shipping lines. In addition,
Interpool relies on its strong credit rating and low financing costs to maintain
its competitive position.
From time to time the Company considers possible acquisitions of
complementary businesses and asset portfolios.
The Company is a Delaware corporation formed in February 1988 with its
principal executive offices located at 211 College Road East, Princeton, New
Jersey 08540. Its telephone number is (609) 452-8900.
15
<PAGE> 21
RECENT DEVELOPMENTS
On July 29, 1997, the Company issued and sold $150 million principal amount
of its 7.35% Notes due 2007 (the "7.35% Notes") to Smith Barney Inc. In
addition, on July 31, 1997, the Company entered into a Purchase Agreement under
which the Company will sell $75 million principal amount of its 7.20% Notes due
2007 (the "7.20% Notes," and together with the 7.35% Notes, the "Senior Notes").
The 7.35% Notes were issued, and the 7.20% Notes will be issued, in a private
transaction exempt from registration under the Securities Act. The sale of the
7.20% Notes is expected to close on August 5, 1997.
The Company used a portion of the net proceeds from the sale of the 7.35%
Notes to repay all outstanding borrowings under the Company's revolving credit
agreement. As of July 15, 1997, outstanding borrowings under the revolving
credit agreement totaled $48.0 million. The Company intends to use the remainder
of the net proceeds from the sale of the 7.35% Notes and the net proceeds from
the sale of the 7.20% Notes for general corporate purposes, which may include
the repayment of other secured indebtedness of the Company and/or its
subsidiaries, the purchase of equipment, acquisitions and/or working capital. As
a result of the sale of the 7.35% Notes and the pending sale of the 7.20% Notes,
the Company's senior debt is expected to increase by approximately $175 million.
The Company may, from time to time, engage in additional capital financings
of a character and in amounts to be determined by the Company in light of its
needs at such time or times and in light of prevailing market conditions. In the
ordinary course of business, the Company purchases equipment and, on a regular
basis, considers acquisition opportunities, although no such acquisitions are
currently pending.
USE OF PROCEEDS
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the Exchange Capital Securities offered hereby. In consideration for
issuing the Exchange Capital Securities in exchange for Private Capital
Securities as described in this Prospectus, the Trust will receive Private
Capital Securities in like Liquidation Amount. The Private Capital Securities
surrendered in exchange for the Exchange Capital Securities will be retired and
canceled.
The proceeds to the Trust (without giving effect to expenses of the
offering payable by the Company) from the offering of the Private Capital
Securities was $75,000,000. All of the proceeds from the sale of Private Capital
Securities was invested by the Trust in the Private Junior Subordinated
Debentures. The Company used $52.9 million of the net proceeds from the sale of
the Private Junior Subordinated Debentures to redeem 509,964 shares of 5 3/4%
Preferred Stock having an aggregate liquidation preference of $51.0 million. The
remaining net proceeds of $20.4 million were invested in interest bearing
accounts and were used to retire indebtedness.
16
<PAGE> 22
RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for the Company
for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS
---------------------------------------------------------------------------- ENDED MARCH 31,
1992 1992 1993 1994 1995 1996 1996 --------------------
-------- --------- -------- -------- -------- -------- --------- 1997 1997
-------- ---------
(ACTUAL) (PRO (ACTUAL) (ACTUAL) (ACTUAL) (ACTUAL) (PRO
(ACTUAL) (PRO
FORMA)(1) FORMA)(2)
(DOLLARS IN THOUSANDS) FORMA)(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges(3)..... 1.8x 1.8x 2.4x 2.2x 1.9x 1.9x 1.7x 1.8x 1.7x
Ratio of earnings to
combined fixed
charges and preferred
stock dividends(4)... 1.8x 1.8x 2.4x 2.2x 1.8x 1.8x 1.7x 1.7x 1.7x
</TABLE>
- ---------------
(1) The 1992 pro forma ratios give effect to (a) the recapitalization of Trac
Lease (effected in July 1992), and (b) the acquisition of Trac Lease and the
minority interest in Interpool Limited (effected in 1993), as if these
transactions had been consummated as of January 1, 1992.
(2) The pro forma ratios give effect to the consummation of the offering of the
Private Capital Securities and to the use by the Company of $52.9 million of
the net proceeds of the issuance of the Junior Subordinated Debentures to
retire 509,964 shares of 5 3/4% Preferred Stock, as if such transactions had
occurred on the first day of the period indicated; the remaining net
proceeds from the sale of the Junior Subordinated Debentures of $20.4
million are treated as if invested in interest bearing accounts earning 5%
per annum. The pro forma ratios do not give effect to the sale of the Senior
Notes described under "Recent Developments."
(3) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before provision for income taxes, extraordinary
items and fixed charges and (ii) fixed charges consist of interest expense
and 75% of rental payments under operating leases (an amount estimated by
management to be the interest component of such rentals).
(4) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, (i) earnings consist of income before
provision for income taxes, extraordinary items and fixed charges and (ii)
fixed charges consist of interest expense and 75% of rental payments under
operating leases (an amount estimated by management to be the interest
component of such rentals). No preferred stock dividends were paid prior to
1995.
17
<PAGE> 23
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company at March 31, 1997, which reflects the consummation of the offering
of the Private Capital Securities and the application of $52.9 million of the
net proceeds to the Company to redeem 509,964 shares of the Company's 5 3/4%
Preferred Stock. The remaining net proceeds of $20.4 million were invested in
interest bearing accounts and were used to retire certain indebtedness. This
table does not give effect to the sale of the Senior Notes described under
"Recent Developments." The table should be read in conjunction with the
Company's consolidated financial statements and notes thereto included in the
documents incorporated by reference herein. See "Incorporation of Certain
Documents by Reference."
<TABLE>
<CAPTION>
AT MARCH 31, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Short-term debt (including current portion of long-term debt and capital
lease obligations)...................................................... $ 73,084
========
Long-term debt:
Senior debt and capital lease obligations (less current portion).......... $524,688
--------
Total long-term debt and capital lease obligations.............. 524,688
--------
Company-obligated mandatorily redeemable preferred securities in
subsidiary grantor trusts (holding solely junior subordinated deferrable
interest debentures of the Company) (75,000 shares 9 7/8% Capital
Securities outstanding, liquidation preference $75,000)(1).............. 75,000
Stockholders' equity:
Preferred stock, par value $0.001 per share, 1,000,000 shares
authorized; none issued............................................. --
Common stock, par value $0.001 per share, 100,000,000 shares
authorized; 27,551,728 shares issued and outstanding................ 28
Additional paid-in capital........................................... 124,046
Retained earnings.................................................... 109,860
Net unrealized gain on marketable securities......................... 465
--------
Total stockholders' equity...................................... 234,399
--------
Total capitalization............................................ $834,087
========
</TABLE>
- ---------------
(1) As described herein, the sole asset of Interpool Capital Trust is the
$77,320,000 aggregate principal amount of the Company's 9 7/8% Junior
Subordinated Deferrable Interest Debentures due February 15, 2027.
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with the
Company's financial statements. The Capital Securities will be presented on the
Company's balance sheet as a separate line item entitled "Company Obligated
Mandatorily Redeemable Preferred Securities in Subsidiary Grantor Trusts." All
future reports of the Company filed with the Commission under the Securities
Exchange Act of 1934 will present the Capital Securities on the consolidated
balance sheet as a separate line item entitled "Company Obligated Mandatorily
Redeemable Preferred Securities in Subsidiary Grantor Trusts (holding solely
junior subordinated deferrable interest debentures of the Company)." The Company
will include in a footnote to its financial statements filed with the Commission
disclosure that the sole assets of the Trust are the Junior Subordinated
Debentures (specifying the principal amount, interest rate, and maturity date of
Junior Subordinated Debentures held). In addition, the Company will include in
an audited footnote to its year-end financial statements, disclosure that (i)
the Trust is wholly-owned; (ii) the sole assets of the Trust are the Junior
Subordinated Debentures (specifying the principal amount, interest rate and
maturity date of the Junior Subordinated Debentures); and (iii) obligations of
the Company under the Junior Subordinated Debentures, the Indenture, the
Guarantee and the back-up obligations, in the aggregate, constitute a full and
unconditional guarantee by the Company of the obligations of the Trust under the
Capital Securities.
18
<PAGE> 24
SELECTED FINANCIAL DATA
The following table sets forth selected historical and pro forma
consolidated financial data for the Company, for the periods and at the dates
indicated. The historical financial data for each of the five years in the
period ended December 31, 1996, and at December 31, 1992, 1993, 1994, 1995 and
1996, have been derived from and are qualified by reference to the historical
consolidated financial statements that have been audited and reported upon by
Arthur Andersen LLP, independent public accountants. The historical financial
data for the three months ended, and at, March 31, 1996 and 1997 have been
derived from the unaudited financial statements of the Company. The historical
financial information for the three months ended, and at, March 31, 1996 and
1997 reflects, in the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the results for the
interim period. This information should be read in conjunction with the
historical consolidated financial statements of the Company and the notes
thereto and the other financial information included elsewhere or incorporated
by reference in this Prospectus. The historical financial information for the
three months ended March 31, 1997 is not necessarily indicative of results for
the full year ending December 31, 1997. For information about the Company's sale
of Senior Notes, see "Recent Developments."
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------------- -----------------
1992 1993 1994 1995(2) 1996(3) 1996 1997
------- ------- ------- -------- -------- ------- -------
PRO
1992 FORMA(1)
------- -------
ACTUAL
-------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................... $41,117 $74,538 $79,526 $92,272 $127,925 $147,148 $35,179 $38,176
Income before extraordinary items........... $10,115 $13,946 $20,004 $24,102 $ 29,545 $ 34,196 $ 6,056 $ 9,094
Income per share before extraordinary items
and premium paid on redemption of
preferred stock in 1997(4)(5):
Primary................................. $ 0.57 $ 0.77 $ 0.86 $ 0.93 $ 1.08 $ 1.21 $ 0.28 $ 0.30
Fully diluted........................... N/A N/A N/A $ 0.87 $ 1.01 $ 1.15 $ 0.27 N/A
Weighted average shares outstanding:
Primary................................. 17,777 18,191 23,180 25,953 26,193 26,726 26,342 27,491
Fully diluted........................... N/A N/A N/A 30,326 30,834 31,820 30,884 N/A
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
PRO FORMA DATA:(6)
Income before extraordinary items................................. $30,396 $ 8,846
Income per share before extraordinary items and premium paid on
redemption of preferred stock in 1997(7)(8)..................... $ 1.16 $ 0.31
Weighted average shares outstanding(8)............................ 28,322 28,714
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------------- AT MARCH 31,
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- ------------
PRO
1992 FORMA(1)
-------- --------
ACTUAL
--------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, short-term investments and
marketable securities......... $ 33,585 $ 29,906 $124,574 $107,398 $ 70,661 $ 70,055 $ 63,724
Total assets.................... 203,509 277,554 435,984 664,792 851,600 939,418 942,974
Total debt and capital lease
obligations(9)................ 149,846 202,737 278,397 482,323 571,102 602,704 597,772
Stockholders' equity............ 34,555 46,850 133,454 156,147 246,690 280,546 234,399
</TABLE>
(footnotes on following page)
19
<PAGE> 25
(Dollars in thousands, except per share amounts)
(1) The 1992 pro forma financial data give effect to (a) the recapitalization of
Trac Lease (effected in July 1992), and (b) the acquisition of Trac Lease
and the minority interest in Interpool Limited (effected in 1993), as if
these transactions had been consummated as of January 1, 1992.
(2) The 1995 income statement data exclude the extraordinary gain of $2,422 net
of taxes resulting from the exchange of $67,436 of the Company's 5 1/4%
Convertible Exchangeable Subordinated Notes due 2018 into shares of the
Company's 5 3/4% Cumulative Convertible Preferred Stock (the "5 3/4%
Preferred Stock").
(3) The 1996 income statement data include a non-cash and non-recurring charge
of $2,392 representing cumulative unpaid dividends of the Company's
subsidiary Trac Lease which resulted from the acquisition of the outstanding
preferred stock of Trac Lease through the issuance of shares of the
Company's 5 3/4% Preferred Stock.
(4) In connection with its initial public offering in May 1993, the Company
ceased to be a Subchapter "S" corporation for federal income tax purposes
and thereafter became subject to federal income taxes. The Company's
financial statements for the years ended December 31, 1991 through 1993
include a pro forma provision for taxes as if the Company had been subject
to federal income taxes for such periods.
(5) Restated to give effect to a three-for-two stock split effective March 27,
1997.
(6) The pro forma information gives effect to the completion of the offering of
the Private Capital Securities and to the use by the Company of $52,871 of
the net proceeds of the issuance of the Junior Subordinated Debentures to
retire 509,964 shares of 5 3/4% Preferred Stock, as if such transactions had
occurred on the first day of the period indicated; the remaining net
proceeds from the sale of the Junior Subordinated Debentures of $20,429 are
treated as if invested in interest bearing accounts earning 5% per annum.
The pro forma information does not give effect to the sale of the Senior
Notes described under "Recent Developments."
(7) Pro forma income per share before extraordinary items and premium paid on
redemption of preferred stock does not reflect a one-time charge of
approximately $0.24 per share which resulted from the excess of the
redemption price of 509,964 shares of 5 3/4% Preferred Stock over the
carrying amount and an extraordinary loss of $0.01 per share on retirement
of debt. The charge on the redemption of preferred stock has been reflected
as a reduction in retained earnings.
(8) Pro forma income per share before extraordinary items and premium paid on
redemption of preferred stock has been determined using the weighted average
shares outstanding on a primary basis. The impact of full dilution on income
per share would not be material.
(9) Debt at December 31, 1993 and 1994 included $60,000 and $67,600,
respectively, of the Company's 5 1/4% Convertible Exchangeable Subordinated
Notes due 2018.
