<PAGE>
PROSPECTUS
2,000,000 TRUST PREFERRED SECURITIES
WPSR CAPITAL TRUST I
7.00% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
WPS RESOURCES CORPORATION
---------------------
The 7.00% trust preferred securities represent undivided preferred
beneficial interests in the assets of WPSR Capital Trust I, a statutory business
trust created under the laws of the State of Delaware. WPS Resources
Corporation, a Wisconsin corporation, will own all of the common securities of
WPSR Capital Trust I. The Trust exists for the sole purpose of issuing its
securities and investing the proceeds in an equivalent amount of 7.00% Junior
Subordinated Deferrable Interest Debentures due 2038 of WPS Resources
Corporation. The holders of the Trust Preferred Securities will have a
preference over the holders of the Trust Common Securities with respect to
distributions and payments upon liquidation and redemption.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE TRUST PREFERRED SECURITIES.
The New York Stock Exchange, Inc. has authorized, upon official notice of
issuance, the listing of the Trust Preferred Securities. You can expect trading
of the Trust Preferred Securities on the New York Stock Exchange to begin within
a 30-day period after the issuance of the Trust Preferred Securities. The
trading symbol for the Trust Preferred Securities will be: WPSPRA
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER TRUST
PREFERRED SECURITY TOTAL
------------------ -----------
<S> <C> <C>
Public Offering Price................... $25.00(1) $50,000,000(1)
Underwriting Commission (2)............. (3) (3)
Proceeds to Trust....................... 25.00(1)(3)(4) $50,000,000(1)(3)(4)
</TABLE>
- -------
(1) Plus accrued distributions, if any, from July 30, 1998.
(2) WPS Resources Corporation and WPSR Capital Trust I have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(3) WPS Resources Corporation has agreed to pay to the Underwriters, as
compensation (the "Underwriters' Compensation") for their arranging the
investment therein of such proceeds, $0.7875 per Trust Preferred Security
(or $1,575,000 in the aggregate). See "Underwriting."
(4) Expenses of the offering which are payable by WPS Resources Corporation are
estimated to be $291,000.
------------------------
The Underwriters are severally offering the Trust Preferred Securities,
subject to the prior receipt and acceptance of the Trust Preferred Securities by
the Underwriters and their right to reject any order in whole or in part.
Delivery of the Trust Preferred Securities will be made in book-entry form only
through the facilities of The Depository Trust Company on or about July 30,
1998.
A. G. EDWARDS & SONS, INC.
ROBERT W. BAIRD & CO.
INCORPORATED
LEGG MASON WOOD WALKER
INCORPORATED
------------------------
THE DATE OF THIS PROSPECTUS IS JULY 27, 1998.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS
THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT
LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by WPS Resources Corporation ("WPSR") and WPSR Capital Trust I
(the "Trust") with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Trust Preferred Securities, the WPSR junior subordinated deferrable interest
debentures (the "Subordinated Debentures") and the WPSR guarantee of obligations
of the Trust under the Trust Preferred Securities (the "Guarantee")
(collectively, the "Offered Securities"). This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the SEC.
Reference is made to the Registration Statement and to the exhibits relating
thereto for further information with respect to WPSR, the Trust and the Offered
Securities. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the SEC or incorporated by reference herein are not necessarily complete,
and, in each instance, reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such statement is
qualified in its entirety by such reference.
WPSR 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 SEC. Reports, proxy
statements and other information filed by WPSR with the SEC may be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices located at Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661 and at the 13th Floor, Seven World Trade Center, New
York, New York 10048. Copies of such material may be obtained from the public
reference section of the SEC, 450 Fifth Street, N.W. Washington, D.C. 20549, at
prescribed rates. Such reports, proxy statements and other information
concerning WPSR may also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005 and the Chicago Stock
Exchange, 440 South LaSalle Street, Chicago, Illinois 60605, on which exchanges
WPSR's common stock is listed. Such information may also be accessed
electronically by means of the SEC's home page on the World Wide Web located at
http://www.sec.gov.
No separate financial statements of the Trust have been included or
incorporated by reference herein. WPSR does not believe that such financial
statements would be material to holders of the Trust Preferred Securities
because (i) all of the voting securities of the Trust will be owned by WPSR, a
reporting company under the Exchange Act, (ii) the Trust has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in Subordinated Debentures issued by WPSR, and (iii) the
obligations of the Trust under the Trust Preferred Securities are, to the extent
that the Trust has funds available to meet such obligations, fully and
unconditionally guaranteed by WPSR. See "Description of the Subordinated
Debentures" and "Description of the Guarantee."
The Trust is not currently subject to the information reporting requirements
of the Exchange Act. The Trust will become subject to such requirements upon the
effectiveness of the Registration Statement, although it intends to seek and
expects to receive exemptions therefrom.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by WPSR with the SEC pursuant to
the Exchange Act are incorporated herein by reference:
1. WPSR's Annual Report on Form 10-K for the year ended December 31, 1997;
2. WPSR's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998; and
3. WPSR's Current Reports on Form 8-K, dated February 25, 1998, June 10,
1998, and July 2, 1998.
All documents subsequently filed by WPSR pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Trust Preferred Securities offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
WPSR will provide without charge to each person to whom a copy of this
Prospectus has been delivered, on the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference (other than exhibits to such
documents which are not specifically incorporated by reference into the
information that this Prospectus incorporates). Requests for such copies should
be directed to Francis J. Kicsar, Secretary, WPS Resources Corporation, P.O. Box
19001, 700 North Adams Street, Green Bay, Wisconsin 54307-9001, telephone
920-433-1466.
3
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified by the more detailed information and financial
statements appearing elsewhere, or incorporated by reference, in this
Prospectus.
THE COMPANY
WPS Resources Corporation ("WPSR"), a Wisconsin corporation, was
incorporated on December 3, 1993, and operates as a holding company with both
regulated (utility) and non-regulated subsidiaries. WPSR has its principal
office at 700 North Adams Street, Green Bay, Wisconsin 54301.
WPSR's principal wholly owned subsidiary is Wisconsin Public Service
Corporation ("WPSC"), from which WPSR derived 79% of its consolidated revenues
and all of its net income for 1997. WPSC is a regulated public utility engaged
in the generation, transmission, distribution and sale of electric energy and in
the distribution and sale of natural gas in an 11,000 square mile service
territory in northeastern and central Wisconsin and an adjacent part of the
upper peninsula of Michigan.
WPSR's principal nonregulated subsidiaries are WPS Energy Services, Inc.
("ESI") and WPS Power Development, Inc. ("PDI"). ESI sells electric energy,
natural gas and alternate fuel products principally to commercial, industrial
and wholesale customers in the midwestern and eastern United States. ESI also
provides risk management and energy utilization consulting services and energy
management and project management services. PDI develops and owns electric
generation projects and provides services to the electric power generation
industry.
THE TRUST
WPSR Capital Trust I (the "Trust") is a statutory business trust created
under Delaware law pursuant to (i) a declaration of trust (as amended, the
"Declaration"), executed by WPSR as sponsor (the "Sponsor") of the Trust and the
trustees of the Trust (the "Trustees") and (ii) the filing of a certificate of
trust with the Secretary of State of the State of Delaware on June 9, 1998. The
Trust exists for the exclusive purposes of (i) issuing and selling the 7.00%
Trust Preferred Securities offered pursuant to this prospectus (the "Trust
Preferred Securities") and the common securities of the Trust (the "Trust Common
Securities, and together with the Trust Preferred Securities, the "Trust
Securities"), (ii) using the gross proceeds from the sale of the Trust
Securities to acquire the Subordinated Debentures and (iii) engaging in only
those other activities necessary or incidental thereto. All of the Trust Common
Securities will be owned by WPSR. The Trust Common Securities will rank PARI
PASSU, and payments will be made thereon pro rata, with the Trust Preferred
Securities, except that, if an event of default under the Declaration with
respect to the Trust Securities (a "Declaration Event of Default") has occurred
and is continuing, the rights of the holders of the Trust Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. WPSR will acquire Trust Common Securities in an aggregate
liquidation amount equal to approximately 3% of the total capital of the Trust.
The Trust's affairs will be conducted by the Trustees appointed by WPSR as
the holder of all of the Trust Common Securities. WPSR, as the holder of the
Trust Common Securities, will be entitled to appoint, remove or replace any of,
or increase or reduce the number of, the Trustees, provided, however, if an
event of default under the Declaration has occurred and is continuing, then the
Property Trustee and the Delaware Trustee may not be removed by WPSR but may be
removed and replaced by the holders of at least a majority in aggregate
liquidation amount of the outstanding Trust Preferred Securities. The duties and
obligations of the Trustees shall be governed by the Declaration. The Trust will
initially have four Trustees. Two of the initial Trustees (the "Administrative
Trustees") will be employees or officers of or otherwise affiliated with WPSR.
The third Trustee (the "Property Trustee") will be State Street Bank and Trust
Company, Boston, Massachusetts, which shall act as Property Trustee under the
Declaration and as indenture trustee for the purposes of compliance with the
provisions of Trust Indenture Act of 1939, as amended. The fourth Trustee will
be either a legal entity with its principal place of business in Delaware or an
individual resident in Delaware, which will serve for the limited
4
<PAGE>
purpose of satisfying certain Delaware laws (the "Delaware Trustee"). Initially
First Union Trust Company, National Association, Wilmington, Delaware, will be
Delaware Trustee. WPSR will pay all fees and expenses related to the Trust and
the offering of the Trust Preferred Securities.
The principal corporate trust office of the Property Trustee, State Street
Bank and Trust Company, is Two International Place, 4th Floor, P.O. Box 778,
Boston, Massachusetts 02102-0778. The address for the Trust is c/o WPS Resources
Corporation, the Sponsor of the Trust, at WPSR's corporate headquarters located
at P.O. Box 19001, 700 North Adams Street, Green Bay, Wisconsin 54307-9001;
telephone 920-433-1466.
THE OFFERING
TRUST PREFERRED SECURITIES OFFERED. The securities being offered are
2,000,000 7.00% Trust Preferred Securities evidencing preferred undivided
beneficial interests in the assets of the Trust. Holders of the Trust Preferred
Securities will be entitled to receive cumulative cash distributions at an
annual rate of 7.00% of the liquidation amount of $25 per Trust Preferred
Security, accruing from the date of original issuance and payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year
commencing on September 30, 1998 ("distributions"). Distributions payable for
the first payment period will be computed on the basis of 63 days. The
distribution rate and the distribution and other payment dates for the Trust
Preferred Securities will correspond to the interest rate and interest and other
payment dates on the Subordinated Debentures, which, along with interest and
principal payments received on the Subordinated Debentures, will be the only
assets of the Trust. As a result, if principal or interest is not paid on the
Subordinated Debentures, no amounts will be paid on the Trust Preferred
Securities. See "Risk Factors--Ranking of Subordinate Obligations under the
Guarantee and Subordinated Debentures" and "Description of the Trust Preferred
Securities."
SUBORDINATED DEBENTURES. The Trust will invest the proceeds from the
issuance of the Trust Securities in an equivalent amount of 7.00% Subordinated
Debentures of WPSR (the "Subordinated Debentures"). The Subordinated Debentures
will rank subordinate and junior in right of payment to all Senior Indebtedness
of WPSR. See "Description of the Subordinated Debentures--Subordination."
GUARANTEE. Payment of distributions out of moneys held by the Trust and
payments on liquidation of the Trust or the redemption of Trust Preferred
Securities are guaranteed by WPSR (the "Guarantee") if and to the extent the
Trust has funds available therefor. If WPSR does not make principal or interest
payments on the Subordinated Debentures, the Trust will not have sufficient
funds to make distributions on the Trust Preferred Securities, in which event
the Guarantee shall not apply to such distribution until WPSR has made such
principal or interest payments therefor. See "Description of the Guarantee" and
"Effect of Obligations under the Subordinated Debentures and the Guarantee." The
obligations of WPSR under the Guarantee are unsecured and will be subordinate
and junior in right of payment to all existing and future Senior Indebtedness
(as defined herein) of WPSR. At March 31, 1998, Senior Indebtedness aggregated
approximately $23.1 million, including a guarantee of an $11.5 million
obligation of a WPSR subsidiary. WPSR's obligations under the Subordinated
Debentures will also be effectively subordinated to all existing and future
liabilities of WPSR's subsidiaries. At March 31, 1998, the aggregate liabilities
of the subsidiaries of WPSR (excluding intercompany liabilities) were
approximately $760 million (including approximately $283 million of WPSC first
mortgage bonds). See "Risk Factors--Ranking of Subordinate Obligations under the
Guarantee and Subordinated Debentures" and "Description of the Guarantee."
WPSR's obligations under the Guarantee, taken together with its back-up
undertakings, consisting of obligations of WPSR (including the obligation to pay
expenses of the Trust) as set forth in the Declaration, the Indenture (as
defined herein) and the Subordinated Debentures issued to the Trust, provide a
full and unconditional guarantee by WPSR of payments due on the Trust Preferred
Securities. The obligations of WPSR under the Guarantee are subordinate and
junior in right of payment to all other liabilities of WPSR and PARI PASSU with
the most senior preferred or preference stock, if any, hereafter issued by WPSR
and with any guarantee hereafter entered into by WPSR in respect of any
preferred or preference securities of any affiliate of
5
<PAGE>
WPSR. See "Effect of Obligations Under the Subordinated Debentures and the
Guarantee" herein and "Description of the Guarantee."
RIGHT TO DEFER INTEREST. WPSR has the right to defer payments of interest
on the Subordinated Debentures by extending the interest payment period on the
Subordinated Debentures, from time to time, for up to 20 consecutive quarters
(each, an "Extension Period"). No Extension Period, however, may extend beyond
the Maturity Date (as defined herein) of the Subordinated Debentures. If
interest payments on the Subordinated Debentures are so deferred, distributions
on the Trust Preferred Securities will also be deferred. During any Extension
Period, distributions will continue to accrue with interest thereon (to the
extent permitted by applicable law) as described herein. There could be multiple
Extension Periods of varying lengths during the term of the Subordinated
Debentures. During an Extension Period, holders of the Trust Preferred
Securities will be required to include deferred interest income allocated to
their Trust Preferred Securities in their gross income on a daily economic
accrual basis for United States federal income tax purposes (as original issue
discount ("OID")) even though the cash payments attributable thereto have not
been made. Unless and until WPSR elects to defer interest, it is expected that
holders of Trust Preferred Securities will report interest income under their
own regular method of accounting (e.g., cash or accrual basis). See "Risk
Factors--Option to Extend Interest Payment Period" and "--Tax Consequences of
Extension of Interest Payment Period," "Description of the Subordinated
Debentures--Option to Extend Interest Payment Period" and "United States Federal
Income Taxation--Original Issue Discount."