20
<PAGE> 26
INTERPOOL CAPITAL TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, dated as of November 25, 1996, executed by the
Company, as Sponsor, the Delaware Trustee and the Regular Trustees named therein
(the "Initial Declaration"), and (ii) the filing of a certificate of trust with
the Secretary of State of the State of Delaware on November 25, 1996. The
Initial Declaration was replaced by an amended and restated declaration of trust
executed on January 27, 1997 by the Company, as Sponsor, and the Issuer Trustees
(as defined herein) (the "Declaration"). The Trust exists for the exclusive
purposes of (i) issuing and selling the Trust Securities, which represent
beneficial interests in the assets of the Trust, (ii) using the proceeds of the
sale of the Trust Securities to acquire the Junior Subordinated Debentures,
(iii) making Distributions to holders of the Trust Securities and (iv) engaging
in only those other activities necessary, advisable or incidental thereto. Under
no circumstances may the Trust undertake or engage in any business activities.
The Junior Subordinated Debentures will be the sole assets of the Trust and
payments under the Junior Subordinated Debentures will be the sole revenues of
the Trust. All of the Common Securities will be owned directly or indirectly by
the Company. The Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Capital Securities, except that upon the
occurrence and during the continuance of an Event of Default under the
Declaration, the rights of the Company as holder of the Common Securities to
payments in respect of Distributions and payments upon liquidation, redemption
or otherwise will be subordinated and rank junior to the rights of the holders
of the Capital Securities. See "Description of Capital
Securities -- Subordination of Common Securities." The Company acquired Common
Securities in a Liquidation Amount equal to 3% of the total capital of the
Trust. The Trust has a term of 31 years but may terminate earlier as provided in
the Declaration. The Trust's business and affairs will be conducted by its
trustees, each appointed by the Company as holder of the Common Securities. The
trustees of the Trust will be IBJ Schroder Bank & Trust Company, as the Property
Trustee, Delaware Trust Capital Management, Inc., as the Delaware Trustee, and
three Regular Trustees who are employees or officers of the Company. IBJ
Schroder Bank & Trust Company, as Property Trustee, will act as sole indenture
trustee under the Declaration. IBJ Schroder Bank & Trust Company will also act
as Debenture Trustee under the Indenture and Guarantee Trustee under the
Guarantee. See "Description of Guarantee" and "Description of Junior
Subordinated Debentures." The holder of the Common Securities of the Trust or,
if an Event of Default under the Declaration has occurred and is continuing, the
holders of a majority in Liquidation Amount of the Capital Securities, will be
entitled to appoint, remove or replace the Property Trustee and/or the Delaware
Trustee. In no event will the holders of the Capital Securities have the right
to vote to appoint, remove or replace the Regular Trustees; such voting rights
will be vested exclusively in the holder of the Common Securities. The duties
and obligations of each Issuer Trustee are governed by the Declaration. The
Declaration provides that it may be amended without the consent of holders of
the Capital Securities to cure any ambiguity, to correct or supplement
inconsistent provisions in the Declaration or to make any other provisions with
respect to matters or questions arising under the Declaration, provided that
such action shall not adversely affect in any material respect the interests of
the holders of the Capital Securities. In addition, subject to certain
conditions, the Declaration may be amended with the consent of holders
representing a majority of the outstanding Trust Securities. However, certain
provisions of the Declaration may not be amended without the consent of each
holder. The Company will pay, directly or indirectly, all fees, expenses, debts
and obligations related to the Trust and the offering of the Capital Securities,
including all ongoing costs, expenses and liabilities of the Trust (other than
the Trust's obligations to the holders of the Trust Securities). The principal
executive office of the Trust is c/o Interpool, Inc., 211 College Road East,
Princeton, New Jersey 08540.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Capital Securities were sold by the Company on January 27, 1997
(the "Issue Date") to the Initial Purchasers pursuant to the Purchase Agreement.
The Initial Purchasers subsequently sold the Private Capital Securities to (i)
"qualified institutional buyers" ("QIBs"), as defined in Rule 144A under the
Securities Act ("Rule 144A"), in reliance on Rule 144A and (ii) to institutional
"accredited investors" within
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the meaning of subparagraph (a)(1), (2) (3) or (7) of Rule 501 under the
Securities Act. As a condition to the sale of the Private Capital Securities,
the Trust, the Company and the Initial Purchasers entered into the Registration
Rights Agreement on January 27, 1997. Pursuant to the Registration Rights
Agreement, the Trust and the Company agreed that, unless the Exchange Offer is
not permitted by applicable law or Commission policy, it would (i) file with the
Commission a Registration Statement under the Securities Act with respect to the
Exchange Capital Securities within 150 days after the Issue Date, (ii) use its
best efforts to cause such Registration Statement to become effective under the
Securities Act within 180 days after the Issue Date and (iii) use its best
efforts to consummate the Exchange Offer within 45 days after the Registration
Statement has become effective. A copy of the Registration Rights Agreement has
been filed as an exhibit to the Registration Statement. The Registration
Statement is intended to satisfy certain of the Trust's and the Company's
obligations under the Registration Rights Agreement and the Purchase Agreement.
RESALE OF THE EXCHANGE CAPITAL SECURITIES
With respect to the Exchange Capital Securities, based upon an
interpretation by the staff of the Commission set forth in certain no-action
letters issued to third parties, the Trust and the Company believe that a holder
(other than (i) a broker-dealer who purchased such Exchange Capital Securities
directly from the Trust or the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act, (ii) any such holder that is
an "affiliate" of the Trust or the Company within the meaning of Rule 405 under
the Securities Act or (iii) a broker-dealer who acquired Private Capital
Securities as a result of market making or other trading activities) who
exchanges Private Capital Securities for Exchange Capital Securities in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement with any person to participate, in a
distribution of the Exchange Capital Securities, will be allowed to resell
Exchange Capital Securities to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Capital
Securities a prospectus that satisfies the requirements of Section 10 of the
Securities Act. However, if any holder acquires Exchange Capital Securities in
the Exchange Offer for the purpose of distributing or participating in the
distribution of the Exchange Capital Securities or is a broker-dealer, such
holder cannot rely on the position of the staff of the Commission enumerated in
certain no-action letters issued to third parties and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Each broker-dealer that receives Exchange Capital
Securities for its own account in exchange for Private Capital Securities, where
such Private Capital Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Capital Securities. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Capital Securities
received in exchange for Private Capital Securities where such Private Capital
Securities were acquired by such broker-dealer as a result of market-making or
other trading activities. Pursuant to the Registration Rights Agreement, the
Trust and the Company have agreed to make this Prospectus, as it may be amended
or supplemented from time to time, available to broker-dealers for use in
connection with any resale for a period of one year after the Registration
Statement is declared effective or until such earlier date on which the Exchange
Capital Securities are freely tradable. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Trust and the Company will accept any and
all Private Capital Securities validly tendered and not withdrawn prior to the
Expiration Date. The Trust will issue $1,000 Liquidation Amount of Exchange
Capital Securities in exchange for each $1,000 Liquidation Amount of outstanding
Private Capital Securities surrendered pursuant to the Exchange Offer. Private
Securities may be tendered in whole or in part in a
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Liquidation Amount of not less than $100,000 (100 Private Capital Securities) or
any integral multiple of $1,000 Liquidation Amount (one Private Security) in
excess thereof.
The form and terms of the Exchange Capital Securities are the same as the
form and terms of the Private Capital Securities except that (i) the exchange
will be registered under the Securities Act and, therefore, the Exchange Capital
Securities will not bear legends restricting the transfer thereof, (ii) the
Exchange Capital Securities will not contain the $100,000 minimum liquidation
amount transfer restriction, (iii) the Exchange Capital Securities will not
provide for payment of additional distributions thereon, (iv) the Exchange
Junior Subordinated Debentures will not contain the $100,000 minimum liquidation
amount transfer restriction, (v) the Exchange Junior Subordinated Debentures
will not provide for payment of liquidated damages thereon and (vi) holders of
the Exchange Capital Securities will not be entitled to any of the rights of
holders of Private Capital Securities under the Registration Rights Agreement,
which rights will terminate upon the consummation of the Exchange Offer except
under certain limited circumstances. See "-- Termination of Certain Rights." The
Exchange Capital Securities will evidence the same obligations as the Private
Capital Securities (which they replace) and will be issued under, and be
entitled to the benefits of, the Declaration and the Indenture, which also
authorized the issuance of the Private Capital Securities, such that both series
of Securities will be treated as a single class of securities under the
Declaration and the Indenture.
As of the date of this Prospectus, $75,000,000 in aggregate Liquidation
Amount of the Private Capital Securities are outstanding, $74,900,000 aggregate
Liquidation Amount of which are registered in the name of Cede & Co., as nominee
for DTC, and $100,000 aggregate Liquidation Amount of which are registered in
the name of Merrill Lynch & Co. Inc. Merrill Lynch, Pierce, Fenner & Smith
Incorporated. Only a registered holder of the Private Capital Securities (or
such holder's legal representative or attorney-in-fact) as reflected on the
records of the Property Trustee under the Declaration may participate in the
Exchange Offer. There will be no fixed record date for determining registered
holders of the Private Capital Securities entitled to participate in the
Exchange Offer.
Holders of the Private Capital Securities do not have any appraisal or
dissenters' rights under the Declaration in connection with the Exchange Offer.
The Trust and the Company intend to conduct the Exchange Offer in accordance
with the provisions of the Registration Rights Agreement and the applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations of the Commission thereunder.
The Trust and the Company shall be deemed to have accepted validly tendered
Private Capital Securities when, as and if the Trust and the Company have given
oral or written notice thereof to the Exchange Agent. The Exchange Agent will
act as agent for the tendering holders of Private Capital Securities for the
purposes of receiving the Exchange Capital Securities from the Trust and the
Company.
Holders who tender Private Capital Securities in the Exchange Offer will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Private Capital Securities pursuant to the Exchange Offer. The Trust
and the Company will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "-- Fees and
Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
September 2, 1997, unless the Trust and the Company, in their sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Trust and the Company will (i)
notify the Exchange Agent of any extension by oral or written notice, (ii) mail
to the registered holders an announcement thereof and (iii) issue a press
release or other public announcement, which shall include disclosure of the
approximate number of Private Capital Securities deposited to date, each prior
to 9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Trust and
the Company may choose to make a public announcement of any delay, extension,
amendment or
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termination of the Exchange Offer, the Trust and the Company shall have no
obligation to publish, advertise, or otherwise communicate any such public
announcement, other than by making a timely release to an appropriate news
agency.
The Trust and the Company reserve the right, in their reasonable
discretion, (i) to delay accepting any Private Capital Securities, (ii) to
extend the Exchange Offer or (iii) if any conditions set forth below under
"-- Conditions" shall not have been satisfied, to terminate the Exchange Offer
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders. If the Exchange Offer is amended in a manner
determined by the Trust and the Company to constitute a material change, the
Trust and the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
the Trust and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the amendment and the
manner of disclosure to the registered holders, if the Exchange Offer would
otherwise expire during such five to ten business day period.
DISTRIBUTIONS ON EXCHANGE CAPITAL SECURITIES
Holders of Private Capital Securities whose Private Capital Securities are
accepted for exchange will not receive Distributions on such Private Capital
Securities and will be deemed to have waived the right to receive any
Distributions on such Private Capital Securities accumulated from and after
August 15, 1997. Accordingly, holders of Exchange Capital Securities as of the
record date for payment of distributions on February 15, 1998 will be entitled
to receive Distributions accumulated from and after August 15, 1997.
PROCEDURES FOR TENDERING
Only a registered holder of Private Capital Securities may tender such
Private Capital Securities in the Exchange Offer. To tender in the Exchange
Offer, a holder of Private Capital Securities must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent at
the address set forth below under "-- Exchange Agent" for receipt prior to the
Expiration Date. In addition, either (i) certificates for such Private Capital
Securities must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Private Capital Securities, if such procedure is
available, into the Exchange Agent's account at the Depositary pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described below.
THE TENDER BY A HOLDER THAT IS NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE
WILL CONSTITUTE AN AGREEMENT BETWEEN SUCH HOLDER, THE TRUST AND THE COMPANY IN
ACCORDANCE WITH THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN AND IN
THE LETTER OF TRANSMITTAL.
THE METHOD OF DELIVERY OF PRIVATE CAPITAL SECURITIES AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE CAPITAL
SECURITIES SHOULD BE SENT TO THE TRUST OR THE COMPANY. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO
EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner(s) of the Private Capital Securities whose Private
Capital Securities are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who wishes to tender should contact the
registered holder promptly and instruct such registered holder to tender on such
beneficial
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owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Capital Securities, either make
appropriate arrangements to register ownership of the Private Capital Securities
in such owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined) unless the Private Capital Securities
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box titled "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantee must be made by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act which is
a member of one of the recognized signature guarantee programs identified in the
Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Private Capital Securities listed therein, such Private
Capital Securities must be endorsed or accompanied by a properly completed bond
power, signed by such registered holder as such registered holder's name appears
on such Private Capital Securities.
If the Letter of Transmittal or any Private Capital Securities or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Trust and the Company, evidence satisfactory to the Trust
and the Company of their authority to so act must be submitted with the Letter
of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Private Capital
Securities.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Capital Securities will
be determined by the Trust and the Company in their reasonable discretion, which
determination will be final and binding. The Trust and the Company reserve the
absolute right to reject any and all Private Capital Securities not properly
tendered or any Private Capital Securities the Trust's or the Company's
acceptance of which would, in the opinion of counsel for the Trust and the
Company, be unlawful. The Trust and the Company also reserve the right to waive
any defects, irregularities or conditions of tender as to particular Private
Capital Securities. The Trust's and the Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Private Capital
Securities must be cured within such time as the Trust and the Company shall
determine. Although the Trust and the Company intends to notify holders of
defects or irregularities with respect to tenders of Private Capital Securities,
neither the Trust, the Company, the Exchange Agent nor any other person shall
incur any liability for failure to give such notification. Tenders of Private
Capital Securities will not be deemed to have been made until such defects or
irregularities have been cured or waived.
While the Trust and the Company have no present plan to acquire any Private
Capital Securities that are not tendered in the Exchange Offer or to file a
registration statement to permit resales of any Private Capital Securities that
are not tendered pursuant to the Exchange Offer, the Trust and the Company
reserves the right in its sole discretion to purchase or make offers for any
Private Capital Securities that remain outstanding subsequent to the Expiration
Date or, as set forth below under "-- Conditions," to terminate the Exchange
Offer and, to the extent permitted by applicable law, purchase Private Capital
Securities in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
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By tendering, each holder of Private Capital Securities will represent to
the Trust and the Company that, among other things, (i) Exchange Capital
Securities to be acquired by such holder of Private Capital Securities in
connection with the Exchange Offer are being acquired by such holder in the
ordinary course of business of such holder, (ii) such holder has no arrangement
or understanding with any person to participate in the distribution of the
Exchange Capital Securities, (iii) such holder acknowledges and agrees that any
person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the
Exchange Capital Securities must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the Exchange Capital Securities, acquired by such person
and cannot rely on the position of the staff of the Commission set forth in
certain no-action letters, (iv) such holder understands that a secondary resale
transaction described in clause (iii) above and any resales of Exchange Capital
Securities obtained by such holder in exchange for Private Capital Securities
acquired by such holder directly from the Trust or the Company should be covered
by an effective registration statement containing the selling securityholder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
of the Commission and (v) such holder is not an "affiliate," as defined in Rule
405 under the Securities Act, of the Trust or the Company. If the holder is a
broker-dealer that will receive Exchange Capital Securities for such holder's
own account in exchange for Private Capital Securities that were acquired as a
result of market-making activities or other trading activities, such holder will
be required to acknowledge in the Letter of Transmittal that such holder will
deliver a copy of this Prospectus (as it may be supplemented or amended) in
connection with any resale of such Exchange Capital Securities; however, by so
acknowledging and by delivering a prospectus, such holder will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
RETURN OF PRIVATE CAPITAL SECURITIES
If any tendered Private Capital Securities are not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or if Private
Capital Securities are withdrawn or are submitted for a greater principal amount
than the holders desire to exchange, such unaccepted, withdrawn or non-exchanged
Private Capital Securities will be returned without expense to the tendering
holder thereof (or, in the case of Private Capital Securities tendered by
book-entry transfer into the Exchange Agent's account at the Depositary pursuant
to the book-entry transfer procedures described below, such Private Capital
Securities will be credited to an account maintained with the Depositary) as
promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Capital Securities at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make
book-entry delivery of Private Capital Securities by causing DTC to transfer
such Private Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfer. However, although delivery of
Private Capital Securities may be effected through book-entry transfer at DTC,
the Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under
"-- Exchange Agent" on or prior to the Expiration Date or pursuant to the
guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Capital Securities and (i) whose
Private Capital Securities are not immediately available or (ii) who cannot
deliver their Private Capital Securities, the Letter of Transmittal or any other
required documents to the Exchange Agent prior to the Expiration Date, may
effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided
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by the Trust and the Company (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder, the certificate
number(s) of such Private Capital Securities and the principal amount of
Private Capital Securities tendered, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or a facsimile
thereof), together with the certificate(s) representing the Private Capital
Securities in proper form for transfer or a Book-Entry Confirmation, as the
case may be, and any other documents required by the Letter of Transmittal,
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Private
Capital Securities in proper form for transfer and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within five New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Capital Securities according to
the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Capital Securities
may be withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Private Capital Securities in the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. Any
such notice of withdrawal must (i) specify the name of the person having
deposited the Private Capital Securities to be withdrawn (the "Depositor"), (ii)
identify the Private Capital Securities to be withdrawn (including the
certificate number or numbers and principal amount of such Private Capital
Securities) and (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Private Capital Securities
were tendered (including any required signature guarantees). All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Trust and the Company, in their sole discretion, whose
determination shall be final and binding on all parties. Any Private Capital
Securities so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Capital Securities will be issued
with respect thereto unless the Private Capital Securities so withdrawn are
validly retendered. Properly withdrawn Private Capital Securities may be
retendered by following one of the procedures described above under "The
Exchange Offer -- Procedures for Tendering" at any time prior to the Expiration
Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Trust and the
Company shall not be required to accept for exchange, or exchange the Exchange
Capital Securities for, any Private Capital Securities, and may terminate the
Exchange Offer as provided herein before the acceptance of such Private Capital
Securities, if the Exchange Offer violates applicable law, rules or regulations
or an applicable interpretation of the staff of the Commission.
If the Trust and the Company determine in their reasonable discretion that
any of these conditions are not satisfied, the Trust and the Company may (i)
refuse to accept any Private Capital Securities and return all tendered Private
Capital Securities to the tendering holders, (ii) extend the Exchange Offer and
retain all Private Capital Securities tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of holders to withdraw such
Private Capital Securities (see "-- Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Private Capital Securities that have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Trust and
the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered holders of the Private
Capital Securities, and the Trust and the Company will extend the Exchange Offer
for a period of five to ten business days, depending upon the
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significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Private Capital Securities eligible to participate in
the Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Trust's and the Company's continuing obligations (i) to
indemnify such holders (including any broker-dealers) and certain parties
related to such holders against certain liabilities (including liabilities under
the Securities Act), (ii) to provide, upon the request of any holder of a
transfer-restricted Private Security, the information required by Rule
144A(d)(4) under the Securities Act in order to permit resales of such Private
Capital Securities pursuant to Rule 144A, (iii) to use its best efforts to keep
the Registration Statement effective to the extent necessary to ensure that it
is available for resales of Exchange Capital Securities by broker-dealers for a
period of up to one year from the date the Registration Statement is declared
effective or until such earlier date on which the Exchange Capital Securities
are freely tradeable and to provide copies of the latest version of the
Prospectus to such broker-dealers upon their request during such period and (iv)
to file a shelf registration statement as required by the Registration Rights
Agreement if any holder of transfer-restricted Securities notifies the Trust and
the Company within 20 business days of the consummation of the Exchange Offer
that (A) such holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) such holder may not resell the
Exchange Capital Securities acquired by it in the Exchange Offer to the public
without delivering a prospectus and that this Prospectus is not appropriate or
available for such resales by such holder, or (C) that such holder is a
broker-dealer and holds Private Capital Securities acquired directly from the
Trust and the Company as one of its affiliate (see "-- Liquidated Damages").
LIQUIDATED DAMAGES
The Registration Rights Agreement provides that (i) the Trust and the
Company will file the Registration Statement with the Commission on or prior to
150 days after the Issue Date, (ii) the Trust and the Company will use its best
efforts to have the Registration Statement declared effective by the Commission
on or prior to 180 days after the Issue Date, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, the Trust and the
Company will commence the Exchange Offer and use its best efforts to issue, on
or prior to 45 days after the date on which the Registration Statement is
declared effective by the Commission, Exchange Capital Securities in exchange
for all Private Capital Securities tendered prior thereto in the Exchange Offer
and (iv) if obligated to file a shelf registration statement pursuant to the
terms of the Registration Rights Agreement (the "Shelf Registration Statement"
and, collectively with the Registration Statement, the "Registration
Statements"), the Trust and the Company will use their best efforts to file such
Shelf Registration Statement with the Commission.
If the Company or the Trust fails to comply with the Registration Rights
Agreement or if the Exchange Offer Registration Statement or the Shelf
Registration Statement fails to become effective, then an additional amount
("Liquidated Damages") shall become payable in respect of the Junior
Subordinated Debentures, and corresponding Additional Distributions (the
"Additional Distributions") shall become payable on the Trust Securities as
provided in the Registration Rights Agreement.
Holders of Securities will be required to make certain representations to
the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Securities included
in the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Trust and the
Company. The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by officers and
regular employees of the Trust, the Company and their affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Trust and the Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Trust and the Company and are estimated in the aggregate to be
approximately $200,000. Such expenses include registration fees, fees and
expenses of the Exchange Agent and the Property Trustee, accounting and legal
fees and printing costs, among others.
The Trust and the Company will pay all transfer taxes, if any, applicable
to the exchange of Private Capital Securities pursuant to the Exchange Offer.
If, however, a transfer tax is imposed for any reason other than the exchange of
the Private Capital Securities pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Capital Securities are urged to consult their financial and tax advisors in
making their own decisions on what action to take.
The Private Capital Securities that are not exchanged for the Exchange
Capital Securities pursuant to the Exchange Offer will remain restricted
securities. Accordingly, such Private Capital Securities may be resold only (i)
to a person whom the seller reasonably believes is a QIB in a transaction
meeting the requirements of Rule 144A, (ii) in a transaction meeting the
requirements of Rule 144 under the Securities Act, (iii) outside the United
States to a foreign person in a transaction meeting the requirements of Rule 904
under the Securities Act, (iv) in accordance with another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel if the Company so requests), (v) to the Trust or the Company or (vi)
pursuant to an effective registration statement and, in each case, in accordance
with any applicable securities laws of any state of the United States or any
other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Capital Securities.
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EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance and requests for additional copies
of this Prospectus or of the Letter of Transmittal should be directed to the
Exchange Agent as follows:
<TABLE>
<CAPTION>
By Registered or Certified Mail: By Hand or Overnight Delivery:
<S> <C>
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Securities Transfer Window, Subcellar One
Attn: Reorganization Operations Dept.
</TABLE>
Confirm by Telephone:
(212) 858-2103
Facsimile Transmissions:
(Eligible Institutions Only)
IBJ Schroder Bank & Trust Company
Attn: Reorganization Operations Dept.
(212) 858-2611
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
DESCRIPTION OF EXCHANGE SECURITIES
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
The Exchange Capital Securities will represent preferred beneficial
interests in the Trust and the holders thereof will be entitled to a preference
over the Common Securities in certain circumstances with respect to
Distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust. See "-- Subordination of Common Securities." The
Declaration has been qualified under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The following description of certain provisions of
the Exchange Capital Securities, the Common Securities and the Declaration does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Declaration and the Trust Indenture Act. Certain
capitalized terms used herein are defined in the Declaration.
General
The Capital Securities (including the Private Capital Securities and the
Exchange Capital Securities) will be limited to $75,000,000 aggregate
Liquidation Amount at any one time outstanding. The Capital Securities will rank
pari passu, and payments will be made thereon pro rata, with the Common
Securities except as described under "-- Subordination of Common Securities"
below. Legal title to the Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the holders of the Capital
Securities and the Common Securities. The Exchange Guarantee will not guarantee
payment of Distributions or amounts payable on redemption of the Exchange
Capital Securities or liquidation of the Trust when the Trust does not have
funds on hand legally available for such payments. See "-- Description of
Exchange Guarantee."
Distributions
Distributions on the Exchange Capital Securities will be cumulative, will
accumulate from August 15, 1997 and will be payable semi-annually in arrears on
February 15 and August 15 of each year, commencing February 15, 1998, at the
annual rate of 9 7/8% of the Liquidation Amount to the holders of the Exchange
Capital Securities on the February 1 or August 1 immediately preceding such
dates. The amount of
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Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which Distributions
are payable on the Exchange Capital Securities is not a Business Day (as defined
herein), 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 to any such delay), in each case with the same force and
effect as if made on such date (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in New York, New York or Wilmington, Delaware are authorized or
required by law or executive order to remain closed.
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company will have the right under the Indenture to elect to
defer the payment of interest on the Exchange Junior Subordinated Debentures at
any time or from time to time for a period not exceeding 10 consecutive
semi-annual periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity Date. Upon any such
election, semi-annual Distributions on the Exchange Capital Securities will be
deferred by the Trust during such Extension Period. Distributions to which
holders of the Exchange Capital Securities are entitled during any such
Extension Period will accumulate additional Distributions thereon at the rate
per annum of 9 7/8% thereof, compounded semi-annually from the relevant
Distribution Date. The term "Distributions," as used herein, shall include any
such additional Distributions.
During any such Extension Period, the Company may further extend such
Extension Period, provided that such extension does not cause such Extension
Period to exceed 10 consecutive semi-annual periods or to extend beyond the
Stated Maturity Date. Upon the termination of any such Extension Period and the
payment of all amounts then due, and subject to the foregoing limitations, the
Company may elect to begin a new Extension Period. The Company must give the
Property Trustee, the Regular Trustees and the Debenture Trustee notice of its
election of any Extension Period or any extension thereof at least five Business
Days prior to the earlier of (i) the date the Distributions on the Capital
Securities would have been payable except for the election to begin or extend
such Extension Period and (ii) the date the Trust is required to give notice to
any securities exchange or to holders of the Exchange Capital Securities of the
record date or the date such Distributions are payable, but in any event not
less than five Business Days prior to such record date. There is no limitation
on the number of times that the Company may elect to begin an Extension Period.
See "-- Description of Exchange Junior Subordinated Debentures -- Option to
Extend Interest Payment Date" and "Certain Federal Income Tax
Considerations -- Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) or (ii) make any payment of principal of or
premium, if any, or interest on or repay, repurchase or redeem any debt
securities of the Company (including Other Debentures) that rank pari passu with
or junior in right of payment to the Exchange Junior Subordinated Debentures or
(iii) make any guarantee payments with respect to any guarantee by the Company
of the debt securities of any subsidiary of the Company (including Other
Guarantees) if such guarantee ranks pari passu with or junior in right of
payment to the Exchange Junior Subordinated Debentures (other than (a) dividends
or distributions in shares of, or options, warrants or rights to subscribe for
or purchase shares of, common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Exchange
Guarantee, (d) the purchase of fractional shares resulting from a
reclassification of the Company's capital stock, (e) 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, (f) the purchase of fractional interests
in shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (g) purchases of common stock related to the issuance of common stock or
rights under any of the Company's benefit plans for its directors, officers or
employees or any of the Company's dividend reinvestment plans).
Although the Company may in the future exercise its option to defer
payments of interest on the Exchange Junior Subordinated Debentures, the Company
has no current intention to do so.
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The revenue of the Trust available for distribution to holders of the
Exchange Capital Securities will be limited to payments under the Exchange
Junior Subordinated Debentures in which the Trust has invested the proceeds from
the issuance and sale of the Trust Securities. See "-- Description of Exchange
Junior Subordinated Debentures -- General." If the Company does not make
interest payments on the Exchange Junior Subordinated Debentures, the Property
Trustee will not have funds available to pay Distributions on the Exchange
Capital Securities. The payment of Distributions (if and to the extent the Trust
has funds on hand legally available for the payment of such Distributions) will
be guaranteed by the Company on a limited basis as set forth herein under
"Description of Exchange Guarantee."