REDEMPTION. The Subordinated Debentures are redeemable by WPSR (in whole
or, from time to time, in part) on or after July 30, 2003, or at any time, in
whole but not in part, upon the occurrence of a Tax Event (as defined herein) or
an Investment Company Event (as defined herein). If the Subordinated Debentures
are redeemed, the Trust must redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Subordinated
Debentures so redeemed at $25 per Trust Preferred Security plus accrued and
unpaid distributions thereon to the date fixed for redemption (the "Redemption
Price"). The outstanding Trust Preferred Securities will be redeemed at the
Redemption Price upon maturity of the Subordinated Debentures. The Subordinated
Debentures mature on June 30, 2038 (the "Stated Maturity"). See "Description of
the Trust Preferred Securities--Mandatory Redemption" and "--Special Event
Redemption."
RIGHT TO DISSOLVE THE TRUST. At any time, WPSR will have the right to
dissolve the Trust and, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, cause the Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the Trust.
If the Subordinated Debentures are distributed to the holders of the Trust
Securities, WPSR will use its best efforts to have the Subordinated Debentures
listed on the New York Stock Exchange or on such other exchange as the Trust
Preferred Securities are then listed. See "Description of the Trust Preferred
Securities--Distribution of the Subordinated Debentures."
In the event of any involuntary or voluntary liquidation, dissolution or
winding up of the Trust in which Subordinated Debentures are not distributed to
the holders of the Trust Preferred Securities, such holders will be entitled to
receive for each Trust Preferred Security, solely out of the assets of the Trust
available for distribution to such holders, after payment (or provision for
payment) of all liabilities to creditors, a liquidation amount of $25 plus
accrued and unpaid distributions thereon (including interest thereon) to the
date of payment. See "Description of the Trust Preferred Securities--Liquidation
Distribution upon Dissolution."
USE OF PROCEEDS. The proceeds from the sale of the Trust Preferred
Securities by the Trust will be invested in the Subordinated Debentures of WPSR.
WPSR expects to use the net proceeds from the sale of such Subordinated
Debentures to the Trust (i) to reduce short-term borrowings of WPSR principally
incurred to fund equity contributions by WPSR to its Subsidiaries and (ii) for
general corporate purposes. WPSR's short-term borrowings at July 22, 1998,
aggregate approximately $56 million, bear interest at a weighted average
interest rate of 5.54 percent and are due on July 31, 1998.
6
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following summary financial information should be read in conjunction
with the consolidated financial statements of WPSR and notes thereto included in
WPSR's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
See "Incorporation of Certain Documents by Reference." The summary operating
results for each of the fiscal years in the five-year period ended December 31,
1997, are derived from the audited consolidated financial statements of WPSR.
The summary operating results for each of the three-month periods ended March
31, 1997 and March 31, 1998 have been derived from the unaudited consolidated
financial statements of WPSR and in the opinion of management include all
adjustments which are necessary to present fairly the operating results of WPSR
for the periods presented. All such adjustments are of a normal recurring
nature. The summary financial information for the three-month period ended March
31, 1998 is not necessarily indicative of the results to be expected for the
full year ending December 31, 1998.
<TABLE>
<CAPTION>
3 MONTHS ENDED
MARCH 31 YEARS ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS (THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME SUMMARY:
Operating revenues........... $ 276,809 $ 263,013 $ 878,340 $ 858,254 $ 719,848 $ 673,795 $ 680,632
Operating Income............. 30,935 33,270 100,089 100,821 108,407 105,811 116,851
Net income................... 17,101 18,235 53,742 47,755 55,343 52,691 58,889
</TABLE>
FIRST QUARTER 1998 RESULTS
RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 ARE SET FORTH BELOW:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1998 1997
---------- ----------
(THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Operating revenues........................................................................ $ 276,809 $ 263,013
Operating expenses........................................................................ 245,874 229,743
---------- ----------
Operating income.......................................................................... 30,935 33,270
Other income.............................................................................. 2,333 1,183
Interest expense.......................................................................... 6,116 6,518
---------- ----------
Income before income taxes................................................................ 27,152 27,935
Income taxes.............................................................................. 9,485 9,203
Minority interest......................................................................... (212) (281)
Preferred stock dividends of subsidiary................................................... 778 778
---------- ----------
Net income................................................................................ $ 17,101 $ 18,235
</TABLE>
The 1998 three-month net-income was lower than that for the comparable
period of 1997 primarily due to reduced electric margins resulting from
implementation of a February 27, 1997, Public Service Commission of Wisconsin
rate order, decreased gas margins due to extremely mild weather in the first
quarter of 1998, and increased depreciation and decommissioning expenses.
RECENT DEVELOPMENTS
On July 22, 1998, WPSR issued a press release announcing its operating
results for the second quarter of 1998. WPSR's operating revenues, operating
income and net income for the three months ended June 30, 1998 were $219.6
million, $19.5 million and $9.9 million, respectively, as compared with $191.4
million, $15.6 million
7
<PAGE>
and $9.6 million, respectively, for the comparable period of 1997. WPRS's
operating revenues, operating income and net income for the six months ended
June 30, 1998, were $496.4 million, $50.5 million and $27.0 million,
respectively, as compared with $454.4 million, $48.9 million and $27.8 million,
respectively, for the first six months of 1997.
On July 1, 1998, WPSC retired at maturity $50 million principal amount of
its first mortgage bonds with a $34 million equity infusion from WPSR and funds
on hand.
Recent developments relating to the Kewaunee Nuclear Power Plant of which
WPSC is the operator and a 41.2% owner and recent developments relating to PDI
are described in WPSR's Current Report on Form 8-K dated July 2, 1998.
PROPOSED MERGER
On July 10, 1997, WPSR announced an agreement to merge with Upper Peninsula
Energy Corporation ("UPEN"). The shareholders of UPEN approved the merger on
January 29, 1998. On May 27, 1998, the Federal Energy Regulatory Commission
issued an order approving the merger. WPSR's request for early termination of
the waiting period applicable to the merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 was granted by the Federal Trade Commission
on July 9, 1998. The merger is also subject to (1) approval by the SEC under the
Public Utility Holding Company Act of 1935; (2) receipt by the parties of an
opinion of counsel that the merger qualifies as a tax-free transaction; (3)
receipt by the parties of appropriate assurances that the transaction will be
accounted for as a pooling of interests; and (4) the satisfaction of various
other conditions. The merger is expected to be completed in the second half of
1998. Upon satisfaction of the foregoing conditions, UPEN will merge with and
into WPSR, and Upper Peninsula Power Company ("UPPCO"), UPEN's utility
subsidiary, will become a wholly-owned subsidiary of WPSR.
Under the terms of the merger agreement each of the 2,950,001 outstanding
shares of UPEN common stock (no par value) will be converted into 0.90 shares of
WPSR common stock ($1.00 par value), subject to adjustment for fractional
shares.
If the merger had been effective as of January 1, 1997, (i) the revenues and
net income of UPEN and its consolidated subsidiaries for 1997 would have
constituted 6.40% and 3.70%, respectively, of the combined consolidated revenues
and net income of WPSR and UPEN and their subsidiaries for 1997; (ii) the
utility plant assets of UPPCO at December 31, 1997, would have constituted
10.36% of the combined utility plant assets of UPPCO and WPSC at December 31,
1997; and (iii) the electric energy customers of UPPCO at December 31, 1997,
would have constituted 11.40% of the total electric energy customers of WPSC and
UPPCO at December 31, 1997.
8
<PAGE>
RISK FACTORS
Prospective purchasers of Trust Preferred Securities should consider
carefully all of the information contained in this Prospectus including the
information in the documents incorporated by reference and, in particular,
should evaluate the specific factors set forth below for risks involved with an
investment of the Trust Preferred Securities.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND SUBORDINATED
DEBENTURES
WPSR's obligations under the Guarantee are unsecured and will be subordinate
and junior in right of payment to all other liabilities of WPSR. The obligations
of WPSR under the Subordinated Debentures are subordinate and junior in right of
payment to all present and future Senior Indebtedness of WPSR and PARI PASSU
with obligations to or rights of WPSR's general unsecured creditors other than
holders of Senior Indebtedness. As of March 31, 1998, Senior Indebtedness
aggregated approximately $23.1 million, including a guarantee of an $11.5
million obligation of a WPSR subsidiary.
WPSR is a holding company whose assets consist principally of the stock in
its wholly owned subsidiaries. WPSC is the principal subsidiary of WPSR
accounting for 95% of WPSR's consolidated assets as of December 31, 1997 and 79%
of WPSR's consolidated revenues and all of its consolidated net income for 1997.
WPSR's rights and the rights of its creditors, including the holders of the
Subordinated Debentures, to participate in the assets of WPSC and the other
subsidiaries of WPSR upon the liquidation or recapitalization of WPSC or such
other subsidiaries or otherwise will be subject to the prior claims of the
creditors of WPSC or such other subsidiaries except to the extent that claims of
WPSR itself as a creditor of its subsidiaries may be recognized. At March 31,
1998, the aggregate liabilities of the subsidiaries of WPSR (excluding
intercompany liabilities) were approximately $760 million (including
approximately $283 million of WPSC first mortgage bonds).
There are no terms in the Trust Preferred Securities, the Subordinated
Debentures or the Guarantee that limit WPSR's ability to incur additional
indebtedness, including indebtedness that ranks senior to the Subordinated
Debentures and the Guarantee. See "Description of the Guarantee--Status of the
Guarantee" and "Description of the Subordinated Debentures--Subordination."
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act. State Street Bank and Trust Company will act as indenture trustee under the
Guarantee for the purposes of compliance with the provisions of the Trust
Indenture Act (the "Guarantee Trustee"). The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Trust Preferred Securities.
Pursuant to the Guarantee, WPSR guarantees to the holders of the Trust
Preferred Securities the payment of (i) any accrued and unpaid distributions
that are required to be paid on the Trust Preferred Securities, to the extent
the Trust has funds available therefor, (ii) the redemption price, including all
accrued and unpaid distributions with respect to the Trust Preferred Securities
called for redemption by the Trust, to the extent the Trust has funds available
therefor, and (iii) upon a voluntary or involuntary dissolution or winding-up of
the Trust (other than in connection with the distribution of Subordinated
Debentures to the holders of the Trust Preferred Securities or a redemption of
all the Trust Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on the Trust
Preferred Securities to the date of the payment to the extent the Trust has
funds available therefor or (b) the amount of assets of the Trust remaining
available for distribution to holders of the Trust Preferred Securities in
liquidation of the Trust.
The holders of a majority in liquidation amount of the Trust Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee. Notwithstanding the foregoing, any holder of Trust Preferred
Securities may institute a legal proceeding directly against WPSR to enforce
such holder's rights under the Guarantee without first instituting a legal
proceeding against
9
<PAGE>
the Trust, the Guarantee Trustee or any other person or entity. If WPSR were to
default on its obligation to pay amounts payable on the Subordinated Debentures
or otherwise, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Trust Preferred Securities
or otherwise, and, in such event, holders of the Trust Preferred Securities
would not be able to rely upon the Guarantee for payment of such amounts.
Instead, holders of the Trust Preferred Securities would rely on the enforcement
(1) by the Property Trustee of its rights as registered holder of the
Subordinated Debentures against WPSR pursuant to the terms of the Subordinated
Debentures or (2) by such holders of their right against WPSR to enforce
payments on the Subordinated Debentures. See "Description of the Guarantee" and
"Description of the Subordinated Debentures." The declaration of trust for the
Trust provides that each holder of the Trust Preferred Securities, by acceptance
thereof, agrees to the provisions of the Guarantee, including the subordination
provisions thereof, and of the indenture pursuant to which the Subordinated
Debentures are being issued.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Trust Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the
Subordinated Debentures against WPSR. In addition, the holders of a majority in
liquidation amount of the Trust Preferred Securities will have the right to
direct the time, method, and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee to exercise the remedies available to it as
a holder of the Subordinated Debentures. If the Property Trustee fails to
enforce its rights with respect to the Subordinated Debentures held by the
Trust, any record holder of Trust Preferred Securities may, to the fullest
extent permitted by law, institute legal proceedings directly against WPSR to
enforce the Property Trustee's rights under the Subordinated Debentures without
first instituting any legal proceedings against the Property Trustee or any
other person or entity. In addition, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of WPSR
to pay interest or principal on the Subordinated Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a record holder of Trust Preferred Securities may
directly institute a proceeding against WPSR for enforcement of payment to such
holder of the principal of or interest on the Subordinated Debentures having a
principal amount equal to the aggregate liquidation amount of the Trust
Preferred Securities held by such holder (a "Direct Action") on or after the
respective due dates specified in the Subordinated Debentures. In connection
with such Direct Action, WPSR will be subrogated to the rights of such record
holder of Trust Preferred Securities to the extent of any payment made by WPSR
to such holder of Trust Preferred Securities in such Direct Action. The record
holder in the case of the issuance of one or more global Trust Preferred
Securities certificates will be The Depository Trust Company or its nominee
acting at the direction of the beneficial owners of the Trust Preferred
Securities. See "Description of the Trust Preferred Securities--Declaration
Events of Default."
TRUST DISTRIBUTIONS DEPENDENT ON WPSR'S PAYMENTS ON SUBORDINATED DEBENTURES
The Trust's ability to make distributions and other payments on the Trust
Preferred Securities is entirely dependent upon WPSR making interest and other
payments on the Subordinated Debentures. If WPSR does not make payments on the
Subordinated Debentures for any reason, including as a result of WPSR's election
to defer the payment of interest on the Subordinated Debentures by extending the
interest payment period on the Subordinated Debentures, the Trust will not make
payments on the Trust Preferred Securities. In such an event, holders of the
Trust Preferred Securities would not be able to rely on the Guarantee because
distributions and other payments on the Trust Preferred Securities are subject
to the Guarantee only if and to the extent that the Trust has funds available
therefor. See "Description of the Guarantee--General" and "Effect of Obligations
under the Subordinated Debentures and the Guarantee."
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<PAGE>
OPTION TO EXTEND INTEREST PAYMENT PERIOD
WPSR has the right under the Indenture to defer payments of interest on the
Subordinated Debentures by extending the interest payment period at any time,
and from time to time, on the Subordinated Debentures. As a consequence of such
an extension, quarterly distributions on the Trust Preferred Securities would be
deferred (but despite such deferral, to the extent permitted by law, would
continue to accrue, with interest thereon compounded quarterly) by the Trust
during any such extended interest payment period. WPSR has the right to defer
payments of interest on the Subordinated Debentures, from time to time, but no
Extension Period may be more than 20 consecutive calendar quarters or extend
beyond the Maturity Date (as defined herein) of the Subordinated Debentures.
There could be multiple Extension Periods of varying lengths during the term of
the Subordinated Debentures. WPSR covenants under the Indenture that in the
event that WPSR exercises its right to defer interest payments, then, prior to
the payment of all accrued interest on outstanding Subordinated Debentures, (a)
WPSR shall not declare or pay dividends on, or make a distribution with respect
to, or redeem, purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock, (b) WPSR shall not, directly or indirectly, and
will not allow any of its subsidiaries to, make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by WPSR that rank PARI PASSU with or junior to the
Subordinated Debentures, and (c) WPSR shall not make guarantee payments with
respect to the foregoing (other than pursuant to the Guarantee); provided,
however, that the restriction in clause (a) above does not apply (i) to
repurchases or acquisitions of common shares of WPSR as contemplated by any
employment arrangement, benefit plan or similar contract with or for the benefit
of employees, officers or directors entered into in the ordinary course of
business, (ii) to any purchase of WPSR common stock pursuant to the WPSR Stock
Investment Plan or WPSR Deferred Compensation Plan, as in effect immediately
prior to the date upon which WPSR gives notice of its election of such Extension
Period, (iii) as a result of an exchange or conversion of any class or series of
WPSR's capital stock for common shares, (iv) to the purchase of fractional
interests in shares of WPSR's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, provided that such capital stock or security was outstanding prior to
the date upon which WPSR gives notice of its election of such Extension Period,
or (v) to the payment of any stock dividend by WPSR where the dividend is paid
in the form of the same stock as that on which the dividend is paid. Prior to
the termination of any such Extension Period, WPSR may further extend the
interest payment period; provided that each Extension Period, if any, may not
exceed 20 consecutive calendar quarters or extend beyond the Maturity Date of
the Subordinated Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, WPSR may commence a new Extension Period,
subject to the above requirements. WPSR covenants that at the end of the
Extension Period, WPSR will pay all interest accrued and unpaid on the
Subordinated Debentures to the holders in whose names the Subordinated
Debentures are registered on the first record date after the end of the
Extension Period. WPSR has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures and views the exercise of such right during the term of
the Subordinated Debentures as unlikely. However, should WPSR determine to
exercise such right in the future, the market price of the Trust Preferred
Securities is likely to be adversely affected. See "Description of the Trust
Preferred Securities-- Distributions" and "Description of the Subordinated
Debentures--Option to Extend Interest Payment Period."
TAX CONSEQUENCES OF EXTENSION OF INTEREST PAYMENT PERIOD
Should WPSR exercise its right to defer payments of interest by extending
the interest payment period, each holder of Trust Preferred Securities will
accrue income (as original issue discount ("OID")) in respect of the deferred
interest allocable to its Trust Preferred Securities for United States federal
income tax purposes on a daily economic accrual basis. Such income will be
allocated but not distributed to holders of the Trust Preferred Securities. As a
result, each such holder of Trust Preferred Securities will recognize income for
United States federal income tax purposes in advance of the receipt of cash and
will not receive the cash from the Trust related to such income if such holder
disposes of its Trust Preferred Securities prior to the record date for the date
on which distributions of such amounts are made. A holder that disposes of its
Trust Preferred Securities during an Extension Period, therefore, might not
receive the same return on its investment as a holder that continues to
11
<PAGE>
hold its Trust Preferred Securities. In addition, as a result of the existence
of WPSR's right to defer interest payments, the market price of the Trust
Preferred Securities (which represent an undivided beneficial interest in the
Subordinated Debentures) may be more volatile than other securities on which OID
accrues that do not have such rights. See "United States Federal Income
Taxation--Original Issue Discount."
DISTRIBUTION OF THE SUBORDINATED DEBENTURES
At any time, WPSR will have the right to dissolve the Trust and, after
satisfaction of the liabilities to creditors of the Trust as required by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Trust Preferred Securities in liquidation of the Trust. Under
current United States federal income tax law and interpretation and assuming, as
expected, that the Trust is treated as a grantor trust, a distribution of the
Subordinated Debentures should not be a taxable event to holders of the Trust
Preferred Securities. Should there be a change in law, a change in legal
interpretation, a Tax Event or other circumstances, however, the distribution
could be a taxable event to the holders of the Trust Preferred Securities. In
addition, a dissolution of the Trust in which holders of the Trust Preferred
Securities receive cash would be a taxable event to such holders. See "United
States Federal Income Taxation--Receipt of Subordinated Debentures or Cash upon
Dissolution of the Trust."
There can be no assurance as to the market prices for the Trust Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Trust Preferred Securities if a dissolution or liquidation of the Trust were
to occur. Accordingly, the Trust Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Subordinated Debentures that a holder of Trust Preferred Securities may
receive on dissolution and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Trust Preferred Securities
offered hereby. Because holders of Trust Preferred Securities may receive
Subordinated Debentures upon any election by WPSR to dissolve the Trust and
cause the Subordinated Debentures to be distributed to the holders of the Trust
Preferred Securities, prospective purchasers of Trust Preferred Securities are
also making an investment decision with regard to the Subordinated Debentures
and should review carefully all the information regarding the Subordinated
Debentures and WPSR contained in this Prospectus. See "Description of the Trust
Preferred Securities--Distribution of the Subordinated Debentures" and
"Description of the Subordinated Debentures."
PREPAYMENT CONSIDERATIONS; SPECIAL EVENT REDEMPTION
At the option of WPSR, the Subordinated Debentures may be redeemed, in whole
or in part, at any time on or after July 30, 2003, at a redemption price equal
to 100% of the principal amount to be redeemed plus any accrued and unpaid
interest to the redemption date. See "Description of the Subordinated
Debentures-- Optional Redemption." Investors in the Trust Preferred Securities
should assume that WPSR will exercise its redemption option if WPSR is able to
refinance at a lower interest rate or it is otherwise in the interest of WPSR to
redeem the Subordinated Debentures. Upon the occurrence of a Tax Event (as
defined herein) or an Investment Company Act Event (as defined herein), even if
such event occurs before July 30, 2003, WPSR will have the right to redeem the
Subordinated Debentures, in whole (but not in part), in which event the Trust
will redeem all outstanding Trust Securities. The outcome of a case pending in
the United States Tax Court could give rise to a Tax Event. See "United States
Federal Income Taxation--Classification of Subordinated Debentures." If
Subordinated Debentures are redeemed, the Trust must redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of Subordinated Debentures so redeemed. See "Description of the Trust Preferred
Securities--Mandatory Redemption" and "--Special Events Redemption."
LIMITED VOTING RIGHTS
Holders of Trust Preferred Securities will have only limited voting rights,
primarily in connection with directing the activities of the Property Trustee as
the holder of the Subordinated Debentures. Holders of Trust Preferred Securities
will not be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of, the Trustees except that upon the occurrence and
continuance of a Declaration Event of Default, the
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<PAGE>
right to remove and replace the Property Trustee and the Delaware Trustee shall
be vested solely in the holders of at least a majority in aggregate liquidation
amount of the outstanding Trust Preferred Securities. Voting rights with respect
to Trustee matters are otherwise vested exclusively in the holder of the Common
Securities. See "Description of the Trust Preferred Securities--Voting Rights."
TRADING PRICE
The Trust Preferred Securities are expected to be listed on the New York
Stock Exchange. The Trust Preferred Securities are expected to trade at a price
that takes into account the value, if any, of accrued but unpaid distributions;
purchasers will not pay, and sellers will not receive, accrued and unpaid
distributions with respect to the Trust Preferred Securities that is not
included in the trading price thereof. A holder who disposes of his Trust
Preferred Securities between record dates for payments of distributions thereon
will be required to include accrued but unpaid interest on the Subordinated
Debentures through the date of disposition in income as ordinary income (I.E.,
OID), and to add such amount to his adjusted tax basis in his pro rata share of
the underlying Subordinated Debentures deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include,
in the form of OID, all accrued but unpaid interest), a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
See "United States Federal Income Taxation--Original Issue Discount" and
"--Sales of Trust Preferred Securities."
The trading price of the Trust Preferred Securities is likely to be
sensitive to the level of interest rates generally. If interest rates rise in
general, the trading price of the Trust Preferred Securities may decline to
reflect the additional yield requirements of the purchasers. Conversely, a
decline in interest rates may increase the trading price of the Trust Preferred
Securities, although any increase will be moderated by WPSR's ability to call
the Subordinated Debentures at any time on or after July 30, 2003 at a
redemption price equal to 100% of the principal amount to be redeemed plus
accrued but unpaid interest.
ABSENCE OF PUBLIC MARKET FOR SECURITIES
Since the Trust Preferred Securities will be newly issued, there is no
current market for them. The New York Stock Exchange, Inc. has authorized, upon
official notice of issuance, the listing of the Trust Preferred Securities.
There can be no assurance that there will be an active trading market for the
Trust Preferred Securities.
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<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED DIVIDEND REQUIREMENT
WPSR's consolidated ratios of earnings to fixed charges and earnings to
combined fixed charges and preferred dividend requirements were as follows for
the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31 FISCAL YEAR ENDED
------------- ------------------------------------------
1998 1997 1996 1995 1994
------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges................................ 4.99 3.91 3.67 4.18 4.19
Ratio of Earnings to Combined Fixed Charges and Preferred Dividend
Requirements.................................................... 4.20 3.33 3.10 3.53 3.51
<CAPTION>
1993
---------
<S> <C>
Ratio of Earnings to Fixed Charges................................ 4.45
Ratio of Earnings to Combined Fixed Charges and Preferred Dividend
Requirements.................................................... 3.70
</TABLE>
In computing the ratios, earnings represent consolidated income of WPSR and
its subsidiaries before interest expense, amortization of debt discount, premium
and expense, federal and state income taxes, and the allowance for borrowed
funds used during construction and the estimated interest component of rentals.
Fixed charges represent interest expense, amortization of debt discount, premium
and expense and the estimated interest component of rentals of WPSR and its
subsidiaries; and preferred stock dividends include total preferred stock
dividend requirements of WPSC increased to an amount representing the pre-tax
earnings required to cover such dividend requirements.
A statement setting forth the computation of the unaudited ratios of
earnings to fixed charges and earnings to combined fixed charges and preferred
dividends is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
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<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of WPSR and
its subsidiaries as of March 31, 1998, and as adjusted to give effect to the
issuance of the Trust Preferred Securities and the use of proceeds thereof. See
"Use of Proceeds." The table should be read in conjunction with the consolidated
financial statements and notes thereto of WPSR and its subsidiaries, included in
the documents incorporated by reference herein. See "Incorporation of Certain
Documents by Reference."
<TABLE>
<CAPTION>
AT MARCH 31, 1998
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
($ THOUSANDS)
<S> <C> <C>
Long-term debt of subsidiaries:
WPSC First Mortgage Bonds.............................................................. $ 283,307 $ 283,307
Other.................................................................................. 21,154 21,154
---------- -----------
$ 304,461 $ 304,461
Company obligated mandatorily redeemable preferred securities of subsidiary trust........ 50,000
Preferred securities of subsidiary (WPSC) without mandatory redemption provisions........ 51,200 51,200
Common share equity:..................................................................... 482,959 482,959
---------- -----------
Total capitalization..................................................................... $ 838,620 $ 888,620
---------- -----------
---------- -----------
</TABLE>
- -------
(1) As described herein, the sole assets of the Trust will be the 7.00% Junior
Subordinated Deferrable Interest Debentures due 2038 of WPSR with a
principal amount of approximately $51,500,000, and upon redemption of such
debt, the Trust Preferred Securities will be mandatorily redeemable.
THE TRUST
WPSR Capital Trust I is a statutory business trust created under Delaware
law pursuant to a declaration of trust, dated as of June 9, 1998, and the filing
of a certificate of trust with the Secretary of State of the State of Delaware
on June 9, 1998. Such declaration will be amended and restated in its entirety
(as so amended and restated, the "Declaration") by execution of an Amended and
Restated Declaration of Trust, substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus is a part. The Declaration
will be qualified as an indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). Upon issuance of the Trust Preferred
Securities, the purchasers thereof will own all of the Trust Preferred
Securities. See "Description of the Trust Preferred Securities." Simultaneously
with the issuance of the Trust Preferred Securities, WPSR will acquire Trust
Common Securities in an aggregate liquidation amount equal to at least 3% of the
total capital of the Trust. The Trust exists for the exclusive purposes of (i)
issuing the Trust Securities representing undivided beneficial interests in the
assets of the Trust, (ii) investing the gross proceeds of the Trust Securities
in the Subordinated Debentures and (iii) engaging in only those other activities
necessary or incidental thereto. The Trust has a term of approximately 55 years,
but may dissolve earlier as provided in the Declaration.
Pursuant to the Declaration, the number of Trustees will initially be four.
Under the Declaration, WPSR, as holder of a majority in liquidation amount of
the Trust Common Securities, will have the right to increase or decrease, from
time to time, the number of Trustees. The Declaration further provides, however,
that there must always be (i) one Trustee which is either a resident of the
State of Delaware or an entity which has its principal place of business in
Delaware (the "Delaware Trustee"), (ii) at least one Trustee who is an employee
or officer of, or is affiliated with, WPSR (an "Administrative Trustee"), and
(iii) one Trustee which is a financial institution with combined capital and
surplus of at least $50,000,000 and which acts as property trustee and as
indenture trustee for purposes of compliance with the Trust Indenture Act. The
same entity may serve as Delaware Trustee and Property Trustee. Initially, State
Street Bank and Trust Company, a Massachusetts trust company, will be the
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<PAGE>
Property Trustee and First Union Trust Company, National Association, a national
banking association, will be the Delaware Trustee, in each case until removed or
replaced as provided in the Declaration. For purposes of compliance with the
provisions of the Trust Indenture Act, State Street Bank and Trust Company will
also act as trustee (the "Guarantee Trustee") under the Guarantee and as the
Debt Trustee (as defined herein) under the Indenture. See "Description of the
Guarantee" and "Description of the Trust Preferred Securities--Voting Rights."