Redemption
Upon the repayment on the Stated Maturity Date or prepayment prior to the
Stated Maturity Date of the Exchange Junior Subordinated Debentures, the
proceeds from such repayment or prepayment shall be applied by the Property
Trustee to redeem a Like Amount (as defined below) of the Trust Securities, upon
not less than 30 nor more than 60 days' notice of a date of redemption (the
"Redemption Date"), at the applicable Redemption Price, which shall be equal to
(i) in the case of the repayment of the Exchange Junior Subordinated Debentures
on the Stated Maturity Date, the Maturity Redemption Price (equal to the
principal of and accrued interest on the Junior Subordinated Debentures), (ii)
in the case of the optional prepayment of the Exchange Junior Subordinated
Debentures prior to February 15, 2007 upon the occurrence and continuation of a
Special Event, the Special Event Redemption Price (equal to the Special Event
Prepayment Price in respect of the Exchange Junior Subordinated Debentures) and
(iii) in the case of the optional prepayment of the Exchange Junior Subordinated
Debentures on or after February 15, 2007, the Optional Redemption Price (equal
to the Optional Prepayment Price in respect of the Exchange Junior Subordinated
Debentures). See "-- Description of Exchange Junior Subordinated
Debentures -- Optional Prepayment" and "-- Special Event Prepayment."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount Exchange of Junior Subordinated Debentures to be paid in accordance with
their terms and (ii) with respect to a distribution of Exchange Junior
Subordinated Debentures upon the liquidation of the Trust, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Exchange Junior Subordinated
Debentures are distributed.
Liquidation of the Trust and Distribution of Exchange Junior Subordinated
Debentures
The Company will have the right at any time to terminate the Trust and
cause the Exchange Junior Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust. Such right is
subject to the Company having received an opinion of counsel to the effect that
such distribution will not be a taxable event to holders of Exchange Capital
Securities.
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the distribution of a Like Amount of the Exchange Junior Subordinated Debentures
to the holders of the Trust Securities, if the Company, as Sponsor, has given
written direction to the Property Trustee to terminate the Trust (which
direction is optional and, except as described above, wholly within the
discretion of the Company, as Sponsor); (iii) redemption of all of the Trust
Securities as described under "-- Redemption" above; (iv) expiration of the term
of the Trust; and (v) the entry of an order for the dissolution of the Trust by
a court of competent jurisdiction.
If a termination occurs as described in clause (i), (ii), (iv), or (v) of
the preceding paragraph, the Trust shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, to the holders of the Trust Securities a Like Amount of the
Exchange Junior Subordinated Debentures, unless such distribution is determined
by the Property Trustee not to be practicable, in which event such holders will
be entitled to receive out of the assets of the Trust legally available for
distribution to holders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to the aggregate of the
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<PAGE> 38
Liquidation Amount plus accumulated and unpaid Distributions thereon to the date
of payment (such amount being the "Liquidation Distribution"). If the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets on hand legally available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on the
Exchange Capital Securities and the Common Securities shall be paid on a pro
rata basis, except that if a Debenture Event of Default or a Declaration Event
of Default has occurred and is continuing, the Exchange Capital Securities shall
have a priority over the Common Securities. See "-- Subordination of Common
Securities."
After the liquidation date is fixed for any distribution of Exchange Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) each registered
global certificate representing Trust Securities and held by DTC or its nominee
will receive a registered global certificate or certificates representing the
Exchange Junior Subordinated Debentures to be delivered upon such distribution
and (iii) any certificates representing Trust Securities not held by DTC or its
nominee will be deemed to represent Exchange Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of such Trust
Securities and bearing accrued and unpaid interest in an amount equal to the
accumulated and unpaid Distributions on such Trust Securities until such
certificates are presented to the Regular Trustees or their agent for
cancellation, whereupon the Company will issue to such holder, and the Debenture
Trustee will authenticate, a certificate representing such Exchange Junior
Subordinated Debentures.
There can be no assurance as to the market prices for the Exchange Capital
Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for the Trust Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Exchange Capital
Securities that an investor may purchase, or the Exchange Junior Subordinated
Debentures that an investor may receive on dissolution and liquidation of the
Trust, may trade at a discount to the price that such investor paid to purchase
the Exchange Capital Securities offered hereby.
Redemption Procedures
If applicable, Trust Securities shall be redeemed at the applicable
Redemption Price with the proceeds from the contemporaneous repayment or
prepayment of the Exchange Junior Subordinated Debentures. Any redemption of
Trust Securities shall be made and the applicable Redemption Price shall be
payable on the Redemption Date only to the extent that the Trust has funds
legally available for the payment of such applicable Redemption Price.
If the Trust gives a notice of redemption in respect of the Exchange
Capital Securities, then, by 2:00 p.m., New York City time, on the Redemption
Date, to the extent funds are legally available, with respect to the Exchange
Capital Securities held by DTC or its nominees, the Property Trustee will
deposit irrevocably with DTC funds sufficient to pay the applicable Redemption
Price. See "-- Form, Denomination, Book-Entry Procedures and Transfer." With
respect to the Capital Securities held in certificated form, the Property
Trustee, to the extent funds are legally available, will irrevocably deposit
with the paying agent for the Exchange Capital Securities funds sufficient to
pay the applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the applicable Redemption Price to the holders
thereof upon surrender of their certificates evidencing the Exchange Capital
Securities. See "-- Payment and Paying Agent." Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date shall be payable to the
holders of such Capital Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of the Exchange Capital Securities will cease, except the right of the
holders of the Capital Securities to receive the applicable Redemption Price,
but without interest on such Redemption Price, and the Capital Securities will
cease to be outstanding. In the event that any Redemption Date of Exchange
Capital Securities is not a Business Day, then the applicable Redemption Price
payable on such date will be paid on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay)
except that, if such 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 applicable Redemption Price is improperly withheld or refused and
not paid either by the Trust or by the
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<PAGE> 39
Company pursuant to the Exchange Guarantee as described under "Description of
the Exchange Guarantee," Distributions on Exchange Capital Securities called for
redemption will continue to accumulate at the then applicable rate, from the
Redemption Date originally established by the Trust to the date such applicable
Redemption Price is actually paid, and the actual payment date will be the
Redemption Date for purposes of calculating the applicable Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Exchange Capital Securities by tender, in
the open market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Company defaults in payment of the applicable
Prepayment Price on, or in the repayment of, the Exchange Junior Subordinated
Debentures, on and after the Redemption Date, Distributions will cease to accrue
on the Trust Securities called for redemption.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, the Exchange
Capital Securities and the Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of the Capital Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date an Event of Default under the Declaration shall have occurred and be
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of the Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid Distributions
on all of the outstanding Exchange Capital Securities for all Distribution
periods terminating on or prior thereto or, in the case of Exchange Capital
Securities called for redemption on a Redemption Date on or prior thereto, the
full amount of the Redemption Price therefor, shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions on, or Redemption Price of, the
Exchange Capital Securities then due and payable.
In the case of any Event of Default under the Declaration, the Company as
holder of the Common Securities will be deemed to have waived any right to act
with respect to such Event of Default under the Declaration until the effect of
such Event of Default under the Declaration shall have been cured, waived or
otherwise eliminated. Until any such Event of Default under the Declaration has
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of the Exchange Capital Securities and not on
behalf of the Company as holder of the Common Securities, and only the holders
of the Exchange Capital Securities will have the right to direct the Property
Trustee to act on their behalf.
Events of Default; Notice
The occurrence of a Debenture Event of Default (see "-- Description of
Exchange Junior Subordinated Debentures -- Debenture Events of Default")
constitutes an "Event of Default" under the Declaration.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Exchange Capital
Securities, the Regular Trustees and the Company, as Sponsor, unless such Event
of Default shall have been cured or waived. The Company, as Sponsor, and the
Regular Trustees are required to file annually with the Property Trustee a
certificate as to whether or not they are in compliance with all the conditions
and covenants applicable to them under the Declaration.
If a Debenture Event of Default has occurred and is continuing, the
Exchange Capital Securities shall have a preference over the Common Securities
as described under "-- Liquidation of the Trust and Distribution of Exchange
Junior Subordinated Debentures" and "-- Subordination of Common Securities"
above.
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Removal of Issuer Trustees
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Regular Trustees, which voting
rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of an Issuer Trustee and no appointment of
a successor trustee shall be effective until the acceptance of appointment by
the successor Trustee in accordance with the provisions of the Declaration.
Merger or Consolidation of Issuer Trustees
Any corporation into which the Property Trustee, the Delaware Trustee or
any Regular Trustee that is not a natural person may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which such Issuer Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of such Issuer Trustee, shall be the successor of such Issuer Trustee
under the Declaration, provided such corporation shall be otherwise qualified
and eligible in accordance with the applicable provisions of the Declaration.
Merger, Conversions, Consolidations, Amalgamations or Replacements of the
Trust
The Trust may not merge or convert with or into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to, any corporation or other Person,
except as described below. The Trust may, at the request of the Company, as
Sponsor, with the consent of a majority of the Regular Trustees but without the
consent of the Property Trustee, the Delaware Trustee or the holders of the
Capital Securities, merge or convert with or into, consolidate, amalgamate, or
be replaced by or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to, a trust organized as such under the
laws of any State; provided, that (i) such successor entity either (a) expressly
assumes all of the obligations of the Trust with respect to the Capital
Securities or (b) substitutes for the Capital Securities other securities having
substantially the same terms as the Capital Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Capital
Securities rank in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee with respect to the Junior Subordinated Debentures, (iii) the
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Capital Securities are then listed, if any, (iv) such
merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Capital Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Capital Securities (including
any Successor Securities) in any material respect, (vi) such successor entity
has a purpose identical to that of the Trust, (vii) prior to such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Company has received an opinion from independent counsel to the Trust
experienced in such matters to the effect that (a) such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Capital Securities (including any Successor Securities) in any material respect,
and (b) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such successor
entity will be required to register as an investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
(viii) the Company or any permitted successor or assignee owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee. Notwithstanding the foregoing, the Trust shall not, except
with the consent of holders of 100% in Liquidation Amount of the Trust
Securities, consolidate, amalgamate,
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merge or convert with or into, or be replaced by or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge or
convert with or into, or replace it if such consolidation, amalgamation, merger,
conversion, replacement, conveyance, transfer or lease would cause the Trust or
the successor entity not to be classified as a grantor trust for United States
federal income tax purposes. In addition, the Property Trustee will be required
pursuant to the Indenture to exchange, as a part of the Exchange Offer, the
Junior Subordinated Debentures for the Exchange Junior Subordinated Debentures,
which will have terms identical to the Junior Subordinated Debentures except
that the Exchange Junior Subordinated Debentures will not contain terms with
respect to the transfer restrictions under the Securities Act, the $100,000
minimum aggregate principal amount transfer restrictions and the provision for
an increase in the interest rate thereon under certain circumstances. See
"Exchange Offer; Registration Rights."
Voting Rights; Amendment of the Declaration
Except as provided below and under "-- Removal of Issuer Trustees" and
"-- Mergers, Conversions, Consolidations, Amalgamations or Replacements of the
Trust" above and "Description of Exchange Guarantee -- Amendments and
Assignment" and as otherwise required by law and the Declaration, the holders of
the Exchange Capital Securities will have no voting rights.
The Declaration may be amended from time to time by the Company, the
Property Trustee and the Regular Trustees, without the consent of the holders of
the Trust Securities (i) to cure any ambiguity, correct or supplement any
provisions in the Declaration that may be inconsistent with any other provision,
or to make any other provisions with respect to matters or questions arising
under the Declaration, which shall not be inconsistent with the other provisions
of the Declaration, or (ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust will
be classified for United States federal income tax purposes as a grantor trust
at all times that any Trust Securities are outstanding or to ensure that the
Trust will not be required to register as an "investment company" under the
Investment Company Act; provided, however, that such action shall not adversely
affect in any material respect the interests of the holders of the Trust
Securities, and any amendments of the Declaration shall become effective when
notice thereof is given to the holders of the Trust Securities. The Declaration
may be amended by the Issuer Trustees and the Company (i) with the consent of
holders representing a majority (based upon Liquidation Amount) of the
outstanding Trust Securities, and (ii) upon receipt by the Issuer Trustees of an
opinion of counsel to the effect that such amendment or the exercise of any
power granted to the Issuer Trustees in accordance with such amendment will not
affect the Trust's status as a grantor trust for United States federal income
tax purposes or the Trust's exemption from status as an "investment company"
under the Investment Company Act, provided that, without the consent of each
holder of Trust Securities, the Declaration may not be amended to (i) change the
amount or timing of any Distribution or other payment on the Trust Securities or
any redemption provisions or otherwise adversely affect the amount of any
Distribution or other payment required to be made in respect of the Trust
Securities as of a specified date or (ii) restrict the right of a holder of
Trust Securities to institute suit for the enforcement of any such payment on or
after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive certain past defaults under the
Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Junior Subordinated
Debentures or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
a majority in Liquidation Amount of all outstanding Capital Securities;
provided, however, that where a consent under the Indenture would require the
consent of each holder of Junior Subordinated Debentures affected thereby, no
such consent shall be given by the Property Trustee without the prior approval
of each holder of the Capital Securities. The Issuer Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Capital Securities except by subsequent vote
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of such holders. The Property Trustee shall notify each holder of Capital
Securities of any notice of default with respect to the Junior Subordinated
Debentures. In addition to obtaining the foregoing approvals of such holders of
the Capital Securities, prior to taking any of the foregoing actions, the Issuer
Trustees shall obtain an opinion of counsel experienced in such matters to the
effect that the Trust will not be classified as an association taxable as a
corporation for United States federal income tax purposes on account of such
action.
Any required approval of holders of Capital Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Capital Securities are entitled to vote, or of any matter upon which
action by written consent of such holders is to be taken, to be given to each
holder of record of Capital Securities in the manner set forth in the
Declaration.
No vote or consent of the holders of Capital Securities will be required
for the Trust to redeem and cancel the Capital Securities in accordance with the
Declaration.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Issuer Trustees or any affiliate
of the Company or any Issuer Trustees shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer
The Exchange Capital Securities initially will be represented by one or
more Capital Securities in registered, global form (collectively, the "Global
Exchange Capital Securities"). The Global Exchange Capital Securities will be
deposited upon issuance with the Property Trustee as custodian for DTC in New
York, New York, and registered in the name of DTC or its nominee, in each case
for credit to an account of a direct or indirect participant in DTC as described
below.
Except as set forth below, the Global Exchange Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Exchange
Capital Securities may not be exchanged for Exchange Capital Securities in
certificated form except in the limited circumstances described under
"-- Exchange of Book-Entry Exchange Capital Securities for Certificated Exchange
Capital Securities" below.
Other Exchange Capital Securities will be issued only in registered,
certificated (i.e., non-global) form. Other Exchange Capital Securities may not
be exchanged for beneficial interests in any Global Exchange Capital Securities
except in the limited circumstances described below. See "--Exchange of
Certificated Exchange Capital Securities for Book-Entry Exchange Capital
Securities."
Depositary Procedures
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Exchange Capital Securities,
DTC will credit the accounts of Participants designated by the Initial
Purchasers with portions of the Liquidation Amount of the Global Exchange
Capital Securities and (ii) ownership of such interests in the Global Exchange
Capital Securities will be shown on, and the transfer
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<PAGE> 43
of ownership thereof will be effected only through, records maintained by DTC
(with respect to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial interests in the Global
Exchange Capital Securities).
Investors in the Global Exchange Capital Securities may hold their
interests therein directly through DTC if they are Participants in such system
or indirectly through organizations which are Participants in such system. All
interests in a Global Exchange Capital Security will be subject to the
procedures and requirements of DTC. The laws of some states require that certain
persons take physical delivery in certificated form of securities that they own.
Consequently, the ability to transfer beneficial interests in a Global Exchange
Capital Security to such persons will be limited to that extent. Because DTC can
act only on behalf of Participants, which in turn act on behalf of Indirect
Participants and certain banks, the ability of a person having beneficial
interests in a Global Exchange Capital Security to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests. For certain other restrictions on the
transferability of the Capital Securities, see "-- Exchange of Book-Entry
Capital Securities for Certificated Capital Securities" and "-- Exchange of
Certificated Capital Securities for Book-Entry Capital Securities" below.
Except as described below, owners of interests in the Global Exchange
Capital Securities will not have Capital Securities registered in their name,
will not receive physical delivery of Capital Securities in certificated form
and will not be considered the registered owners or holders thereof under the
Declaration for any purpose.
Payments in respect of the Global Exchange Capital Security registered in
the name of DTC or its nominee will be payable by the Property Trustee to DTC in
its capacity as the registered holder under the Declaration. Under the terms of
the Declaration, the Property Trustee will treat the persons in whose names the
Capital Securities, including the Global Exchange Capital Securities, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Property
Trustee nor any agent thereof has or will have any responsibility or liability
for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Exchange Capital Securities, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Exchange Capital Securities or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised the Trust and the Company that its current
practice, upon receipt of any payment in respect of securities such as the
Capital Securities, is to credit the accounts of the relevant Participants with
the payment on the payment date, in amounts proportionate to their respective
holdings in Liquidation Amount of beneficial interests in the relevant security
as shown on the records of DTC unless DTC has reason to believe it will not
receive payment on such payment date. Payments by the Participants and the
Indirect Participants to the beneficial owners of Capital Securities will be
governed by standing instructions and customary practices and will be the
responsibility of the Participants or the Indirect Participants and will not be
the responsibility of DTC, the Property Trustee, the Trust or the Company.
Neither the Trust nor the Company or the Property Trustee will be liable for any
delay by DTC or any of its Participants in identifying the beneficial owners of
the Capital Securities, and the Trust or the Company and the Property Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee for all purposes.
Interests in the Global Exchange Capital Securities will trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its Participants and Indirect
Participants. Transfers among Participants and Indirect Participants in DTC will
be effected in accordance with DTC's procedures, and will be settled in same-day
funds.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of Capital Securities only at the direction of
one or more Participants to whose account with DTC interests in the Global
Exchange Capital Securities are credited and only in respect of such portion of
the Liquidation Amount of the Capital Securities as to which such Participant or
Participants has or have given
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<PAGE> 44
such direction. However, if there is an Event of Default under the Declaration,
DTC reserves the right to exchange the Global Exchange Capital Securities for
legended Capital Securities in certificated form and to distribute such Capital
Securities to its Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Exchange Capital Securities among Participants in DTC,
it is under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Trust nor the
Company or the Property Trustee will have any responsibility for the performance
by DTC or its Participants or Indirect Participants of their respective
obligations under the rules and procedures governing DTC's operations.
Exchange of Book-Entry Exchange Capital Securities for Certificated
Exchange Capital Securities
A Global Exchange Capital Security is exchangeable for Capital Securities
in registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Exchange Capital
Security and the Trust thereupon fails to appoint a successor Depositary within
90 days or (y) has ceased to be a clearing agency registered under the Exchange
Act, (ii) the Company in its sole discretion elects to cause the issuance of the
Capital Securities in certificated form or (iii) there shall have occurred and
be continuing an Event of Default or any event which after notice or lapse of
time or both would be an Event of Default under the Declaration. In addition,
beneficial interests in a Global Exchange Capital Security may be exchanged for
certificated Capital Securities upon request but only upon at least 20 days
prior written notice given to the Property Trustee by or on behalf of DTC in
accordance with customary procedures. In all cases, certificated Capital
Securities delivered in exchange for any Global Exchange Capital Security or
beneficial interests therein will be registered in the names, and issued in any
approved denominations, requested by or on behalf of the Depositary (in
accordance with its customary procedures) and will bear the legend referred to
in "Notice to Investors," unless the Property Trustee determines otherwise in
compliance with applicable law.
Exchange of Certificated Exchange Capital Securities for Book-Entry Capital
Securities
Other Capital Securities, which will be issued in certificated form, may
not be exchanged for beneficial interests in any Global Exchange Capital
Security unless such exchange occurs in connection with a transfer of such Other
Capital Securities and the transferor first delivers to the Property Trustee a
written certificate (in the form provided in the Declaration) to the effect that
such transfer will comply with the appropriate transfer restrictions applicable
to such Capital Securities.
Payment and Paying Agent
Payments in respect of the Exchange Capital Securities held in global form
shall be made to the Depositary, which shall credit the relevant accounts at the
Depositary on the applicable Distribution Dates or in respect of the Exchange
Capital Securities that are not held by the Depositary, such payments shall be
made by check mailed to the address of the holder entitled thereto as such
address shall appear on the register. The paying agent (the "Paying Agent")
shall initially be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Regular Trustees and the Company. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Property Trustee and the Company. In the event that the Property
Trustee shall no longer be the Paying Agent, the Regular Trustees shall appoint
a successor (which shall be a bank or trust company acceptable to the Regular
Trustees and the Company) to act as Paying Agent.
Registrar and Transfer Agent
The Property Trustee will act as registrar and transfer agent for the
Capital Securities.
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<PAGE> 45
Registration of transfers of the Exchange Capital Securities will be
effected without charge by or on behalf of the Trust but upon payment of any tax
or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required to register or cause to be
registered the transfer of the Exchange Capital Securities after they have been
called for redemption.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Declaration and, after such Event of Default under the
Declaration, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Declaration at the request of any holder of Trust
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no Event of Default under the
Declaration has occurred and is continuing and the Property Trustee is required
to decide between alternative causes of action, construe ambiguous provisions in
the Declaration or is unsure of the application of any provision of the
Declaration, and the matter is not one on which holders of the Capital
Securities or the Common Securities are entitled under the Declaration to vote,
then the Property Trustee shall take such action as is directed by the Company
and if not so directed, shall take such action as it deems advisable and in the
best interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
Miscellaneous
The Regular Trustees are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an "investment company" required to be registered under the Investment Company
Act or classified as an association taxable as a corporation for United States
federal income tax purposes and so that the Junior Subordinated Debentures will
be treated as indebtedness of the Company for United States federal income tax
purposes. In this connection, the Company and the Regular Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust or the Declaration, that 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 Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Exchange Junior Subordinated Debentures were issued and the Exchange
Junior Subordinated Debentures will be issued as a separate series under the
Indenture, as supplemented from time to time (as so supplemented, the
"Indenture"), between the Company and IBJ Schroder Bank & Trust Company, as
trustee. The Indenture has been qualified under the Trust Indenture Act of 1939,
as amended. This summary of certain terms and provisions of the Exchange Junior
Subordinated Debentures and the Indenture does not purport to be complete and,
where reference is made to particular provisions of the Indenture, such
provisions, including the definitions of certain terms, some of which are not
otherwise defined herein, are qualified in their entirety by reference to all of
the provisions of the Indenture and those terms made a part of the Indenture by
the Trust Indenture Act.
General
Concurrently with the issuance of the Private Capital Securities, the Trust
invested the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in Private Junior Subordinated Debentures
issued by the Company. The Private Junior Subordinated Debentures bear interest
at the annual rate of 9 7/8% of the principal amount thereof, payable
semi-annually in arrears on February 15 and August 15 of each year (each, an
"Interest Payment Date"), commencing February 15, 1997, to the
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<PAGE> 46
person in whose name each Private Junior Subordinated Debenture is registered,
subject to certain exceptions, at the close of business on the February 1 or
August 1 immediately preceding each Interest Payment Date. It is anticipated
that, until the liquidation, if any, of the Trust, each Junior Subordinated
Debenture will be held in the name of the Property Trustee in trust for the
benefit of the holders of the Trust Securities. The amount of interest payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on the Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay).
Accrued interest that is not paid on the applicable Interest Payment Date will
bear interest on the amount thereof (to the extent permitted by law) at the rate
per annum of 9 7/8% thereof, compounded semi-annually. The term "interest," as
used herein, shall include semi-annual interest payments, interest on
semi-annual interest payments not paid on the applicable Interest Payment Date
and Additional Sums (as defined herein), as applicable.
The Private Junior Subordinated Debentures were issued and the Exchange
Junior Subordinated Debentures will be issued in denominations of $1,000 and
integral multiples thereof. The Junior Subordinated Debentures will mature on
February 15, 2027 (the "Stated Maturity Date").
The Exchange Junior Subordinated Debentures will rank pari passu with all
Other Debentures and will be unsecured and subordinate and rank junior in right
of payment, to the extent and in the manner set forth in the Indenture, to all
Senior Indebtedness. See "-- Subordination."
The Company is a legal entity separate and distinct from its other
subsidiaries. The Company's subsidiaries include, among others, Interpool
Limited and Trac Lease. The right of the Company to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of the
subsidiary, except to the extent the Company may itself be recognized as a
creditor of that subsidiary. Accordingly, the Exchange Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the Company,
including Senior Indebtedness, or the incurrence of liabilities by the Company's
subsidiaries. See "-- Subordination."
Form, Registration and Transfer
If the Exchange Junior Subordinated Debentures are distributed to the
holders of the Trust Securities, the Exchange Junior Subordinated Debentures may
be represented by one or more global certificates registered in the name of Cede
& Co. as the nominee of DTC. The depository arrangements for such Exchange
Junior Subordinated Debentures are expected to be substantially similar to those
in effect for the Exchange Capital Securities. For a description of DTC and the
terms of the depository arrangements relating to payments, transfers, voting
rights, redemptions and other notices and other matters, see "Description of the
Exchange Securities -- Description of Exchange Capital Securities -- Form,
Denomination, Book-Entry Procedures and Transfer."
Payment and Paying Agents
Payment of principal of and premium, if any, and any interest on Exchange
Junior Subordinated Debentures will be made at the office of the Debenture
Trustee in New York, New York or at the office of such Paying Agent or Paying
Agents as the Company may designate from time to time, except that at the option
of the Company payment of any interest may be made, except in the case of
Exchange Junior Subordinated Debentures in global form, by check mailed to the
address of the Person entitled thereto as such address shall appear in the
register for Exchange Junior Subordinated Debentures. Payment of any interest on
any Exchange Junior Subordinated Debenture will be made to the Person in whose
name such Exchange Junior Subordinated Debenture is registered at the close of
business on the Record Date for such interest, except in the case of defaulted
interest. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent; however, the Company will at all
times be required to maintain a Paying Agent in each place of payment for the
Exchange Junior Subordinated Debentures.
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Any monies deposited with the Debenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of and
premium, if any, or interest on any Exchange Junior Subordinated Debenture and
remaining unclaimed for two years after such principal and premium, if any, or
interest has become due and payable shall, at the request of the Company, be
repaid to the Company and the holder of such Exchange Junior Subordinated
Debenture shall thereafter look, as a general unsecured creditor, only to the
Company for payment thereof.
Option to Extend Interest Payment Date
So long as no Debenture Event of Default has occurred and is continuing,
the Company will have the right under the Indenture at any time during the term
of the Exchange Junior Subordinated Debentures to defer the payment of interest
from time to time for a period not exceeding 10 consecutive semi-annual periods
with respect to each Extension Period, provided that no Extension Period may
extend beyond the Stated Maturity Date. At the end of an Extension Period, the
Company must pay all interest then accrued and unpaid (together with interest
thereon at the annual rate of 9 7/8%, compounded semi-annually, to the extent
permitted by applicable law). During an Extension Period, interest will continue
to accrue and holders of Exchange Junior Subordinated Debentures (and holders of
the Trust Securities while Trust Securities are outstanding) will be required to
accrue interest income for United States federal income tax purposes prior to
the receipt of cash attributable to such income. See "Certain Federal Income Tax
Considerations -- Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company (including any Other Debentures) that rank pari passu
with or junior in right of payment to the Exchange Junior Subordinated
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Company of the debt securities of any subsidiary of the Company (including
any Other Guarantees) if such guarantee ranks pari passu with or junior in right
of payment to the Junior Subordinated Debentures (other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Exchange
Guarantee, (d) the purchase of fractional shares resulting from a
reclassification of the Company's capital stock, (e) 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, (f) the purchase of fractional interests
in shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (g) purchases of common stock related to the issuance of common stock or
rights under any of the Company's benefit plans for its directors, officers or
employees or any of the Company's dividend reinvestment plans).