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities, and the Property Trustee will
have the power to exercise all rights, powers and privileges of a holder of
Subordinated Debentures under the Indenture. In addition, the Property Trustee
will maintain exclusive control of a segregated non-interest bearing trust
account (the "Property Account") to hold all payments made in respect of the
Subordinated Debentures for the benefit of the holders of the Trust Securities.
The Property Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Preferred
Securities out of funds from the Property Account. The Guarantee Trustee will
hold the Guarantee for the benefit of the holders of the Trust Preferred
Securities. WPSR, as the holder of all the Trust Common Securities, will have
the right (subject to the terms of the Declaration) to appoint, remove or
replace any Trustee and to increase or decrease the number of Trustees;
provided, that (i) if the Property Trustee does not have its principal place of
business in Delaware, the number of Trustees shall be at least three, and (ii)
there will always be at least one Administrative Trustee, one Property Trustee
which satisfies the requirements of the Trust Indenture Act, and one Trustee
who, if a natural person, is a resident of Delaware or, if not a natural person,
is an entity which has its principal place of business in Delaware, as required
under Chapter 38 of Title 12 of the Delaware Code, as amended, or any successor
legislation (the "Trust Act"). WPSR will pay all fees and expenses related to
the Trust and the offering of the Trust Preferred Securities. See "Description
of the Subordinated Debentures--Miscellaneous."
The rights of the holders of the Trust Preferred Securities, including
economic rights, rights to information and voting rights, are set forth in the
Declaration, the Trust Act and the Trust Indenture Act. See "Description of the
Trust Preferred Securities."
WPS RESOURCES CORPORATION
WPS Resources Corporation ("WPSR"), a Wisconsin corporation, was
incorporated on December 3, 1993, and operates as a holding company with both
regulated (utility) and non-regulated business units. WPSR has its principal
office at 700 North Adams Street, Green Bay, Wisconsin 54301.
WPSR's principal wholly owned subsidiary is WPSC, from which WPSR derived
79% of its consolidated revenues and all of its net income for 1997. WPSC is a
regulated public utility engaged in the generation, transmission, distribution
and sale of electric energy and in the distribution and sale of natural gas in
an 11,000 square mile service territory in northeastern and central Wisconsin
and an adjacent part of the upper peninsula of Michigan.
WPSR's principal nonregulated subsidiaries are ESI and PDI. ESI sells
electric energy, natural gas and alternate fuel products principally to
commercial, industrial and wholesale customers in the midwestern and eastern
United States. ESI also provides risk management and energy utilization
consulting services and energy management and project management services. PDI
develops and owns electric generation projects and provides services to the
electric power generation industry.
On July 10, 1997, WPSR announced an agreement to merge with Upper Peninsula
Energy Corporation ("UPEN"). The shareholders of UPEN approved the merger on
January 29, 1998. On May 27, 1998, the Federal Energy Regulatory Commission
issued an order approving the merger. WPSR's request for early termination of
the waiting period applicable to the merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 was granted by the Federal Trade Commission
on July 9, 1998. The merger is also subject to (1) approval by the SEC under the
Public Utility Holding Company Act of 1935; (2) receipt by the parties of an
opinion of counsel that the merger qualifies as a tax-free transaction; (3)
receipt by the parties of appropriate assurances that the
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<PAGE>
transaction will be accounted for as a pooling of interests; and (4) the
satisfaction of various other conditions. The merger is expected to be completed
in the second half of 1998. Upon satisfaction of the foregoing conditions, UPEN
will merge with and into WPSR, and Upper Peninsula Power Company, UPEN's utility
subsidiary, will become a wholly-owned subsidiary of WPSR.
Under the terms of the merger agreement each of the 2,950,001 outstanding
shares of UPEN common stock (no par value) will be converted into 0.90 shares of
WPSR common stock ($1.00 par value), subject to adjustment for fractional
shares.
If the merger had been effective as of January 1, 1997, (i) the revenues and
net income of UPEN and its consolidated subsidiaries for 1997 would have
constituted 6.40% and 3.70%, respectively, of the combined consolidated revenues
and net income of WPSR and UPEN and their subsidiaries for 1997; (ii) the
utility plant assets of UPPCO at December 31, 1997, would have constituted
10.36% of the combined utility plant assets of UPPCO and WPSC at December 31,
1997; and (iii) the electric energy customers of UPPCO at December 31, 1997,
would have constituted 11.40% of the total electric energy customers of WPSC and
UPPCO at December 31, 1997.
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with WPSR's
consolidated financial statements with the Trust Preferred Securities accounted
for and captioned in the consolidated balance sheet between long-term debt and
preferred stock of subsidiary.
USE OF PROCEEDS
The Trust will use all proceeds from the sale of the Trust Preferred
Securities to purchase the Subordinated Debentures from WPSR. WPSR intends to
use the net proceeds from the sale of the Subordinated Debentures (i) to reduce
short-term borrowings of WPSR principally incurred to fund equity contributions
by WPSR to its subsidiaries and (ii) for general corporate purposes. WPSR's
short-term borrowings at July 22, 1998 aggregate approximately $56 million, bear
interest at a weighted average interest rate of 5.54 percent and are due on July
31, 1998.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, State Street Bank and Trust Company, will
act as indenture trustee under the Declaration for purposes of compliance with
the provisions of the Trust Indenture Act. The terms of the Trust Preferred
Securities will include those stated in the Declaration (including the annex and
exhibits thereto), and those required to be made part of the Declaration by the
Trust Indenture Act. The following summary of the principal terms and provisions
of the Trust Preferred Securities does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the Declaration (a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part), the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Trust to issue the Trust Securities, which
represent undivided beneficial interests in the assets of the Trust. The Trust
Common Securities will have equivalent terms to and will rank PARI PASSU, and
payments will be made thereon on a pro rata basis, with the Trust Preferred
Securities, except that upon the occurrence and during the continuance of a
Declaration Event of Default (as defined herein), the rights of the holders of
the Trust Common Securities to receive payment of periodic distributions and
payments upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the Trust Preferred Securities. In addition, unless a
Declaration Event of Default has occurred and is continuing, holders of the
Trust Common Securities have the exclusive right (subject to the terms of the
Declaration) to appoint, remove or replace any of the Trustees. All of the Trust
Common Securities will be directly or indirectly owned by WPSR.
17
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The Declaration does not permit the issuance by the Trust of any securities
other than the Trust Securities or the incurrence of any indebtedness by the
Trust. Pursuant to the Declaration, the Property Trustee will hold the
Subordinated Debentures purchased by the Trust for the benefit of the holders of
the Trust Preferred Securities. The payment of distributions out of money held
by the Trust, and payments upon redemption of the Trust Preferred Securities or
liquidation of the Trust, will be guaranteed by WPSR to the extent described
under "Description of the Guarantee." The Guarantee, when taken together with
the back-up undertakings, consisting of obligations of WPSR (including the
obligation to pay expenses of the Trust) set forth in the Declaration, the
Indenture and the Subordinated Debentures issued to the Trust, provide a full
and unconditional guarantee by WPSR of the Trust Preferred Securities. The
Guarantee will be held by State Street Bank and Trust Company, the Guarantee
Trustee, for the benefit of the holders of the Trust Preferred Securities. The
Guarantee only covers payment of distributions when WPSR has made the
corresponding payment of interest or principal on the Subordinated Debentures
held by the Trust. In the absence of such payment of interest or principal, the
remedy of a holder of Trust Preferred Securities is to vote to direct the
Property Trustee to enforce the Property Trustee's rights as the holder of the
Subordinated Debentures or, under certain circumstances, to take direct action
against WPSR. See "--Declaration Events of Default, "--Voting Rights,"
"Description of the Guarantee" and "Effect of Obligations under the Subordinated
Debentures and the Guarantee."
The Company and the Trust will agree to treat the Subordinated Debentures as
indebtedness for all United States federal income tax purposes and, by
acceptance of the Trust Preferred Securities, each holder covenants to treat the
Subordinated Debentures as indebtedness and the Trust Preferred Securities as
evidence of an indirect undivided beneficial interest in the Subordinated
Debentures.
DISTRIBUTIONS
Distributions on the Trust Preferred Securities will be fixed at a rate per
annum of 7.00% of the stated liquidation amount of $25 per Trust Preferred
Security. Distributions in arrears for more than one quarter will (to the extent
permitted by applicable law) bear interest thereon from and including the last
day of such quarter at the rate per annum of 7.00% thereof compounded quarterly.
The term "distributions" as used herein includes any such interest payable
unless otherwise stated. The amount of distributions payable for any period will
be computed on the basis of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarter, on the basis of the actual number of days
elapsed in such 90-day quarter.
Distributions on the Trust Preferred Securities will be cumulative, will
accrue from the date of original issuance, and will be payable quarterly in
arrears on March 31, June 30, September 30, and December 31 of each year,
commencing September 30, 1998, when, as and if available for payment, and will
be made by the Property Trustee, except as otherwise described below.
WPSR has the right under the Indenture to defer payments of interest on the
Subordinated Debentures by extending the interest payment period from time to
time on the Subordinated Debentures, which right, if exercised, would defer
quarterly distributions on the Trust Preferred Securities (although to the
extent permitted by law, such distributions would continue to accrue with
interest since interest would continue to accrue on the Subordinated Debentures)
during any such Extension Period. WPSR has the right to defer payments of
interest on the Subordinated Debentures, from time to time, for up to 20
consecutive calendar quarters, provided that no Extension Period may extend
beyond the Maturity Date of the Subordinated Debentures. There could be multiple
Extension Periods of varying lengths during the term of the Subordinated
Debentures. WPSR covenants under the Indenture that in the event that WPSR
exercises this right, then during any Extension Period (a) WPSR shall not
declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock, (b) WPSR shall not, directly or indirectly, and shall not allow
any of its subsidiaries to, make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities issued by WPSR
that rank PARI PASSU with or junior to the Subordinated Debentures, and (c) WPSR
shall not make any guarantee payments with respect to the foregoing; provided,
however, that the restriction in clause (a) above does not apply (i) to
repurchases or acquisitions of common shares of WPSR as contemplated by any
employment arrangement,
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benefit plan or similar contract with or for the benefit of employees, officers
or directors entered into in the ordinary course of business, (ii) to
repurchases of common shares of WPSR as contemplated by the WPSR Stock
Investment Plan or Deferred Compensation Plan, as in effect immediately prior to
the date upon which WPSR gives notice of its election of such Extension Period,
(iii) as a result of an exchange or conversion of any class or series of capital
stock of WPSR for common shares of WPSR, provided that such class or series of
capital stock of WPSR was outstanding prior to the date upon which WPSR gives
notice of its election of such Extension Period, (iv) to the purchase of
fractional interests in shares of capital stock of WPSR pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged or (v) to the payment of any stock dividend by WPSR where
the dividend is paid in the form of the same stock as that on which the dividend
is being paid. Prior to the termination of any such Extension Period, WPSR may
further extend the interest payment period; provided that each Extension Period,
if any, may not exceed 20 consecutive calendar quarters and may not extend
beyond the Maturity Date of the Subordinated Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, WPSR may commence
a new Extension Period, subject to the above requirements. See "Description of
the Subordinated Debentures--Interest" and "--Option to Extend Interest Payment
Period." If distributions are deferred, the deferred distributions and accrued
interest thereon shall be paid to holders of record of the Trust Preferred
Securities as they appear on the books and records of the Trust on the record
date next following the termination of such deferral period.
Distributions on the Trust Preferred Securities must be paid on the dates
payable to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Trust Preferred Securities will be limited to
payments received from WPSR on the Subordinated Debentures. See "Description of
the Subordinated Debentures." The payment of distributions out of moneys held by
the Trust is guaranteed by WPSR to the extent set forth under "Description of
the Guarantee." The Guarantee, when taken together with the back-up
undertakings, consisting of obligations of WPSR (including the obligation to pay
expenses of the Trust) as set forth in the Declaration, the Indenture and the
Subordinated Debentures issued to the Trust, provides a full and unconditional
guarantee by WPSR of the Trust Preferred Securities.
Distributions on the Trust Preferred Securities will be payable to the
holders thereof as they appear on the books and records of the Trust on the
relevant record dates, which, as long as the Trust Preferred Securities remain
in global form, will be one Business Day (as defined below) prior to the
relevant payment dates. Such distributions will be paid through the Property
Trustee who will hold amounts received in respect of the Subordinated Debentures
in the Property Account for the benefit of the holders of the Trust Preferred
Securities. Subject to any applicable laws and regulations and the provisions of
the Declaration, each such payment will be made as described under "--Book-Entry
Issuance--The Depository Trust Company." In the event that the Trust Preferred
Securities do not continue to remain in global form, the relevant record dates
for the Trust Preferred Securities shall conform to the rules of any securities
exchange on which the securities are listed and, if none, shall be selected by
the Administrative Trustees, which dates shall be at least one Business Day but
less than 60 Business Days prior to the relevant payment dates. Distributions
payable on any Trust Preferred Securities that are not punctually paid on any
distribution payment date, as a result of WPSR's having failed to make a payment
under the Subordinated Debentures, will cease to be payable to the person in
whose name such Trust Preferred Securities are registered on the relevant record
date, and such defaulted distribution will instead be payable to the person in
whose name such Trust Preferred Securities are registered on the special record
date or other specified date determined in accordance with the Declaration. In
the event that any date on which distributions are to be made on the Trust
Preferred Securities is not a Business Day, then payment of the distributions
payable on such date will be made on the next succeeding day which is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. A "Business Day" shall
mean any day other than a day on which state or federal banking institutions in
New York, New York or Boston, Massachusetts, are authorized or required by law
to close.
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MANDATORY REDEMPTION
The Subordinated Debentures will mature on June 30, 2038, and may be
redeemed, in whole or in part, at any time on or after July 30, 2003, or at any
time in whole (but not in part) upon the occurrence of a Tax Event or an
Investment Company Event. See "Description of the Subordinated Debentures." Upon
the repayment of the Subordinated Debentures, whether at maturity or upon
redemption, the proceeds from such repayment or redemption shall simultaneously
be applied to redeem Trust Securities having an aggregate liquidation amount
equal to the aggregate principal amount of the Subordinated Debentures so repaid
or redeemed at the Redemption Price; provided that, except in the case of
payments at maturity of the Subordinated Debentures, holders of Trust Securities
shall be given not less than 30 nor more than 60 days notice of such redemption.