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company must give the Property Trustee,
the Regular Trustees and the Debenture Trustee notice of its election of any
Extension Period (or an extension thereof) at least five Business Days prior to
the earlier of (i) the date the Distributions on the Trust Securities would have
been payable except for the election to begin or extend such Extension Period or
(ii) the date the Regular Trustees are required to give notice to any securities
exchange or to holders of Capital Securities of the record date or the date such
Distributions are payable, but in any event not less than five Business Days
prior to such record date. The Debenture Trustee shall give notice to the
holders of the Capital Securities of the Company's
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<PAGE> 48
election to begin or extend an Extension Period. There is no limitation on the
number of times that the Company may elect to begin an Extension Period.
Optional Prepayment
The Exchange Junior Subordinated Debentures will be prepayable, in whole or
in part, at the option of the Company on or after February 15, 2007 (the
"Initial Optional Prepayment Date"), at a prepayment price (the "Optional
Prepayment Price") equal to the percentage of the outstanding principal amount
of the Exchange Junior Subordinated Debentures specified below, plus, in each
case, accrued interest thereon to the date of prepayment if prepaid during the
12-month period beginning February 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---------------------------------------------------------------- ----------
<S> <C>
2007............................................................ 104.9375%
2008............................................................ 104.4438
2009............................................................ 103.9500
2010............................................................ 103.4563
2011............................................................ 102.9625
2012............................................................ 102.4688
2013............................................................ 101.9750
2014............................................................ 101.4813
2015............................................................ 100.9875
2016............................................................ 100.4938
2017 and thereafter............................................. 100.0000%
</TABLE>
Special Event Prepayment
If a Special Event occurs and is continuing, the Company may, at its
option, prepay the Exchange Junior Subordinated Debentures in whole (but not in
part) at any time prior to February 15, 2007 within 90 days of the occurrence of
such Special Event, at a prepayment price (the "Special Event Prepayment Price")
equal to the greater of (i) 100% of the principal amount of such Exchange Junior
Subordinated Debentures or (ii) the sum, as determined by a Quotation Agent, of
the present values of the principal amount and premium payable with respect to
an optional prepayment of Exchange Junior Subordinated Debentures on February
15, 2007, together with scheduled payments of interest on the Exchange Junior
Subordinated Debentures accruing from the prepayment date to and including the
Initial Optional Prepayment Date (the "Remaining Life"), discounted to the
prepayment date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued
interest on the Exchange Junior Subordinated Debentures to the date of
prepayment.
A "Special Event" means a Tax Event or an Investment Company Act Event.
A "Tax Event" means the receipt by the Company and the Trust of an opinion
of counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the Issue Date, there
is more than an insubstantial risk that (i) the Trust is, or will be within 90
days of the date of such opinion, subject to United States federal income tax
with respect to income received or accrued on the Junior Subordinated
Debentures, (ii) interest payable by the Company on the Exchange Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion
will not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, or (iii) the Trust is, or will be within 90 days of
the date of such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
An "Investment Company Act Event" means the receipt by the Company and the
Trust of an opinion of counsel experienced in practice under the Investment
Company Act of 1940, as amended (the "1940 Act"),
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to the effect that, as a result of the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), there is more than an insubstantial risk that the
Trust is or will be considered an "investment company" which is required to be
registered under the 1940 Act, which Change in 1940 Act Law becomes effective on
or after the Issue Date.
"Adjusted Treasury Rate" means, with respect to any prepayment date, (i)
the rate per annum equal to the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently published
statistical release designated "H.15 (519)" or any successor publication which
is published weekly by the Federal Reserve Board and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the Remaining Life (if no maturity is within three months before or after the
maturity corresponding to the Remaining Life, yields for the two published
maturities most closely corresponding to the Remaining Life shall be determined
and the Adjusted Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding to the nearest month) or (ii) if such
release (or any successor release) is not published during the week preceding
the calculation date or does not contain such yields, the rate per annum equal
to the semi-annual equivalent yield to maturity of the Comparable Treasury
Issue, calculated using a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such prepayment date, in each case calculated on the third Business Day
preceding the prepayment date plus in each case (a) 1.35% if such prepayment
date occurs on or prior to January 31, 1998 and (b) .50% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Remaining
Life of the Exchange Junior Subordinated Debentures that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
Remaining Life of the Junior Subordinated Debentures. If no United States
Treasury security has a maturity which is within a period from three months
before to three months after the Initial Optional Prepayment Date, the two most
closely corresponding United States Treasury securities shall be used as the
Comparable Treasury Issue, and the Adjusted Treasury Rate shall be interpolated
or extrapolated on a straight-line basis, rounding to the nearest month, using
such securities.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Company. "Reference Treasury Dealer" means: (i) Merrill Lynch Government
Securities, Inc. and its respective successors; provided, however, that if the
foregoing shall cease to be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Company shall substitute therefor
another Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer
selected by the Company.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of five Reference Treasury Dealer Quotations for such prepayment date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Debenture Trustee obtains fewer than three such Reference Treasury
Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such prepayment date.
"Additional Sums" means such additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on the
outstanding Capital Securities and Common Securities
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shall not be reduced as a result of any additional taxes, duties or other
governmental charges to which the Trust has become subject as a result of a
Special Event.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Exchange Junior
Subordinated Debentures to be prepaid at its registered address. Unless the
Company defaults in payment of the prepayment price, on and after the prepayment
date interest ceases to accrue on such Exchange Junior Subordinated Debentures
called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Special Event, the Company will pay as
additional amounts on the Exchange Junior Subordinated Debentures the Additional
Sums.
Certain Covenants of the Company
The Company will also covenant that it will not, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Company (including Other Debentures) that rank pari passu with
or junior in right of payment to the Exchange Junior Subordinated Debentures or
(iii) make any guarantee payments with respect to any guarantee by the Company
of the debt securities of any subsidiary of the Company (including under Other
Guarantees) if such guarantee ranks pari passu or junior in right of payment to
the Exchange Junior Subordinated Debentures (other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholder's rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Exchange
Guarantee, (d) the purchase of fractional shares resulting from a
reclassification of the Company's capital stock, (e) 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, (f) the purchase of fractional interests
in shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
and (g) purchases of common stock related to the issuance of common stock or
rights under any of the Company's benefit plans for its directors, officers or
employees or any of the Company's dividend reinvestment plans) if at such time
(1) there shall have occurred any event of which the Company has actual
knowledge that (a) is, or with the giving of notice or the lapse of time, or
both, would be, a Debenture Event of Default and (b) in respect of any
nonpayment default, which the Company shall not have taken reasonable steps to
cure, and in respect of any payment default, which has not been cured, (2) if
such Exchange Junior Subordinated Debentures are held by the Trust, the Company
shall be in default with respect to its payment of any obligations under the
Exchange Guarantee or (3) the Company shall have given notice of its election of
an Extension Period, or any extension thereof, as provided in the Indenture and
shall not have rescinded such notice, and such Extension Period, or any
extension thereof, shall have commenced.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Exchange Junior Subordinated Debentures constitutes a
"Debenture Event of Default" (whatever the reason for such Debenture Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) failure for 30 days to pay any interest on the Exchange Junior
Subordinated Debentures or any Other Debentures, when due (subject to the
deferral of any due date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on the Exchange
Junior Subordinated Debentures or any Other Debentures when due whether at
maturity, upon redemption, by declaration of acceleration of maturity or
otherwise; or
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(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to the Company from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of Exchange Junior Subordinated
Debentures; or
(iv) certain events of bankruptcy, insolvency or reorganization of the
Company or
(v) the dissolution, winding up or termination of the Trust, other
than upon redemption of all outstanding Trust Securities, under the
circumstances described under " -- Description of Capital
Securities -- Liquidation of the Trust and Distribution of Exchange Junior
Subordinated Debentures" or upon a permitted merger, conversion,
consolidation or amalgamation of the Trust.
The holders of a majority in aggregate outstanding principal amount of the
Exchange Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Exchange Junior Subordinated
Debentures may declare the principal due and payable immediately upon a
Debenture Event of Default. The holders of a majority in aggregate outstanding
principal amount of the Junior Subordinated Debentures may annul such
declaration and waive the default if the default (other than the nonpayment of
the principal of the Exchange Junior Subordinated Debentures which has become
due solely by such acceleration) has been cured and a sum sufficient to pay all
matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Exchange Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Exchange Junior Subordinated Debentures, waive any past
default except a default in the payment of principal of or premium, if any, on
or interest (unless such default has been cured and a sum sufficient to pay all
matured installments of interest and premium, if any, and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Exchange Junior Subordinated Debenture.
The Indenture requires the annual filing by the Company with the Debenture
Trustee of a certificate as to the absence of certain defaults under the
Indenture.
Enforcement of Certain Rights by Holders of Exchange Capital Securities
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of the Company to pay interest or premium,
if any, on principal of the Exchange Junior Subordinated Debentures on the due
date, a holder of Exchange Capital Securities may institute a Direct Action. The
Company may not amend the Indenture to remove the foregoing right to bring a
Direct Action without the prior written consent of the holders of all of the
Exchange Capital Securities. If the right to bring a Direct Action is removed
following the Exchange Offer, the Trust may become subject to the reporting
obligations under the Exchange Act. Notwithstanding any payments made to a
holder of Capital Securities by the Company in connection with a Direct Action,
the Company shall remain obligated to pay the principal of or premium, if any,
or interest on the Exchange Junior Subordinated Debentures, and the Company
shall be subrogated to the rights of the holder of such Capital Securities with
respect to payments on the Exchange Capital Securities to the extent of any
payments made by the Company to such holder in any Direct Action.
The holders of the Exchange Capital Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Exchange Junior Subordinated Debentures unless
there shall have been an Event of Default under the Declaration. See
" -- Description of Capital Securities -- Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets as
an entirety or substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Company or convey, transfer or lease its
properties and
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assets as an entirety or substantially as an entirety to the Company, unless:
(i) in case the Company consolidates with or merges into another Person or
conveys or transfers its properties and assets substantially as an entirety to
any Person, the successor Person is organized under the laws of the United
States or any State or the District of Columbia, and such successor Person
expressly assumes the Company's obligations on the Exchange Junior Subordinated
Debentures; and (ii) immediately after giving effect thereto, no Debenture Event
of Default, and no event which, after notice or lapse of time or both, would
become a Debenture Event of Default, shall have occurred and be continuing.
The general provisions of the Indenture do not afford holders of the
Exchange Junior Subordinated Debentures protection in the event of a highly
leveraged or other transaction involving the Company that may adversely affect
holders of the Exchange Junior Subordinated Debentures.
Modification of the Indenture
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interests of the holders of Junior
Subordinated Debentures), making any other change that does not adversely affect
the rights of any holder of Junior Subordinated Debentures and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act.
The Indenture contains provisions permitting the Company and the Debenture
Trustee, with the consent of the holders of a majority in principal amount of
Junior Subordinated Debentures, to modify the Indenture in a manner affecting
the rights of the holders of Junior Subordinated Debentures; provided that no
such modification may, without the consent of the holders of each outstanding
Junior Subordinated Debenture so affected, (i) change the Stated Maturity or
reduce the principal amount of the Junior Subordinated Debentures or reduce the
rate or extend the time of payment of interest thereon or reduce any amount
payable upon redemption or prepayment thereof or change any date on which the
Junior Subordinated Debentures may be prepaid or (ii) reduce the percentage of
principal amount of Junior Subordinated Debentures, the holders of which are
required to consent to any such modification of the Indenture.
Satisfaction and Discharge
The Indenture provides that when, among other things, all Exchange Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at maturity within one year, and the Company deposits or causes to be deposited
with the Debenture Trustee funds, in trust, for the purpose and in an amount
sufficient to pay and discharge the entire indebtedness on the Exchange Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation, for the principal and premium, if any, and interest to the date of
the deposit or to the Stated Maturity 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.
Subordination
The Indenture provides that the Exchange Junior Subordinated Debentures
issued thereunder will be subordinate and junior in right of payment to all
Senior Indebtedness to the extent provided in the Indenture. No payments on
account of principal or premium, if any, or interest, if any, in respect of the
Exchange Junior Subordinated Debentures may be made if there shall have occurred
and be continuing a default in any payment with respect to Senior Indebtedness,
or an event of default with respect to any Senior Indebtedness resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency,
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debt restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Senior Indebtedness will
first be entitled to receive payment in full before the holders of Exchange
Junior Subordinated Debentures will be entitled to receive or retain any payment
in respect thereof.
In the event of the acceleration of the maturity of Exchange Junior
Subordinated Debentures, the holders of all Senior Indebtedness outstanding at
the time of such acceleration will first be entitled to receive payment in full
before the holders of Exchange Junior Subordinated Debentures will be entitled
to receive or retain any payment in respect of the Exchange Junior Subordinated
Debentures.
The term "Senior Indebtedness" means (i) the principal, premium, if any,
and interest in respect of (A) indebtedness of the Company for money borrowed,
whether outstanding on the date of the Indenture or thereafter created, and (B)
indebtedness evidenced by securities, debentures, bonds or other similar
instruments issued by the Company, (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 agreement (but
excluding trade accounts payable arising in the ordinary course of business),
(iv) all obligations of the Company for the reimbursement on any letter of
credit, banker's acceptance, security purchase facility or similar credit
transactions, (v) all obligations of the Company arising from off-balance sheet
guarantees by the Company and direct credit substitutes and obligations of the
Company associated with derivative products such as interest and foreign
exchange rate contracts, commodity contracts, swap agreements (including
interest rate and foreign exchange swap agreements), cap agreements, floor
agreements, collar agreements, interest rate agreements, foreign exchange rate
agreements, options, commodity futures contracts and commodity option contracts;
(vi) all obligations of the types 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 types
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 ranks pari passu with the Exchange Junior Subordinated
Debentures and (2) any indebtedness between or among the Company or its
affiliates, including all other debt securities and guarantees in respect of
those debt securities, issued to (a) the Trust or (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 Exchange Capital
Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness
and be entitled to the benefits of the subordination provisions irrespective of
any amendment, modification or waiver of any term of such Senior Indebtedness.