See "Description of the Subordinated Debentures--Optional Redemption." In the
event that fewer than all of the outstanding Trust Securities are to be
redeemed, the Trust Securities will be redeemed pro rata to each holder
according to the aggregate liquidation amount of Trust Securities held by the
relevant holder in relation to the aggregate liquidation amount of all Trust
Securities outstanding. See "--Book-Entry Issuance--The Depository Trust
Company" for a description of procedures of The Depository Trust Company in the
event of redemption.
SPECIAL EVENT REDEMPTION
If, at any time, a Tax Event or Investment Company Event (each a "Special
Event"), shall occur and be continuing, WPSR shall have the right, upon not less
than 30 nor more than 60 days notice, to redeem the Subordinated Debentures, in
whole (but not in part), for cash within 90 days following the occurrence of
such Special Event, and, following such redemption, all Trust Securities shall
be redeemed by the Trust at the Redemption Price.
"Tax Event" means that the Administrative Trustees shall have received an
opinion of an independent tax counsel experienced in such matters to the effect
that, as a result of (a) 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
(b) any official administrative pronouncement or judicial decision interpreting
or applying such laws or regulations, which amendment or change is effective or
such pronouncement or decision is announced on or after the date of original
issuance of the Trust Preferred Securities, there is more than an insubstantial
risk that (i) the Trust is, or will be within 90 days after the date thereof,
subject to United States federal income tax with respect to interest accrued or
received on the Subordinated Debentures, (ii) the Trust is, or will be within 90
days after the date thereof, subject to more than a de minimis amount of taxes,
duties or other governmental charges, or (iii) interest payable to the Trust on
the Subordinated Debentures is not, or within 90 days of the date thereof, will
not be deductible, in whole or in part, by WPSR for United States federal income
tax purposes.
"Investment Company Event" means 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") to the effect that the Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), which Change in 1940 Act
becomes effective on or after the date of original issuance of the Trust
Preferred Securities.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Trust Preferred
Securities (i) unless all accrued and unpaid distributions have been paid on all
Trust Preferred Securities for all quarterly distribution periods terminating on
or prior to the date of redemption or (ii) if such redemption would result in
the delisting of the Trust Preferred Securities from any national securities
exchange or other organization on which the Trust Preferred Securities are then
listed.
If the Trust gives a notice of redemption in respect of Trust Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New York
City time, on the redemption date, provided that WPSR has paid to
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the Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Subordinated Debentures, the Trust will
irrevocably deposit with the Depositary (as defined herein) funds sufficient to
pay the Redemption Price and will give the Depositary irrevocable instructions
and authority to pay the Redemption Price to the Beneficial Owners (as defined
herein) of the Trust Preferred Securities. See "--Book-Entry Issuance--The
Depository Trust Company." If notice of redemption shall have been given and
funds deposited as required, then, immediately prior to the close of business on
the date of such deposit, distributions will cease to accrue and all rights of
holders of such Trust Preferred Securities so called for redemption will cease,
except the right of the holders of such Trust Preferred Securities to receive
the Redemption Price but without interest on such Redemption Price. In the event
that any date fixed for redemption of Trust Preferred Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding day that is a Business Day (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 WPSR fails to repay the Subordinated
Debentures on maturity or payment of the Redemption Price in respect of Trust
Preferred Securities is improperly withheld or refused and not paid either by
the Trust, or by WPSR pursuant to the Guarantee, distributions on such Trust
Preferred Securities will continue to accrue at the then applicable rate from
the original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
In the event that fewer than all of the outstanding Trust Preferred
Securities are to be redeemed, the Trust Preferred Securities will be redeemed
as described under "--Book-Entry Issuance--The Depository Trust Company."
If a partial redemption of the Trust Preferred Securities would result in
the delisting of the Trust Preferred Securities by a national securities
exchange or other organization on which the Trust Preferred Securities are then
listed, WPSR, pursuant to the Indenture, will only redeem the Subordinated
Debentures in whole and, as a result, the Trust may only redeem the Trust
Preferred Securities in whole.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), WPSR or its subsidiaries may at any
time, and from time to time, purchase outstanding Trust Preferred Securities by
tender, in the open market or by private agreement.
DISTRIBUTION OF THE SUBORDINATED DEBENTURES
At any time, WPSR will have the right to dissolve the Trust and, after
satisfaction of the liabilities to creditors of the Trust as required by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust. Under current
United States federal income tax law and interpretation and assuming, as
expected, that the Trust is treated as a grantor trust, a distribution of the
Subordinated Debentures should not be a taxable event to holders of the Trust
Preferred Securities. Should there be a change in law, a change in legal
interpretation, a Tax Event or Investment Company Event or other circumstances,
however, the distribution could be a taxable event to the holders of the Trust
Preferred Securities. See "United States Federal Income Taxation--Receipt of
Subordinated Debentures or Cash upon Dissolution of the Trust."
If the Subordinated Debentures are distributed to the holders of the Trust
Preferred Securities, WPSR will use its best efforts to cause the Subordinated
Debentures to be listed on the New York Stock Exchange or on such other exchange
as the Trust Preferred Securities are then listed.
After the date for any distribution of Subordinated Debentures upon
dissolution of the Trust, (i) the Trust Preferred Securities will no longer be
deemed to be outstanding, (ii) the Depositary or its nominee as the record
holder of the Trust Preferred Securities will receive a registered global
certificate or certificates representing the Subordinated Debentures to be
delivered upon such distribution and (iii) any securities representing Trust
Preferred Securities not held by the Depositary or its nominee will be deemed to
represent Subordinated Debentures having a principal amount equal to the stated
liquidation amount of such Trust Preferred Securities
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and bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid distributions on such Trust Preferred Securities until such certificates
are presented to the Property Trustee for transfer or reissuance.
There can be no assurance as to the market prices for either the Trust
Preferred Securities or the Subordinated Debentures that may be distributed in
exchange for the Trust Preferred Securities if a dissolution and liquidation of
the Trust were to occur. Accordingly, the Trust Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Subordinated Debentures that an investor may receive if
a dissolution and liquidation of the Trust were to occur, may trade at a
discount to the price that the investor paid to purchase the Trust Preferred
Securities offered hereby.
SUBORDINATION OF COMMON TRUST SECURITIES
Payment of distributions on, and the Redemption Price of, the Trust
Securities, as applicable, shall be made pro rata based on the respective
aggregate liquidation amounts of the Trust Securities, provided that if a
Declaration Event of Default has occurred and is continuing, no payment of any
distribution on, or Redemption Price of, any of the Trust Common Securities and
no other payment on account of the liquidation of the Trust Common Securities,
shall be made unless payment in full in cash of all accumulated and unpaid
distributions on all of the outstanding Trust Preferred Securities for all
distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price, the full amount of such Redemption Price on all of the
outstanding Trust Preferred Securities then being redeemed, shall have been made
or provided for.
WPSR as the holder of the Trust Common Securities will be deemed to waive
any Declaration Event of Default with respect to the Trust Common Securities and
its consequences until all Declaration Events of Default with respect to the
Trust Preferred Securities have been cured, waived or otherwise eliminated.
Until such Events of Default have been so cured, waived or otherwise eliminated,
the Property Trustee will be deemed to be acting solely on behalf of the holders
of the Trust Preferred Securities, and only holders of the Trust Preferred
Securities will have the right to direct the Property Trustee in accordance with
the terms of the Trust Securities.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Trust (each, a "Liquidation"), holders of the Trust Preferred
Securities will be entitled to receive out of the assets of the Trust, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, distributions in an amount equal to the aggregate of the stated liquidation
amount of $25 per Trust Preferred Security plus accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation, Subordinated Debentures in an aggregate stated
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, the Trust Preferred
Securities have been distributed on a pro rata basis to the holders of the Trust
Preferred Securities in exchange for such Trust Preferred Securities. WPSR
covenants not to cause or permit the dissolution, winding-up or termination of
the Trust, except in connection with such a distribution of the Subordinated
Debentures or certain mergers, consolidations or amalgamations or as otherwise
required by the Declaration. See "Description of the Subordinated
Debentures--Certain Covenants of WPSR."
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Trust Preferred Securities shall be paid on a pro rata basis. The
holders of the Trust Common Securities will be entitled to receive distributions
upon any such liquidation pro rata with the holders of the Trust Preferred
Securities, except that if a Declaration Event of Default has occurred and is
continuing, the Trust Preferred Securities shall have a preference over the
Trust Common Securities with regard to such distributions.
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The Guarantee, when taken together with the back-up undertakings, consisting
of obligations of WPSR (including the obligation to pay expenses of the Trust)
as set forth in the Declaration, the Indenture and the Subordinated Debentures
issued to the Trust, provide a full and unconditional guarantee by WPSR of the
Trust Preferred Securities.
DISSOLUTION
Pursuant to the Declaration, the Trust shall dissolve upon the earliest of
(i) June 9, 2053, (ii) the bankruptcy of the Sponsor, (iii) the filing of
articles of dissolution or their equivalent with respect to the Sponsor, the
receipt by the Trustees of the consent of the holders of at least a majority in
liquidation amount of the Trust Securities to the dissolution of the Trust, or
the revocation of the articles of incorporation of the Sponsor and the
expiration of 90 days after the date of revocation without a reinstatement
thereof, (iv) at the election of the Sponsor (which election is optional and
wholly within the discretion of the Sponsor), upon satisfaction of the
liabilities of creditors of the Trust as required by applicable law, provided
that all of the Subordinated Debentures shall have been distributed to holders
of the Trust Securities in liquidation of the Trust, (v) the entry of a decree
of a judicial dissolution of the holder of the Trust Common Securities, the
Sponsor or the Trust, (vi) the redemption of all the Trust Securities or (vii)
the time when all of the Administrative Trustees and the Sponsor shall have
consented to the dissolution of the Trust, provided such action is taken before
the issuance of any Trust Securities. As soon as practicable after the
occurrence of any of the foregoing events and completion of the winding up of
the affairs of the Trust, the Trustees shall file a certificate of cancellation
with the Secretary of State of the State of Delaware.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); provided, that pursuant to the
Declaration, the holder of the Trust Common Securities will be deemed to have
waived any Declaration Event of Default with respect to the Trust Common
Securities until all Declaration Events of Default with respect to the Trust
Preferred Securities have been cured, waived or otherwise eliminated. Until such
Declaration Event of Default with respect to the Trust Preferred Securities has
been so cured, waived, or otherwise eliminated, the Property Trustee will be
deemed to be acting solely on behalf of the holders of the Trust Preferred
Securities and only the holders of the Trust Preferred Securities will have the
right to direct the Property Trustee with respect to certain matters under the
Declaration, and therefore the Indenture.
Upon the occurrence of an Indenture Event of Default, the Property Trustee,
as the sole holder of the Subordinated Debentures, will have the right under the
Indenture to declare the principal of and interest on the Subordinated
Debentures to be immediately due and payable. The principal amount of the
Subordinated Debentures will become immediately due and payable, without any
declaration or other action by the Property Trustee or any other person, upon
the occurrence of certain Indenture Events of Default relating to the voluntary
or involuntary bankruptcy of WPSR. Each of WPSR and the Administrative Trustees,
on behalf of the Trust, are required to file annually with the Property Trustee
an officer's certificate as to the compliance of WPSR and the Trust with all
conditions and covenants under the Declaration.
If the Property Trustee fails to enforce its rights with respect to the
Subordinated Debentures held by the Trust, any record holder of Trust Preferred
Securities may, to the fullest extent permitted by law, institute legal
proceedings directly against WPSR to enforce the Property Trustee's rights under
such Subordinated Debentures without first instituting any legal proceedings
against such Property Trustee or any other person or entity. In addition, if a
Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of WPSR to pay interest, principal or other required
payments on the Subordinated Debentures issued to the Trust on the date such
interest, principal or other payment is otherwise payable, then a record holder
of Trust Preferred Securities may institute a proceeding directly against WPSR
for enforcement of payment on the Subordinated Debentures on or after the
respective due dates specified in the Subordinated Debentures having a principal
amount equal to the aggregate liquidation amount of the Trust Preferred
Securities held by such holder. In connection with such Direct Action, WPSR will
be subrogated to the rights of such record holder of
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Trust Preferred Securities to the extent of any payment made by WPSR to such
record holder of Trust Preferred Securities. The record holder in the case of
the issuance of one or more global Trust Preferred Securities certificates will
be The Depository Trust Company or its nominee acting at the direction of the
beneficial owners of the Trust Preferred Securities.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "Description of the Guarantee--Modification of the Guarantee; and
Assignment" and as otherwise required by law and the Declaration, the holders of
the Trust Preferred Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate stated liquidation amount of the Trust
Preferred Securities have the right to (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee or
exercising of any trust or power conferred upon the Property Trustee under the
Declaration including directing the time, method and place of conducting any
proceeding for any remedy available to the Debt Trustee, or exercising any trust
or power conferred on the Debt Trustee, with respect to the Debentures, (ii)
waive any past Indenture Event of Default and its consequences that are waivable
under the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Subordinated Debentures shall be due and payable
or (iv) consent to any amendment, modification or termination of the Indenture
or the Subordinated Debentures, where such consent shall be required; provided,
however, that, where a consent or action under the Indenture would require the
consent or act of the holders of greater than a majority in principal amount of
Subordinated Debentures affected thereby (a "Super-Majority"), the Property
Trustee may only give such consent or take such action at the written direction
of the holders of at least the proportion in liquidation amount of the Trust
Preferred Securities which the relevant Super-Majority represents of the
aggregate principal amount of the Subordinated Debentures outstanding. The
Property Trustee shall not take any of the actions described in clauses (i),
(ii), (iii) or (iv) above unless the Property Trustee has obtained an opinion of
tax counsel to the effect that, notwithstanding such action, the Trust will be
classified as a grantor trust for United States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Property Trustee
shall request the direction of the holders of the Trust Securities with respect
to such amendment, modification or termination and shall vote with respect to
such amendment, modification or termination as directed by the holders of a
majority in stated liquidation amount of the Trust Securities voting together as
a single class; provided, however, that where a consent under the Indenture
would require the consent of a Super-Majority, the Property Trustee may only
give such consent at the direction of the holders of at least the proportion in
liquidation amount of the Trust Securities which the relevant Super-Majority
represents of the aggregate principal amount of the Subordinated Debentures
outstanding. The Property Trustee shall not take any such action in accordance
with the directions of the holders of the Trust Securities unless the Property
Trustee has obtained an opinion of tax counsel to the effect that,
notwithstanding such action, the Trust will be classified as a grantor trust for
the purposes of United States federal income tax.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Trust Preferred Securities
may be given at a separate meeting of holders of Trust Preferred Securities
convened for such purpose, at a meeting of all of the holders of Trust
Securities or pursuant to written consent. The Administrative Trustees will
cause a notice of any meeting at which holders of Trust Preferred Securities are
entitled to vote, or of any matter upon which action by written
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consent of such holders is to be taken, to be mailed to each holder of record of
Trust Preferred Securities. Each such notice will include a statement setting
forth the following information: (i) the date of such meeting or the date by
which such action is to be taken; (ii) a description of any resolution proposed
for adoption at such meeting on which such holders are entitled to vote or of
such matter upon which written consent is sought; and (iii) instructions for the
delivery of proxies or consents. No vote or consent of the holders of Trust
Preferred Securities will be required for the Trust to redeem and cancel Trust
Preferred Securities or distribute Subordinated Debentures in accordance with
the Declaration.