The right of the Company to participate in any distribution of assets of
any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise, is subject to the prior claims of creditors of the subsidiary, except
to the extent the Company may itself be recognized as a creditor of that
subsidiary. Accordingly, the Exchange Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries.
At December 31, 1996, Senior Indebtedness of the Company totaled $602.7
million. The Company expects from time to time to incur additional indebtedness
constituting Senior Indebtedness. The Indenture places no limitation on the
amount of additional Senior Indebtedness that may be incurred by the Company or
the amount of liabilities which the Company's subsidiaries may incur.
Governing Law
The Indenture and the Exchange Junior Subordinated Debentures will be
governed by and construed in accordance with the laws of the State of New York.
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Information Concerning the Debenture Trustee
The Debenture Trustee is subject to all the duties and responsibilities
specified with respect to an indenture trustee under the Trust Indenture Act.
Subject to such provisions, the Debenture Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
holder Exchange of Junior Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Debenture Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if the Debenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
DESCRIPTION OF THE EXCHANGE GUARANTEE
The Private Guarantee was executed and delivered by the Company
concurrently with the issuance by the Trust of the Private Capital Securities
for the benefit of the holders from time to time of the Capital Securities. As
soon as practicable after the date hereof, the Private Guarantee will be
exchanged by the Company for the Exchange Guarantee for the benefit of holders
from time to time of the Exchange Securities. IBJ Schroder Bank & Trust Company
will act as Guarantee Trustee under the Guarantee. The Exchange Guarantee has
been qualified under the Trust Indenture Act. This summary of certain provisions
of the Exchange Guarantee does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of the Exchange
Guarantee, including the definitions therein of certain terms, and the Trust
Indenture Act. The Exchange Guarantee Trustee will hold the Exchange Guarantee
for the benefit of the holders of the Exchange Capital Securities.
General
The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Exchange Capital Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
Exchange Capital Securities to the extent not paid by or on behalf of the Trust
(the "Guarantee Payments"), will be subject to the Exchange Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on the Exchange Capital
Securities, to the extent the Trust has funds on hand legally available
therefor, (ii) the Redemption Price with respect to any Exchange Capital
Securities called for redemption, to the extent that the Trust has funds on hand
legally available therefor, or (iii) upon a voluntary or involuntary termination
and liquidation of the Trust (unless the Exchange Junior Subordinated Debentures
are distributed to holders of the Exchange Capital Securities), the lesser of
(a) the Liquidation Distribution and (b) the amount of assets of the Trust
remaining available for distribution to holders of Exchange Capital Securities.
The Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of the Exchange
Capital Securities or by causing the Trust to pay such amounts to such holders.
The Exchange Guarantee will rank subordinate and junior in right of payment
to all Senior Indebtedness to the extent provided therein. See "-- Status of the
Exchange Guarantee." In addition, the right of the Company to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Company may itself be recognized as a
creditor of that subsidiary. Accordingly, the Company's obligations under the
Exchange Guarantee will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries. See " -- Description of Exchange
Junior Subordinated Debentures -- General." The Exchange Guarantee does not
limit the incurrence or issuance of other secured or unsecured debt of the
Company, including Senior Indebtedness, whether under the Indenture, any other
indenture that the Company may enter into in the future or otherwise.
The Company will, through the Exchange Guarantee, the Declaration, the
Exchange Junior Subordinated Debentures and the Indenture, taken together,
fully, irrevocably and unconditionally guarantee all of the Trust's obligations
under the Exchange Capital Securities. See "Relationship Among the Exchange
Capital Securities, the Exchange Junior Subordinated Debentures and the
Guarantee."
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Status of the Exchange Guarantee
The Exchange Guarantee will constitute an unsecured obligation of the
Company and will rank subordinate and junior in right of payment to all Senior
Indebtedness in the same manner as Exchange Junior Subordinated Debentures,
except in the case of a bankruptcy or insolvency proceeding in respect of the
Company, in which case the Exchange Guarantee will rank subordinate and junior
in right of payment to all liabilities (other than Other Guarantees) of the
Company.
The Exchange Guarantee will rank pari passu with all Other Guarantees
issued by the Company. The Exchange Guarantee will constitute a guarantee of
payment and not of collection (i.e., the guaranteed party may institute a legal
proceeding directly against the Company to enforce its rights under the Exchange
Guarantee without first instituting a legal proceeding against any other person
or entity). The Exchange Guarantee will be held for the benefit of the holders
of the Exchange Capital Securities. The Exchange Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent not
paid by the Trust or upon distribution to the holders of the Capital Securities
of the Exchange Junior Subordinated Debentures.
The Exchange Guarantee does not place a limitation on the amount of
additional Senior Indebtedness that may be incurred by the Company or the amount
of liabilities which the Company's subsidiaries may incur. The Company expects
from time to time to incur additional indebtedness constituting Senior
Indebtedness.
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Capital Securities (in which case no vote will be
required), the Exchange Guarantee may not be amended without the prior approval
of the holders of a majority of the Liquidation Amount of such outstanding
Exchange Capital Securities. The manner of obtaining any such approval will be
as set forth under " -- Description of Exchange Capital Securities -- Voting
Rights; Amendment of the Declaration." All guarantees and agreements contained
in the Exchange Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Exchange Capital Securities then outstanding.
Events of Default
An event of default under the Exchange 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 Liquidation Amount of the Exchange
Capital Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Exchange Guarantee
Trustee in respect of the Exchange Guarantee or to direct the exercise of any
trust or power conferred upon the Exchange Guarantee Trustee under the Exchange
Guarantee.
Any holder of the Exchange Capital Securities may institute a legal
proceeding directly against the Company to enforce its rights under the Exchange
Guarantee without first instituting a legal proceeding against the Trust, the
Exchange Guarantee Trustee or any other person or entity.
The Company, as guarantor, will be required to file annually with the
Exchange Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Exchange Guarantee.
Termination of the Exchange Guarantee
The Guarantee will terminate and be of no further force and effect upon
full payment of the applicable Redemption Price of the Capital Securities, upon
full payment of the Liquidation Amount payable upon liquidation of the Trust or
upon distribution of Exchange Junior Subordinated Debentures to the holders of
the Exchange Capital Securities. The Guarantee will continue to be effective or
will be reinstated, as the case may
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be, if at any time any holder of the Exchange Capital Securities must restore
payment of any sums paid under the Exchange Capital Securities or the Guarantee.
Information Concerning the Exchange Guarantee Trustee
The Exchange Guarantee Trustee, other than during the continuance of a
default by the Company in performance of its obligations under the Exchange
Guarantee, will undertake to perform only such duties as are specifically set
forth in the Exchange Guarantee and, after default, must 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 Exchange Guarantee Trustee will
be under no obligation to exercise any of the powers vested in it by the
Exchange Guarantee at the request of any holder of Exchange Capital Securities,
unless offered reasonable indemnity against the costs, expenses and liabilities
which might be incurred thereby. The Exchange Guarantee Trustee is not required
to expend or risk its own funds or otherwise incur personal financial liability
in the performance of its duties if it reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
Governing Law
The Exchange Guarantee will be governed by, and construed in accordance
with, the laws of the State of New York.
DESCRIPTION OF PRIVATE SECURITIES
The terms of the Private Securities are identical in all material respects
to the Exchange Securities, except that (i) the Private Securities have not been
registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the applicable Registration
Rights Agreement (which rights will terminate upon consummation of the Exchange
Offer, except under limited circumstances), (ii) the Exchange Capital Securities
will not contain the $100,000 minimum Liquidation Amount transfer restriction
and certain other restrictions on transfer applicable to Private Capital
Securities, (iii) the Exchange Capital Securities will not provide for payment
of additional distributions thereon, (iv) the Exchange Junior Subordinated
Debentures will not contain the $100,000 minimum principal amount transfer
restriction and (v) the Exchange Junior Subordinated Debentures will not provide
for payment of liquidated damages thereon. The Private Securities provide that,
in the event that the Exchange Offer is not consummated within 45 days after
July 25, 1997 or, in certain limited circumstances, in the event of a shelf
registration statement (the "Shelf Registration Statement") with respect to the
resale of the Private Capital Securities is not declared effective by July 27,
1997, then liquidated damages will accrue (in addition to the stated interest
rate on the Private Junior Subordinated Debentures) at the rate of 0.25% per
annum on the principal amount of the Private Junior Subordinated Debentures and
additional Distributions will accrue (in addition to the stated Distribution
rate on the Private Capital Securities) at the rate of 0.25% per annum on the
Liquidation Amount of the Private Capital Securities, for the period from the
occurrence of such event until such time as such required Exchange Offer is
consummated or any required Shelf Registration Statement is effective. The
Exchange Securities are not, and upon consummation of the Exchange Offer the
Private Securities will not be, entitled to any such liquidated damages or
additional Distributions. Accordingly, holders of Private Capital Securities
should review the information set forth under "Risk Factors -- Certain
Consequences of a Failure to Exchange Private Capital Securities" and
"Description of Exchange Securities."
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE
JUNIOR SUBORDINATED DEBENTURES AND THE EXCHANGE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Exchange Capital
Securities (to the extent the Trust has funds on hand legally available for the
payment of such Distributions) will be irrevocably guaranteed
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by the Company as and to the extent set forth under "Description of Exchange
Guarantee." Taken together, the Company's obligations under the Exchange Junior
Subordinated Debentures, the Indenture, the Declaration and the Exchange
Guarantee will provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of Distributions and other amounts due on the Exchange
Junior Capital Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Exchange Capital Securities. If and to the extent
that the Company does not make the required payments on the Exchange Junior
Subordinated Debentures, the Trust will not have sufficient funds to make the
related payments, including Distributions, on the Exchange Capital Securities.
The Exchange Guarantee will not cover any such payment when the Trust does not
have sufficient funds on hand legally available therefor. In such event, the
remedy of a holder of Exchange Capital Securities is to institute a Direct
Action. The obligations of the Company under the Exchange Guarantee will be
subordinate and junior in right of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Exchange Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Exchange Capital Securities,
primarily because: (i) the aggregate principal amount or Prepayment Price of the
Exchange Junior Subordinated Debentures will be equal to the sum of the
Liquidation Amount or Redemption Price, as applicable, of the Exchange Capital
Securities and Common Securities; (ii) the interest rate and interest and other
payment dates on the Exchange Junior Subordinated Debentures will match the
Distribution rate and Distribution and other payment dates for the Trust
Securities; (iii) the Company shall pay for all and any costs, expenses and
liabilities of the Trust except the Trust's obligations to holders of Trust
Securities under such Trust Securities; and (iv) the Declaration will provide
that the Trust is not authorized to engage in any activity that is not
consistent with the limited purposes thereof.
ENFORCEMENT OF RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of any Exchange Capital Security may institute a legal proceeding
directly against the Company to enforce its rights under the Exchange Guarantee
without first instituting a legal proceeding against the Exchange Guarantee
Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Declaration. However, in the
event of payment defaults under, or acceleration of, Senior Indebtedness, the
subordination provisions of the Indenture will provide that no payments may be
made in respect of the Exchange Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on Exchange Junior
Subordinated Debentures would constitute an Event of Default under the
Declaration.
LIMITED PURPOSE OF THE TRUST
The Exchange Capital Securities will represent preferred beneficial
interests in the Trust, and the Trust exists for the sole purpose of issuing and
selling the Trust Securities, using the proceeds from the sale of the Trust
Securities to acquire the Exchange Junior Subordinated Debentures, making
Distributions to holders of the Trust Securities and engaging in only those
other activities necessary, advisable or incidental thereto.
RIGHTS UPON TERMINATION
Unless the Exchange Junior Subordinated Debentures are distributed to
holders of the Trust Securities, upon any voluntary or involuntary termination
and liquidation of the Trust, the holders of the Trust Securities will be
entitled to receive, out of assets held by the Trust, the Liquidation
Distribution in cash. See "Description of Exchange Securities -- Description of
Exchange Capital Securities -- Liquidation of the Trust and Distribution of
Exchange Junior Subordinated Debentures." Upon any voluntary or involuntary
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liquidation or bankruptcy of the Company, the Property Trustee, as holder of the
Exchange Junior Subordinated Debentures, would be a subordinated creditor of the
Company, subordinated in right of payment to all Senior Indebtedness as set
forth in the Indenture, but entitled to receive payment in full of principal
(and premium, if any) and interest, before any stockholders of the Company
receive payments or distributions. Since the Company will be the guarantor under
the Exchange Guarantee and will agree to pay for all costs, expenses and
liabilities of the Trust (other than the Trust's obligations to the holders of
its Trust Securities), the positions of a holder of Exchange Capital Securities
and a holder of Exchange Junior Subordinated Debentures relative to other
creditors and to stockholders of the Company in the event of liquidation or
bankruptcy of the Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Stroock & Stroock & Lavan LLP, counsel to the Company and
the Trust, the following is a summary of the material United States federal
income tax consequences of the purchase, ownership and disposition of Capital
Securities. Unless otherwise stated, this summary deals only with Capital
Securities held as capital assets by holders who purchased the Private Capital
Securities upon original issuance at the original offering price. It does not
deal with special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, foreign persons engaged in a
trade or business within the United States or persons that will hold the Capital
Securities as a position in a "straddle," as part of a "synthetic security" or
"hedge," or as part of a "conversion transaction" or other integrated
investment. This summary also does not address the 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 Capital
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the Capital Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder and administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change possibly on a
retroactive basis. No rulings will be obtained from the Internal Revenue Service
(the "IRS") with respect to any of the federal income tax consequences described
herein. Thus, there can be no assurances that the IRS will not take a position
contrary to the views or opinions expressed herein and that such position might
not ultimately be sustained by the courts.
EXCHANGE OF CAPITAL SECURITIES
The exchange of the Private Capital Securities for Exchange Capital
Securities should not be a taxable event to holders of Capital Securities for
United States federal income tax purposes. The exchange of Private Capital
Securities for Exchange Capital Securities pursuant to the Exchange Offer should
not be treated as an "exchange" for United States federal income tax purposes
because the Exchange Capital Securities should not be considered to differ
materially in kind or extent from the Private Capital Securities and because the
exchange will occur by operation of the terms of the Private Capital Securities.