Notwithstanding that holders of Trust Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the Trust
Preferred Securities that are owned at such time by WPSR or any entity directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, WPSR, shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if such Trust Preferred
Securities were not outstanding.
The procedures by which holders of Trust Preferred Securities may exercise
their voting rights while the Trust Preferred Securities are held of record by
The Depository Trust Company or its nominee are described below. See
"--Book-Entry Issuance--The Depository Trust Company."
Holders of the Trust Preferred Securities will have no rights to appoint or
remove the Trustees, who may be appointed, removed or replaced solely by WPSR as
the holder of all of the Trust Common Securities provided, however, if a
Declaration Event of Default has occurred and is continuing then the Property
Trustee and the Delaware Trustee may not be removed and replaced by WPSR but may
be removed and replaced by the holders of at least a majority in aggregate
liquidation amount of the outstanding Trust Preferred Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the
Administrative Trustees (and in certain circumstances the Property Trustee),
provided that, if any proposed amendment provides for, or the Administrative
Trustees otherwise propose to effect, (i) any action that would materially
adversely affect the powers, preferences or special rights of the holders of
Trust Securities, whether by way of amendment to the Declaration or otherwise or
(ii) the dissolution, winding-up or termination of the Trust other than pursuant
to the terms of the Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such amendment or
proposal, and such amendment or proposal shall not be effective except with the
approval of at least a majority in liquidation amount of the Trust Securities
affected thereby; provided, however, that a reduction of the aggregate
liquidation amount or the distribution rate or a change in the terms governing
the payment dates or maturities of the Trust Preferred Securities shall not be
permitted without the consent of each holder of the Trust Preferred Securities;
and provided further that, if any amendment or proposal referred to in clause
(i) above would materially adversely affect only the Trust Preferred Securities
or the Trust Common Securities, then only the affected class will be entitled to
vote on such amendment or proposal, and such amendment or proposal shall not be
effective except with the approval of a majority in liquidation amount of such
class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise materially adversely affect the
powers of the Property Trustee in contravention of the Trust Indenture Act or
(iii) cause the Trust to be deemed an "investment company" which is required to
be registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below or as otherwise described in the Declaration. The Trust may,
with the consent of the Administrative Trustees and without the consent of the
holders of the Trust Securities or the Property Trustee, consolidate,
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amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State of the United States; provided, that (i) if the
Trust is not the survivor, such successor entity either (x) expressly assumes
all of the obligations of the Trust under the Trust Securities or (y)
substitutes for each class of Trust Securities other securities having
substantially the same terms as the Trust Securities of such class (the
"Successor Securities"), so long as each class of the Successor Securities rank
the same as the Trust Securities of such class rank with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii) WPSR
expressly acknowledges a trustee of such successor entity possessing the same
powers and duties as the Property Trustee as the holder of the Subordinated
Debentures, (iii) the Trust Preferred Securities or any Successor Securities
thereof are listed, or any Successor Securities thereof will be listed upon
notification of issuance, on any national securities exchange or with another
organization on which the Trust Preferred Securities are then listed or quoted,
(iv) such merger, consolidation, amalgamation or replacement does not cause the
Trust Preferred Securities (including any Successor Securities thereof) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interest in the new entity),
(vi) such successor entity has a purpose substantially identical to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation or replacement,
WPSR has received an opinion of an independent counsel to the Trust experienced
in such matters to the effect that, (A) such merger, consolidation, amalgamation
or replacement does not adversely affect the rights, preferences and privileges
of the holders of the Trust Securities (including any Successor Securities) in
any material respect (other than with respect to any dilution of the holders'
interest in the new entity), (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor such successor entity will be
required to register as an investment company under the 1940 Act and (C) the
Trust will continue to be classified as a grantor trust for federal income tax
purposes, and (viii) WPSR 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 percent in liquidation amount of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it, if such consolidation, amalgamation, merger or replacement would
cause the Trust or the Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes.
EXPENSES AND TAXES
In the Indenture, WPSR has agreed to pay all costs and expenses of the Trust
(including costs and expenses relating to the organization of the Trust, the
offering, sale and issuance of the Trust Securities, the fees and expenses of
the Trustees and the costs and expenses relating to the operation of the Trust)
and to pay any and all taxes and all costs and expenses with respect thereto
(other than withholding taxes of the United States or any state thereof) to
which the Trust might become subject. The foregoing obligations of WPSR under
the Indenture are for the benefit of, and shall be enforceable by, any person to
whom any such costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice thereof. Any such Creditor may enforce such
obligations of WPSR directly against WPSR, and WPSR has irrevocably waived any
right or remedy to require that any such Creditor take any action against the
Trust or any other person before proceeding against WPSR. WPSR has also agreed
in the Indenture to execute such additional agreements as may be necessary or
desirable to give full effect to the foregoing.
BOOK-ENTRY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary (the
"Depositary") for the Trust Preferred Securities. The Trust Preferred Securities
will initially be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). One or more fully-registered
global Trust Preferred Securities certificates, representing the total aggregate
number of Trust Preferred Securities, will be issued and will be delivered to
DTC.
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The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Trust Preferred
Securities as represented by a global certificate.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
in DTC include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others,
such as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the SEC.
Purchases of Trust Preferred Securities within the DTC system must be made
by or through Direct Participants, which will receive a credit for the Trust
Preferred Securities on DTC's records. The ownership interest of each actual
purchaser of each Trust Preferred Security represented by a global Trust
Preferred Security certificate ("Beneficial Owner") is in turn to be recorded on
the Direct Participants' and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Trust Preferred Securities. Transfers of ownership interests in the
Trust Preferred Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in the Trust
Preferred Securities, except in the event that use of the book-entry system for
the Trust Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Trust Preferred Securities
deposited by Participants with DTC are registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of Trust Preferred Securities with
DTC and their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Trust Preferred Securities. DTC's records reflect only the identity of the
Direct Participants to whose accounts such Trust Preferred Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of Beneficial
Owners that are their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Redemption notices will be sent to DTC. If less than all of the Trust
Preferred Securities are being redeemed, DTC's practice is to determine by lot
the amount of the interest of each Direct Participant in the Trust Preferred
Securities to be redeemed.
Although voting with respect to the Trust Preferred Securities is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Trust Preferred Securities. Under its usual
procedures, DTC mails an omnibus proxy to the Trust as soon as possible after
the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose
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accounts the Trust Preferred Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Trust Preferred Securities will be made to Cede
& Co., as nominee of DTC in immediately available funds. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participants and not of DTC, the Trust or WPSR, subject
to any statutory or regulatory requirements to the contrary that may be in
effect from time to time. Payment of distributions to Cede & Co. is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Trust Preferred
Security certificate will not be entitled to receive physical delivery of Trust
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Trust Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Trust Preferred Securities at any time by giving reasonable
notice to the Trust. Under such circumstances, in the event that a successor
securities depositary is not obtained, Trust Preferred Securities certificates
are required to be printed and delivered to Beneficial Owners. Additionally, the
Administrative Trustees (after consultation with WPSR) may decide to discontinue
use of the system of book-entry transfers through DTC (or any successor
depositary) with respect to the Trust Preferred Securities. In that event,
certificates for the Trust Preferred Securities will be printed and delivered to
Beneficial Owners. In each of the above circumstances, WPSR will appoint a
paying agent with respect to the Trust Preferred Securities.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that WPSR and the Trust believe to be reliable,
but neither WPSR nor the Trust takes responsibility for the accuracy thereof.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform such duties as are specifically set forth in the
Declaration, in the terms of the Trust Securities or in the Trust Indenture Act
and, after default, shall exercise the same degree of care and skill as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, 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 Preferred Securities, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which might be incurred
thereby. Nothing in the preceding sentence shall, however, be taken to relieve
the Property Trustee of its obligation, upon the occurrence of a Declaration
Event of Default, to exercise the rights and powers vested in it by the
Declaration. The Property Trustee also serves as trustee under the Guarantee and
the Indenture. WPSR and its affiliates may have banking relationships with the
Property Trustee in the ordinary course of business. The Property Trustee
currently acts as trustee of the WPSC Employee Stock Ownership Plan and of
various other employee benefit plans of WPSR and its subsidiaries.
PAYMENT AND PAYING AGENCY
Payments in respect of the Trust Preferred Securities represented by a
global certificate shall be made to DTC, which shall credit the relevant
accounts at DTC on the applicable distribution dates. In the event that the
certificates for the Trust Preferred Securities are not in book-entry form, the
Trust will maintain an office or agency in the Borough of Manhattan, New York,
New York, where the Trust Preferred Securities may be
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presented for payment ("Paying Agent"). If WPSR fails to appoint or maintain
another entity as Paying Agent, the Property Trustee will act as such.
In the event that the Trust Preferred Securities do not remain in book-entry
form, registration of transfers of Trust Preferred Securities will be effected
without charge by or on behalf of the Trust, but upon payment (with the giving
of such indemnity as the Administrative Trustees may require) in respect of any
tax or other government charges that may be imposed in relation to it. The Trust
will not be required to register or cause to be registered the transfer of Trust
Preferred Securities after such Trust Preferred Securities have been called for
redemption.
GOVERNING LAW
The Declaration and the Trust Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to operate the Trust
in such a way so that the Trust will not be required to register as an
"investment company" under the 1940 Act or characterized as other than a grantor
trust for United States federal income tax purposes. WPSR is authorized and
directed to conduct its affairs so that the Subordinated Debentures will be
treated as indebtedness of WPSR for United States federal income tax purposes.
In this connection, WPSR and the Administrative Trustees are authorized to take
any action, not inconsistent with applicable law, the certificate of trust of
the Trust or the restated articles of incorporation of WPSR, that each of WPSR
and the Administrative Trustees determine in their discretion to be necessary or
desirable to achieve such end, as long as such action does not adversely affect
the interests of the holders of the Trust Preferred Securities or vary the terms
thereof.
Holders of the Trust Preferred Securities have no preemptive or similar
rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by WPSR for the benefit of the holders from time
to time of the Trust Preferred Securities. The Guarantee will be qualified as an
indenture under the Trust Indenture Act. The Guarantee Trustee, State Street
Bank and Trust Company, will act as independent indenture trustee for Trust
Indenture Act purposes under the Guarantee. The terms of the Guarantee will be
those set forth in the Guarantee and those made part of the Guarantee by the
Trust Indenture Act. The following summary does not purport to be complete and
is subject to and qualified in its entirety by reference to the provisions of
the form of Guarantee, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Trust
Indenture Act. The Guarantee will be held by the Guarantee Trustee for the
benefit of the holders of the Trust Preferred Securities.
GENERAL
Pursuant to the Guarantee, WPSR will irrevocably and unconditionally agree,
to the extent set forth therein, to pay in full to the holders of the Trust
Preferred Securities the Guarantee Payments (as defined herein) (except to the
extent paid by the Trust), as and when due, regardless of any defense, right of
set-off or counterclaim that the Trust may have or assert. The following
payments or distributions with respect to the Trust Preferred Securities to the
extent not paid by the Trust (the "Guarantee Payments") will be subject to the
Guarantee (without duplication): (i) any accrued and unpaid distributions that
are required to be paid on the Trust Preferred Securities, to the extent the
Trust shall have funds available therefor, (ii) the Redemption Price, including
all accrued and unpaid distributions to the date of the redemption, to the
extent the Trust has funds available therefor, with respect to any Trust
Preferred Securities called for redemption by the Trust and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Subordinated Debentures to
the holders of Trust Preferred Securities in exchange for Trust
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Preferred Securities as provided in the Declaration or the redemption of all of
the Trust Preferred Securities upon maturity or redemption of the Subordinated
Debentures), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on such Trust Preferred Securities to the date
of payment, to the extent the Trust has funds available therefor, or (b) the
amount of assets of the Trust remaining for distribution to holders of Trust
Preferred Securities in liquidation of the Trust. WPSR's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
WPSR to the holders of Trust Preferred Securities or by causing the Trust to pay
such amounts to such holders.
The Guarantee will not apply to any payment of distributions on the Trust
Preferred Securities except to the extent the Trust shall have funds available
therefor. If WPSR does not make interest or principal payments on the
Subordinated Debentures purchased by the Trust, the Trust will not pay
distributions on the Trust Preferred Securities issued by the Trust and will not
have funds available therefor.
WPSR will also irrevocably and unconditionally agree to guarantee the
obligations of the Trust with respect to the Trust Common Securities (the "Trust
Common Securities Guarantee") to the same extent as the Guarantee, except that
upon the occurrence and during the continuation of an Event of Default under the
Indenture, holders of Trust Preferred Securities under the Guarantee shall have
priority over holders of Trust Common Securities under the Trust Common
Securities Guarantee with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF WPSR
In the Guarantee, WPSR will covenant that, so long as any Trust Preferred
Securities remain outstanding, if there shall have occurred any event of default
under the Guarantee or a Declaration Event of Default, then (a) WPSR shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock, (b) WPSR shall not, directly or indirectly, and shall not
allow any of its subsidiaries to, make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by WPSR that rank PARI PASSU with or junior to the
Subordinated Debentures and (c) WPSR shall not make any guarantee payments with
respect to the foregoing (other than pursuant to the Guarantee); provided,
however, that the restriction in clause (a) above does not apply (i) to
repurchases or acquisitions of common shares of WPSR as contemplated by any
employment arrangement, benefit plan or other similar contract with or for the
benefit of employees, officers or directors entered into in the ordinary course
of business, (ii) to repurchases of common shares of WPSR as contemplated by the
WPSR Stock Investment Plan or WPSR Deferred Compensation Plan, as in effect
immediately prior to the occurrence of such event of default under the Guarantee
or such Declaration Event of Default, (iii) as a result of an exchange or
conversion of any class or series of capital stock of WPSR for common shares of
WPSR, provided that such class or series of capital stock of WPSR was
outstanding prior to the occurrence of such event of default under the Guarantee
or such Declaration Event of Default, (iv) to the purchase of fractional
interests in shares of capital stock of WPSR pursuant to conversion or exchange
provisions of such capital stock of WPSR or the security being converted or
exchanged, provided that such capital stock of WPSR or security was outstanding
prior to the occurrence of such event of default under the Guarantee or such
Declaration Event of Default, or (v) to the payment of any stock dividend by
WPSR where the dividend is paid in the form of the same stock as that on which
the dividend is being paid.
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Trust Preferred Securities in any material respect (in which case
no consent of such holders will be required), the Guarantee may be amended only
with the prior approval of the holders of not less than a majority in
liquidation amount of the outstanding Trust Preferred Securities. The manner of
obtaining any such approval of holders of the Trust Preferred Securities is set
forth under "Description of the Trust Preferred Securities--Voting Rights." All
guarantees and agreements contained in the Guarantee shall bind the successors,
assigns, receivers, trustees and
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representatives of WPSR and shall inure to the benefit of the holders of the
Trust Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of WPSR
to perform any of its payment or other obligations thereunder. The holders of a
majority in liquidation amount of the Trust Preferred Securities have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any record holder
of Trust Preferred Securities may institute a legal proceeding directly against
WPSR to enforce the Guarantee Trustee's rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. WPSR has waived any right or remedy to require that any
action on the Guarantee be brought first against the Trust or any other person
or entity before proceeding directly against WPSR. The record holder in the case
of the issuance of one or more global Trust Preferred Securities certificates
will be DTC acting at the direction of its Direct Participants, who in turn will
be acting at the direction of the beneficial owners of the Trust Preferred
Securities.
WPSR will be required to provide annually to the Guarantee Trustee a
statement as to the performance by WPSR of certain of its obligations under the
Guarantee and as to any default in such performance.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default under the
Guaranty and after the curing of all such defaults, undertakes to perform only
such duties as are specifically set forth in the Guarantee and, after default,
shall exercise such of the rights and powers vested in it by the Guarantee and
use the same degree of care and skill as a prudent individual would exercise or
use under the circumstances in the conduct of his or her own affairs. Subject to
such provisions, the Guarantee Trustee is under no obligation to exercise any of
the powers vested in it by the Guarantee at the request of any holder of Trust
Preferred Securities, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred thereby. The Guarantee Trustee
also serves as Property Trustee and Debt Trustee. WPSR and its affiliates may
have a banking relationship with the Guarantee Trustee in the ordinary course of
business. The Guarantee Trustee currently acts as trustee of the WPSC Stock
Ownership Plan and of various other employee benefit plans of WPSR and its
subsidiaries.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to the Trust Preferred Securities (a) upon
full payment of the Redemption Price of all Trust Preferred Securities, (b) upon
distribution of the Subordinated Debentures held by the Trust to the holders of
all the Trust Preferred Securities, or (c) upon full payment of the amounts
payable in accordance with the Declaration upon dissolution of the Trust. The
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Trust Preferred Securities must restore payment
of any sums paid under such Trust Preferred Securities or the Guarantee.
STATUS OF THE GUARANTEE
WPSR's obligations under the Guarantee to make the Guarantee Payments will
constitute unsecured obligations of WPSR and will rank (i) subordinate and
junior in right of payment to all other liabilities of WPSR, including the
Subordinated Debentures, except those liabilities of WPSR made PARI PASSU or
subordinate by their terms, (ii) PARI PASSU with the most senior preferred or
preference stock, if any, hereafter issued by WPSR and with any guarantee now or
hereafter entered into by WPSR in respect of any preferred or preference
securities of any affiliate of WPSR, and (iii) senior to WPSR's common shares.
The terms of the Trust Preferred
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Securities provide that each holder of Trust Preferred Securities by acceptance
thereof agrees to the subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
WPSR to enforce its rights under the guarantee without instituting a legal
proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a description of the terms of the Subordinated Debentures
in which the Trust will invest the proceeds from the issuance and sale of the
Trust Securities. The following summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Indenture,
dated as of July 30, 1998, between WPSR and State Street Bank and Trust Company,
as Trustee (the "Debt Trustee"), as supplemented by a First Supplemental
Indenture, dated as of July 30, 1998 (as so supplemented, the "Indenture"), the
forms of which are filed as Exhibits to the Registration Statement of which this
Prospectus forms a part. The terms of the Subordinated Debentures will include
those stated in the Indenture and those made a part of the Indenture by
reference to the Trust Indenture Act. Certain capitalized terms used herein are
defined in the Indenture.
WPSR will have the right, at any time, to dissolve the Trust and, after
satisfaction of the liabilities to creditors of the Trust as required by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust. See "Description of
the Trust Preferred Securities-- Special Event Redemption."
If the Subordinated Debentures are distributed to the holders of the Trust
Preferred Securities, WPSR will use its best efforts to have the Subordinated
Debentures listed on the New York Stock Exchange or on such other exchange on
which the Trust Preferred Securities are then listed.
GENERAL
The Subordinated Debentures will be issued as unsecured subordinated debt
under the Indenture. The Indenture does not limit the aggregate principal amount
of debt securities which may be issued thereunder and provides that the debt
securities may be issued thereunder from time to time in one or more series.
However, the Subordinated Debentures, as a separate series of debt securities,
will be limited in aggregate principal amount to $51,500,000, such amount being
the sum of the aggregate stated liquidation amount of the Trust Preferred
Securities and the Trust Common Securities.
The Subordinated Debentures are not entitled to the benefit of any sinking
fund. The entire principal amount of the Subordinated Debentures will mature and
become due and payable, together with any accrued and unpaid interest thereon
including Additional Interest (as defined herein), if any, on June 30, 2038.
If Subordinated Debentures are distributed to holders of Trust Preferred
Securities in liquidation of such holders' interests in the Trust, WPSR
presently anticipates that such Subordinated Debentures will initially be issued
in the form or one or more Global Securities. As described herein, under certain
limited circumstances, Subordinated Debentures may be issued in certificated
form in exchange for a Global Security. See "--Book-Entry and Settlement." In
the event that Subordinated Debentures are issued in certificated form, such
Subordinated Debentures will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Subordinated Debentures issued as a Global Security will be made to
DTC, a successor depositary or, in the event that no depositary is used, to a
Paying Agent for the Subordinated Debentures. In the event Subordinated
Debentures are issued in certificated form, principal and
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interest will be payable, the transfer of the Subordinated Debentures will be
registrable and Subordinated Debentures will be exchangeable for Subordinated
Debentures of other denominations of a like aggregate principal amount at the
corporate trust office of the Debt Trustee in Boston, Massachusetts, or such
other location designated by WPSR; provided, that payment of interest may be
made at the option of WPSR by check mailed to the address of the persons
entitled thereto or by wire transfer to an account appropriately designated by
the persons entitled thereto. Notwithstanding the foregoing, so long as the
holder of any Subordinated Debentures is the Property Trustee, the payment of
principal and interest on the Subordinated Debentures held by the Property
Trustee will be made at such place and to such account as may be designated by
the Property Trustee.
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction or similar transaction involving WPSR that may adversely affect such
holders.
SUBORDINATION
The Indenture provides that the Subordinated Debentures are subordinated and
junior in right of payment to all Senior Indebtedness of WPSR, whether now
existing or hereafter incurred. No payment of principal (including redemption
payments, if any), premium, if any, or interest on, the Subordinated Debentures
may be made if (i) any Senior Indebtedness of WPSR is not paid when due, and any
applicable grace period with respect to such default has ended and such default
has not been cured or waived or ceased to exist, or (ii) the maturity of any
Senior Indebtedness of WPSR has been accelerated because of a default. Upon any
payment by or distribution of assets of WPSR to creditors upon any dissolution,
winding-up, liquidation or reorganization of WPSR, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all amounts due on all Senior Indebtedness of WPSR must be paid in full, or
payment provided for in money in accordance with its terms, before the holders
of Subordinated Debentures are entitled to receive or retain any payment.
The term "Senior Indebtedness" means, with respect to WPSR, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of WPSR
for money borrowed and (B) indebtedness evidenced by securities, debentures,
bonds or other similar instruments issued by WPSR, (ii) all capital lease
obligations of WPSR, (iii) all obligations of WPSR issued or assumed as the
deferred purchase price of property, all conditional sale obligations of WPSR
and all obligations of WPSR under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of business), (iv) all
obligations of WPSR for the reimbursement on any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction, (v) all
obligations of the type referred to in clauses (i) through (iv) above of other
persons for the payment of which WPSR is responsible or liable as obligor,
guarantor or otherwise and (vi) all obligations of the type referred to in
clauses (i) through (v) above of other persons secured by any lien on any
property or asset of WPSR (whether or not such obligation is assumed by WPSR),
except for (1) any such indebtedness that is by its terms subordinated to or
PARI PASSU with the Subordinated Debentures, as the case may be, and (2) any
indebtedness from WPSR to its affiliates. 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 Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by WPSR. As of March 31, 1998, Senior Indebtedness of WPSR
aggregated approximately $23.1 million, including a guarantee of an $11.5
million obligation of a WPSR subsidiary. WPSR's obligations under the
Subordinated Debentures will also be effectively subordinated to all existing
and future obligations of WPSR's subsidiaries. As of March 31, 1998, the
aggregate liabilities of the subsidiaries of WPSR (excluding intercompany
liabilities) were approximately $760 million (including approximately $283
million of WPSC first mortgage bonds).
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CERTAIN COVENANTS OF WPSR
If (i) there shall have occurred any event that would constitute an
Indenture Event of Default or (ii) WPSR shall be in default with respect to its
payment of any obligations under the Guarantee or the Trust Common Securities
Guarantee, or (iii) WPSR shall have given notice of its election to defer
payments of interest on the Subordinated Debentures by extending the interest
payment period, and such period, or any extension thereof, shall be continuing,
then (a) WPSR shall not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock and (b) WPSR shall not, directly or
indirectly, and shall not allow any of its subsidiaries to, make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by WPSR that rank PARI PASSU with or junior to the
Subordinated Debentures, and (c) WPSR shall not make any guarantee payments with
respect to the foregoing (other than pursuant to the Guarantee); provided,
however, that the restriction in clause (a) above does not apply (i) to
repurchases or acquisitions of common shares of WPSR as contemplated by any
employment arrangement, benefit plan or similar contract with or for the benefit
of employees, officers or directors entered into in the ordinary course of
business, (ii) to repurchases of common shares of WPSR as contemplated by the
WPSR Stock Investment Plan or WPSR Deferred Compensation Plan, as in effect
immediately prior to the occurrence of such Indenture Event of Default or the
date upon which WPSR gives notice of its election to extend the interest payment
period, as applicable, (iii) as a result of an exchange or conversion of any
class or series of capital stock of WPSR for common shares of WPSR, provided
that such class or series of common stock of WPSR was outstanding prior to the
occurrence of such Indenture Event of Default or the date upon which WPSR gives
notice of its election to extend the interest payment period, as applicable,
(iv) to the purchase of fractional interests in shares of capital stock of WPSR
pursuant to the conversion or exchange provisions of such capital stock of WPSR
or the security being converted or exchanged, provided that such capital stock
of WPSR or security was outstanding prior to the occurrence of such Indenture
Event of Default or the date upon which WPSR gives notice of its election to
extend the interest payment period, as applicable, or (v) to the payment of any
stock dividend by WPSR where the dividend is paid in the form of the same stock
as that on which the dividend is being paid.
For so long as the Trust Securities remain outstanding, WPSR will covenant
(i) to maintain 100% direct or indirect ownership of the Trust Common
Securities; provided, however, that any permitted successor of WPSR under the
Indenture may succeed to WPSR's ownership of such Trust Common Securities, (ii)
not to cause, as sponsor of the Trust, or to permit, as holder of the Trust
Common Securities, the dissolution, winding-up or termination of the Trust,
except in connection with a distribution of the Subordinated Debentures as
provided in the Declaration and in connection with certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, and (iii)
to use its reasonable efforts to cause the Trust (a) to remain a statutory
business trust, except in connection with the distribution of Subordinated
Debentures to the holders of Trust Securities upon dissolution of the Trust, the
redemption of all of the Trust Securities of the Trust, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, and (b)
to otherwise continue to be classified for United States federal income tax
purposes as a grantor trust.
OPTIONAL REDEMPTION
WPSR shall have the right to redeem the Subordinated Debentures, (i) in
whole or in part, from time to time, on or after July 30, 2003, or (ii) at any
time in whole (but not in part) within 90 days following the occurrence of a Tax
Event or Investment Company Event, upon not less than 30 nor more than 60-days'
notice, at a redemption price equal to the principal amount to be redeemed plus
any accrued and unpaid interest, including Additional Interest, if any, to the
redemption date. See "Description of the Trust Preferred Securities--Special
Event Redemption." If a partial redemption of the Trust Preferred Securities
resulting from a partial redemption of the Subordinated Debentures would result
in the delisting of the Trust Preferred Securities by such exchange on which the
Trust Preferred Securities are then listed, WPSR may only redeem the
Subordinated Debentures in whole.
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PROPOSED TAX LEGISLATION; LITIGATION
From time to time, the Clinton Administration has proposed certain tax law
changes that would, among other things, generally deny corporate issuers a
deduction for interest in respect of certain debt obligations, such as the
Subordinated Debentures, if the debt obligations have a term exceeding 20 years
and are not reflected as indebtedness on such issuer's consolidated balance
sheet. See "United States Federal Income Taxation-- Proposed Tax Law Changes."
The Internal Revenue Service ("IRS") has taken the position, in a case
pending before the United States Tax Court, that securities issued in
circumstances with certain similarities to the issuance of the Subordinated
Debentures do not constitute debt obligations. If the IRS were to prevail in its
position, this could give rise to a Tax Event with respect to the Trust
Preferred Securities. See "United States Federal Income Taxation--
Classification of the Subordinated Debentures."
INTEREST
Each Subordinated Debenture shall bear interest at the rate specified on the
cover of this Prospectus from the original date of issuance until the principal
thereof becomes due and payable, payable quarterly in arrears on March 31, June
30, September 30, and December 31 of each year (each an "Interest Payment
Date"), commencing September 30, 1998, to the person in whose name such
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment Date.