If, however, the exchange of the Private Capital Securities for the Exchange
Capital Securities were treated as an exchange for United States federal income
tax purposes, such exchange should constitute a non-taxable recapitalization for
United States federal income tax purposes. Accordingly, the Exchange Capital
Securities should have the same issue price as the Private Capital Securities,
and a holder should have the same adjusted tax basis and holding period in the
Exchange Capital Securities as the holder had in the Private Capital Securities
immediately before the exchange.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
Based on the advice of Stroock & Stroock & Lavan LLP, the Company intends
to take the position that the Junior Subordinated Debentures will be classified
for United States federal income tax purposes as indebtedness of the Company
under current law. However, no opinion of counsel has been rendered with respect
to such classification of the Junior Subordinated Debentures as it relates to
the federal income tax consequences of the purchase, ownership and disposition
of the Capital Securities. The remainder of this
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discussion assumes that the Junior Subordinated Debentures will be classified as
indebtedness of the Company for United States federal income tax purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Private Capital Securities, Stroock
& Stroock & Lavan LLP rendered its opinion generally to the effect that, under
then current law and assuming full compliance with the terms of the Declaration
and the Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Trust will be classified for United
States federal income tax purposes as a grantor trust and not as an association
taxable as a corporation. Accordingly, for United States federal income tax
purposes, each holder of Capital Securities generally should be considered the
owner of an undivided interest in the Junior Subordinated Debentures, and each
holder should be required to include in its gross income any interest (or
accrued original issue discount ("OID"), if any) with respect to its allocable
share of those Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Holders (including cash basis holders) of debt instruments issued with OID
must generally include such OID in income as it accrues on a constant yield
method even if there is not a corresponding receipt of cash attributable to such
income. A debt instrument such as a Junior Subordinated Debenture will generally
be treated as issued with OID if the stated interest on the instrument does not
constitute "qualified stated interest." Qualified stated interest is generally
any one of a series of stated interest payments on an instrument that are
unconditionally payable at least annually at a single fixed rate. In determining
whether stated interest on an instrument is unconditionally payable and thus
constitutes qualified stated interest, remote contingencies as to the timely
payment of stated interest are ignored. In the case of the Junior Subordinated
Debentures, the Company has concluded that the likelihood of its exercising its
option to defer payments of interest by extending the interest payment period is
remote because the exercise of such option would prevent the Company from, among
other things, declaring dividends on any class of its stock. Accordingly, the
Company intends to treat the Junior Subordinated Debentures as having been
issued without OID and, therefore, holders of Capital Securities will accrue
interest income under their particular methods of accounting (e.g., cash or
accrual) rather than accruing OID on a constant yield method.
If the option to defer the payment of interest was determined not to be
"remote" or if the Company exercised such option, the Junior Subordinated
Debentures would be treated as issued with OID at the time of issuance or at the
time of such exercise, as the case may be, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the Junior
Subordinated Debentures remained outstanding. In such event, all of a holder's
taxable interest income in respect of the Junior Subordinated Debentures would
constitute OID that would have to be included in income on a constant yield
method before the receipt of cash attributable to such income, regardless of
such person's method of tax accounting, and actual distributions of stated
interest would not be reported as taxable income. Consequently, a holder of
Capital Securities would be required to include such OID in gross income even
though the Company would not make any actual cash payments during an Extension
Period.
The above conclusions are based on recently promulgated Treasury
regulations, which have not been interpreted by any court decisions or addressed
in any ruling or other pronouncements of the IRS, and it is possible that the
IRS could take a position contrary to the conclusions herein.
Corporate holders of the Capital Securities will not be entitled to a
dividends received deduction with respect to any income recognized with respect
to the Capital Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL SECURITIES
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures, as described under the caption "Description of Capital
Securities -- Liquidation of the Trust and Distribution of Junior Subordinated
Debentures," would be treated as a nontaxable event to each holder, and would
result in each holder of Capital Securities receiving directly such holder's pro
rata share of the Junior Subordinated
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Debentures previously held indirectly through the Trust. In such event, each
holder would receive an aggregate tax basis in the Junior Subordinated
Debentures equal to such holder's aggregate tax basis in its Capital Securities,
and such holder's holding period in the Junior Subordinated Debentures would
include the period during which the Capital Securities were held by such holder.
A holder will accrue interest in respect of the Junior Subordinated Debentures
in the manner described above under "-- Interest Income and Original Issue
Discount."
DISPOSITION OF THE CAPITAL SECURITIES
Upon a sale, exchange or other disposition of the Capital Securities
(including a distribution of cash in redemption of a holder's Capital Securities
following the redemption or repayment of the underlying Junior Subordinated
Debentures, but excluding the distribution of Junior Subordinated Debentures), a
holder of Capital Securities will recognize gain or loss equal to the difference
between the amount realized (excluding amounts attributable to accrued and
unpaid interest which the holder has not yet included in income and which will
be treated separately as ordinary income) and the holder's adjusted tax basis in
the Capital Securities disposed of. A holder's adjusted tax basis in the Capital
Securities generally will be the holder's initial purchase price increased by
OID (if any) previously includible in such holder's gross income to the date of
the disposition and decreased by payments received on the Capital Securities
(other than payments attributable to "qualified stated interest" as discussed
above under "-- Interest Income and Original Issue Discount."). Gain or loss
recognized by a holder on Capital Securities held for more than one year will
generally be taxable as long-term capital gain or loss.
The Capital Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder of Capital Securities who disposes of such
holder's Capital Securities between record dates for payments of Distributions
thereon will nevertheless be required to include accrued but unpaid interest
(including OID, if any) on the Junior Subordinated Debentures through the date
of disposition in income as ordinary income, and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. Accordingly, such a holder will recognize a
capital loss to the extent the selling price (which may not fully reflect the
value of accrued but unpaid interest) is less than the holder's adjusted tax
basis (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or which is a citizen
or individual resident (or is treated as a citizen or individual resident) of
the United States for federal income tax purposes, a corporation or partnership
created or organized (or treated as created or organized for federal income tax
purposes) in or under the laws of the United States or any political subdivision
thereof, an estate the income of which is includible in its gross income for
federal income tax purposes without regard to its source or a trust generally if
(i) a court within the United States is able to exercise primary supervision
over the administration of the trust and (ii) one or more United State trustees
have the authority to control all substantial decisions of the trust.
Under present United States federal income tax law: (i) payments by the
Trust or any of its paying agents to any holder of a Capital Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the Capital
Security does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of the Company entitled to vote,
(b) the beneficial owner of the Capital Security is not a controlled foreign
corporation that is related to the Company through stock ownership, and (c)
either (A) the beneficial owner of the Capital Security certifies to the Trust
or its agent, under penalties of perjury, that it is not a U.S. Holder and
provides its name and address or (B) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution"), and
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holds the Capital Security in such capacity, certifies to the Trust or its
agent, under penalties of perjury, that such statement has been received from
the beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes the Trust or its agent with a copy thereof; and
(ii) a United States Alien Holder of a Capital Security will not be subject to
United States federal withholding tax on any gain realized upon the sale or
other disposition of a Capital Security.
On April 22, 1996, the IRS proposed regulations (the "Proposed
Regulations") which, if adopted in their current form, could affect the
procedures to be followed by a United States Alien Holder in establishing such
United States Alien Holder's status as a United States Alien Holder for the
purposes of the withholding rules (including the backup withholding rules
referred to below). The Proposed Regulations, if adopted in their present form,
generally would be effective for payments made after December 31, 1997.
Prospective investors should contact their tax advisors concerning the potential
adoption of such Proposed Regulations and the potential effect on their
ownership of the Capital Securities.
PROPOSED TAX LEGISLATION
President Clinton's fiscal 1998 budget proposal contained provisions which
if enacted would treat as equity for United States federal income tax purposes
instruments that have a maximum term of more than 15 years and that are not
shown as indebtedness on the balance sheet of the issuer. These provisions, if
enacted as proposed, would apply to instruments issued after the date of first
committee action. Since the exchange of Private Securities for the Exchange
Securities should not be a taxable event, it is not anticipated that the Junior
Subordinated Debentures would be treated as reissued and that such provisions,
if enacted as currently proposed, would apply to the Junior Subordinated
Debentures. However, there can be no assurance that legislation implementing
these provisions, if any, or that other future legislation will not adversely
affect the ability of the Company to deduct interest on the Junior Subordinated
Debentures. Such a change in the tax law could give rise to a Tax Event and
could result in the distribution of the Junior Subordinated Debentures to
holders of the Capital Securities or, in certain circumstances, the redemption
of such securities by the Company and the distribution of the resulting cash in
redemption of the Preferred Securities. See "Description of Capital
Securities -- Redemption."
INFORMATION REPORTING TO HOLDERS
The Trust will report income on the Junior Subordinated Debentures, and any
gross proceeds received by the Trust from the retirement or redemption of the
Junior Subordinated Debentures, annually to the holders of record of the Capital
Securities and the Internal Revenue Service. The Trust currently intends to
deliver such reports to holders of record prior to January 31 following each
calendar year. It is anticipated that persons who hold Capital Securities as
nominees for beneficial holders will report the required tax information to
beneficial holders on Form 1099.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will
generally be allowed as a credit against the holder's United States federal
income tax, provided the required information is timely filed with the Internal
Revenue Service.
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
CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
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ERISA CONSIDERATIONS
The Company, the obligor with respect to the Junior Subordinated Debentures
held by the Trust, and its affiliates and the Property Trustee may each be
considered a "party in interest" (within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to many employee
benefit plans ("Plans") that are subject to ERISA. Any purchaser proposing to
acquire Capital Securities with assets of any Plan should consult with its
counsel. The purchase and/or holding of Capital Securities by a Plan that is
subject to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including individual
retirement arrangements and other plans described in Section 4975(e)(1) of the
Code) and with respect to which the Company, the Property Trustee or any
affiliate is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such Capital Securities are acquired
pursuant to and in accordance with an applicable exemption, such as Prohibited
Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), or PTCE 95-60 (an exemption for
transactions involving certain insurance company general accounts) or PTCE 95-23
(an exemption for certain transactions determined by an in-house asset manager).
In addition, a Plan fiduciary considering the purchase of Capital Securities
should be aware that the assets of the Trust may be considered "plan assets" for
ERISA purposes. Therefore, a Plan fiduciary should consider whether the purchase
of Capital Securities could result in a delegation of fiduciary authority to the
Property Trustee, and, if so, whether such a delegation of authority is
permissible under the Plan's governing instrument or any investment management
agreement with the Plan. In making such determination, a Plan fiduciary should
note that the Property Trustee is a U.S. bank qualified to be an investment
manager (within the meaning of section 3(38) of ERISA) to which such a
delegation of authority generally would be permissible under ERISA. Further,
prior to an Event of Default with respect to the Junior Subordinated Debentures,
the Property Trustee will have only limited custodial and ministerial authority
with respect to Trust assets.
PLAN OF DISTRIBUTION
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that the
Exchange Capital Securities issued pursuant to the Exchange Offer in exchange
for Private Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act, (ii) a broker-dealer
who acquired Private Capital Securities directly from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
or (iii) a broker-dealer who acquired Private Capital Securities as a result of
market making or other trading activities), without compliance with the
registration and prospectus delivery requirements of the Securities Act;
provided that the holder is acquiring Exchange Capital Securities in the
ordinary course of its business and is not participating, and has no arrangement
or understanding with any person to participate, in the distribution of the
Exchange Capital Securities. Holders of Private Capital Securities wishing to
accept the Exchange Offer must represent to the Company, as required by the
Registration Rights Agreement, that such conditions have been met. The Company
believes that none of the registered holders of the Private Capital Securities
is an affiliate (as such term is defined in Rule 405 under the Securities Act)
of the Company.
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Private Capital Securities must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Capital
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Capital Securities received
in exchange for Private Capital Securities, where such Private Capital
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed to make this
Prospectus (as it
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may be amended or supplemented) available to any broker-dealer, upon request,
for use in connection with any such resale, for a period of one year after the
Registration Statement is declared effective by the Commission or until such
earlier date on which all the Exchange Capital Securities are freely tradeable.
However, any broker-dealer who acquired the Securities directly from the Company
may not fulfill its prospectus delivery requirements with this Prospectus, but
must comply with the registration and prospectus delivery requirements of the
Securities Act.
The Company will not receive any proceeds from any sale of the Exchange
Capital Securities by broker-dealers or any other persons. Exchange Capital
Securities received by broker-dealers for their own accounts pursuant to the
Exchange Offer may be sold for time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Capital Securities or a combination of such methods of
resale, at market prices prevailing at the time of such resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or purchasers of any such Exchange Capital Securities.
Any broker-dealer that resells Exchange Capital Securities that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in the distribution of such Exchange Capital Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Capital Securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Capital Securities pursuant to the Exchange Offer agrees that, upon
receipt of notice from the Company of the happening of any event which makes any
statement in the Prospectus untrue in any material respect or which requires the
making of any changes in the Prospectus in order to make the statements therein
not misleading (which notice the Company agrees to deliver promptly to such
broker-dealer), such broker-dealer will suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission and has furnished copies of the amended or supplemented Prospectus
to such broker-dealer. If the Company shall give any such notice to suspend the
use of the Prospectus, it shall extend the one-year period referred to above by
the number of days during the period from and including the date of the giving
of such notice to and including the date when the broker-dealers shall have
received copies of the supplemented or amended Prospectus necessary to permit
resales of the Exchange Capital Securities.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders (including any broker-dealers) and certain parties related
to the holders against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The legality of the Exchange Debentures and the Exchange Guarantee will be
passed upon on behalf of the Company by Stroock & Stroock & Lavan LLP, New York,
New York. Stroock & Stroock & Lavan LLP will also pass upon certain matters
relating to United States federal income taxation considerations. Certain
matters of Delaware law relating to the validity of the Capital Securities will
be passed upon on behalf of the Trust by Potter Anderson & Corroon, special
Delaware counsel to the Trust.
EXPERTS
The consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K incorporated by reference into this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in giving said reports.
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