In the event the Subordinated Debentures shall not continue to remain in
book-entry only form or if the Subordinated Debentures are not held by the
Property Trustee and are not represented by a Global Security, WPSR shall have
the right to select record dates, which shall be not less than three Business
Days prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed per 90-day
period in a 360-day year of twelve 30-day months. In the event that any date on
which interest is payable on the Subordinated Debentures is not a Business Day,
then payment of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, then such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
WPSR shall have the right at any time, and from time to time, to defer
payments of interest on the Subordinated Debentures by extending the interest
payment period for a period not exceeding 20 consecutive calendar quarters, at
the end of which Extension Period, WPSR shall pay all interest then accrued and
unpaid (including any Additional Interest) together with interest thereon
compounded quarterly at the rate specified for the Subordinated Debentures to
the extent permitted by applicable law ("Compound Interest"). WPSR will covenant
that in the event WPSR exercises this right, then during any Extension Period,
(a) WPSR may not declare or pay any dividends on, make any distribution with
respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to any of its capital stock and (b) WPSR may not, directly or
indirectly, and will not allow any of its subsidiaries to, make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by WPSR that rank PARI PASSU with or junior to the
Subordinated Debentures and (c) WPSR may not make any guarantee payments with
respect to the foregoing (other than pursuant to the Guarantee); provided,
however, that, the restriction in clause (a) above does not apply (i) to
repurchases or acquisitions of common shares of WPSR as contemplated by any
employment arrangement, benefit plan or other similar contract with or for the
benefit of employees, officers or directors entered into in the ordinary course
of business, (ii) to repurchases of common shares of WPSR as contemplated by the
WPSR Stock
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Investment Plan or WPSR Deferred Compensation Plan, as in effect immediately
prior to the date upon which WPSR gives notice of its election of such Extension
Period, (iii) as a result of an exchange or conversion of any class or series of
capital stock of WPSR for common stock of WPSR, provided that such class or
series of capital stock of WPSR was outstanding prior to the date upon which
WPSR gives notice of its election of such Extension Period, (iv) to the purchase
of fractional interests in shares of capital stock of WPSR pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, provided that such capital stock of WPSR or security was
outstanding prior to the date upon which WPSR gives notice of its election of
such Extension Period, or (v) to the payment of any stock dividend by WPSR where
the dividend is paid in the form of the same stock as that on which the dividend
is being paid. Prior to the termination of any such Extension Period, WPSR may
further defer payments of interest by extending the interest payment period;
provided, however, that, such Extension Period, including all such previous and
further extensions, may not exceed 20 consecutive calendar quarters or extend
beyond the maturity of the Subordinated Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, WPSR may commence a
new Extension Period, subject to the requirements set forth in this paragraph.
No interest during an Extension Period, except at the end thereof, shall be due
and payable, but WPSR may prepay at any time all or any portion of the interest
accrued during an Extension Period. At the end of the Extension Period, WPSR
will pay all interest accrued and unpaid on the Subordinated Debentures,
including any Additional Interest and Compound Interest, to the holders in whose
names the Subordinated Debentures are registered on the first record date after
the end of the Extension Period.
WPSR has no present intention of exercising its right to defer payments of
interest by extending the interest payment period on the Subordinated Debentures
and views the exercise of such right during the term of the Subordinated
Debentures as unlikely. See "--Certain Covenants of WPSR."
If the Property Trustee shall be the sole holder of the Subordinated
Debentures, WPSR shall give the Debt Trustee, the Administrative Trustees and
the Property Trustee notice of its election of such Extension Period at least
one Business Day before the earlier of (i) the next succeeding date on which
distributions on the Trust Preferred Securities are payable or (ii) the date the
Administrative Trustees are required to give notice to the New York Stock
Exchange (or other applicable self-regulatory organization) or to holders of the
Trust Preferred Securities of the record date or the date such distribution is
payable. The Administrative Trustees shall give notice of WPSR's selection of
such Extension Period to the holders of the Trust Preferred Securities. If the
Property Trustee is not the sole holder of the Subordinated Debentures, WPSR
shall give the holders of the Subordinated Debentures and the Debt Trustee
notice of its election of such Extension Period ten Business Days prior to the
earlier of (i) the next succeeding Interest Payment Date or (ii) the date upon
which WPSR is required to give notice to the New York Stock Exchange (or other
applicable self-regulatory organization) or to holders of the Subordinated
Debentures of the record or payment date of such related interest payment.
ADDITIONAL INTEREST
If at any time while the Property Trustee is the holder of any Subordinated
Debentures, the Trust or the Property Trustee shall be required to pay any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States, or any other taxing
authority, then, in any such case, WPSR will pay as additional interest
("Additional Interest") on the Subordinated Debentures held by the Property
Trustee, such additional amounts as shall be required so that the net amounts
received and retained by the Trust and the Property Trustee after paying any
such taxes, duties, assessments or other governmental charges will equal the
amounts the Trust and the Property Trustee would have received had no such
taxes, duties, assessments or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Subordinated Debentures:
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(a) default in payment of interest on the Subordinated Debentures,
including any Additional Interest in respect thereof, when due and
continuance of such default for a period of 30 days; provided, however, that
a valid extension of the interest payment period by WPSR shall not
constitute a default in the payment of interest for this purpose; or
(b) default in payment of principal or premium, if any, on the
Subordinated Debentures when due whether at maturity, upon redemption, by
declaration or otherwise; or
(c) failure to observe or perform any other covenant or agreement with
respect to the Subordinated Debentures contained in the Indenture or
established pursuant thereto for 60 days after written notice of such
failure shall have given to WPSR by the Debt Trustee or to WPSR and the Debt
Trustee by the holders of at least 25% in principal amount of the
outstanding Subordinated Debentures; or
(d) certain events of bankruptcy or reorganization of WPSR; or
(e) the voluntary or involuntary dissolution, winding-up or termination
of the Trust, except in connection with the distribution of Subordinated
Debentures to the holders of Trust Preferred Securities upon dissolution of
the Trust, the redemption of all outstanding Trust Securities of the Trust
and certain mergers, consolidations or amalgamations permitted by the
Declaration.
The Indenture provides that if an Event of Default described in clauses (a),
(b), (c) and (e) of the preceding paragraph occurs and is continuing with
respect to the Subordinated Debentures, either the Debt Trustee or the holders
of not less than 25% in aggregate principal amount of the Subordinated
Debentures may declare, by written notice to WPSR, the principal of all of the
Subordinated Debentures immediately due and payable. If an Event of Default
described in clause (d) of the preceding paragraph occurs and is continuing,
then the principal amount of the Subordinated Debentures, together with the
principal amount of all other series of debt securities issued under the
Indenture, will become immediately due and payable, without any declaration or
action on the part of the Debt Trustee or any holder of the Subordinated
Debentures.
Under the Indenture, the holders of a majority in aggregate principal amount
of the Subordinated Debentures have the right, subject to certain restrictions,
to direct the time, method and place of conducting any proceeding for any remedy
available to the Debt Trustee, or exercising any trust or power conferred on the
Debt Trustee with respect to the Subordinated Debentures. The holders of a
majority in aggregate principal amount of the Subordinated Debentures may also
waive, on behalf of the holders of all of the Subordinated Debentures, any past
default, except (i) a default in the payment of principal, premium, if any, or
interest due otherwise than by acceleration (unless such default has been cured
and a sum sufficient to pay all matured installments of interest and principal
and any applicable premium has been deposited with the Debt Trustee) or (ii) a
default in the covenants described in the first paragraph under "--Certain
Covenants of WPSR." The holders of a majority in aggregate principal amount of
the Subordinated Debentures may annul any declaration accelerating the maturity
of the Subordinated Debentures made in accordance with the preceding paragraph
if all defaults (other than the nonpayment of accelerated principal) have been
cured or waived and a sum sufficient to pay all matured installments of
interest, principal due (other than by acceleration) and premium, if any, on the
Subordinated Debentures has been paid or deposited with the Debt Trustee.
Upon the occurrence of an Event of Default under the Indenture, holders of a
majority in principal amount of the Trust Preferred Securities will have the
right to direct the Property Trustee to exercise its rights and remedies under
the Indenture as sole holder of the Subordinated Debentures. In addition, if the
Event of Default is due to the failure of WPSR to pay interest or principal on
the Subordinated Debentures, when due, holders of the Trust Preferred Securities
may institute a Direct Action against WPSR. See "Description of the Trust
Preferred Securities--Declaration Event of Default," "--Voting Rights," and
"Effect of Obligations under the Subordinated Debentures and the Guarantee."
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BOOK-ENTRY AND SETTLEMENT
If Subordinated Debentures are distributed to holders of Trust Preferred
Securities in liquidation of such holders' interests in the Trust, WPSR
anticipates that the Subordinated Debentures will be issued in the form of one
or more global certificates (each a "Global Security") registered in the name of
the Depositary or its nominee. Except under the limited circumstances described
below, Subordinated Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Subordinated Debentures
in definitive form. The Global Securities described above may not be transferred
except by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or to a
successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Debentures in definitive form and will not be considered the holders (as defined
in the Indenture) thereof for any purpose under the Indenture, and no Global
Security representing Subordinated Debentures shall be exchangeable, except for
another Global Security of like denomination and tenor to be registered in the
name of the Depositary or its nominee or to a successor Depositary or its
nominee. Accordingly, each Beneficial Owner must rely on the procedures of the
Depositary or if such person is not a Participant, on the procedures of the
Participant through which such person owns its interest to exercise any rights
of a holder of Subordinated Debentures under the Indenture.
THE DEPOSITARY
If Subordinated Debentures are distributed to holders of Trust Preferred
Securities in liquidation of such holders' interests in the Trust, it is
expected that DTC will act as securities depositary for the Subordinated
Debentures. For a description of DTC and the specific terms of the depositary
arrangements, see "Description of the Trust Preferred Securities--Book-Entry
Issuance--The Depository Trust Company." As of the date of this Prospectus, the
description therein of DTC's book-entry system and DTC's practices as they
relate to purchases, transfers, notices and payments with respect to the Trust
Preferred Securities apply in all material respects to any debt obligations
represented by one or more Global Securities held by DTC. WPSR may appoint a
successor to DTC or any successor depositary in the event DTC or such successor
depositary is unable or unwilling to continue as a depositary for the Global
Securities.
None of WPSR, the Trust, the Property Trustee, the Debt Trustee, any paying
agent and any other agent of WPSR, the Property Trustee or the Debt Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in a Global
Security for such Subordinated Debentures or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies WPSR that it is unwilling or unable to continue
as a depositary for such Global Security and no successor depositary shall have
been appointed within 90 days after WPSR receives notice or becomes aware of
such condition, as the case may be, (ii) the Depositary, at any time, ceases to
be a clearing agency registered under the Exchange Act at which time the
Depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed within 90 days after WPSR
receives notice or becomes aware of such condition, as the case may be, (iii)
WPSR, in its sole discretion, determines that such Global Security shall be so
exchangeable or (iv) there has occurred an Indenture Event of Default with
respect to the Subordinated Debentures. Any Global Security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for Subordinated
Debentures registered in such
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names as the Depositary shall direct. It is expected that such directions will
be based upon instructions received by the Depositary from its Participants with
respect to ownership of beneficial interests in such Global Security.
In the event the Subordinated Debentures are not represented by one or more
Global Securities, certificates evidencing Subordinated Debentures may be
presented for registration of transfer (with the form of transfer endorsed
thereon duly executed) or exchange, at the corporate trust office of the Debt
Trustee or such other location designated by WPSR for such purpose with respect
to the Subordinated Debentures without service charge and upon payment of any
taxes and other governmental charges as described in the Indenture. WPSR has
initially appointed the Debt Trustee as security registrar with respect to the
Subordinated Debentures. WPSR may at any time rescind the designation of any
such security registrar or approve a change in the location through which any
such security registrar acts, except that WPSR will be required to maintain a
transfer agent at the place of payment. WPSR may at any time designate
additional transfer agents with respect to the Subordinated Debentures.
WPSR shall not be required to (i) issue, exchange or register the transfer
of Subordinated Debentures during a period beginning at the opening of business
15 days before the date of the mailing of a notice of redemption of less than
all of the Subordinated Debentures and ending at the close of business on the
date of such mailing nor (ii) register the transfer of or exchange any
Subordinated Debentures called for redemption.
PAYMENT AND PAYING AGENTS
Payment of principal of the Subordinated Debentures will be made only
against surrender to the Paying Agent of the Subordinated Debentures. Principal
of and interest on Subordinated Debentures will be payable, subject to
applicable laws and regulations, at the office of such Paying Agent as WPSR may
designate from time to time, except that at the option of WPSR payment of any
interest may be made by check mailed to the address of the person entitled
thereto at such address as appears in the Debenture Registrar with respect to
the Subordinated Debentures. Payment of interest on the Subordinated Debentures
on any Interest Payment Date will be made to the persons in whose name the
Subordinated Debentures are registered at the close of business on the regular
record date for such Interest Payment.
The Debt Trustee will act as Paying Agent with respect to the Subordinated
Debentures. WPSR may at any time designate additional Paying Agents or rescind
the designation of any Paying Agent or approve a change in the office through
which the Paying Agent acts, except that WPSR will be required to maintain a
Paying Agent at the place of payment.
All moneys paid by WPSR to a Paying Agent for the payment of principal of or
interest, if any, on any Subordinated Debentures which remain unclaimed at the
end of two years after such principal or interest shall have been due and
payable will be repaid to WPSR and the holder of such Subordinated Debentures
will thereafter look only to WPSR for payment thereof.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting WPSR and the Debt Trustee, with
the consent of the holders of at least a majority in principal amount of the
Subordinated Debentures (and any other series of subordinated debt securities
under the Indenture affected thereby), to modify the Indenture or any
supplemental indenture affecting the rights of the holders of the Subordinated
Debentures; provided that no such modification may, without the consent of the
holder of each outstanding Subordinated Debenture (or, if applicable, other
series of subordinated debt securities) affected thereby, (i) extend the fixed
maturity of the Subordinated Debentures, or reduce the principal amount thereof,
or reduce the rate or extend the time of payment of interest thereon, or reduce
any premium payable upon the redemption thereof or (ii) reduce the aforesaid
percentage of Subordinated Debentures the consent of the holders of which is
required for any such modification. In the event that the consent of the
Property Trustee, as holder of the Subordinated Debentures, is required with
respect to any modification or amendment, the Property Trustee is required,
under the Declaration, to request the direction of the holders of the Trust
Securities with respect to such modification or amendment and to vote on such
matter as
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directed by the holders of a majority in liquidation amount of the Trust
Securities. See "Description of the Trust Preferred Securities--Voting Rights."
In addition, WPSR and the Debt Trustee may execute, without the consent of
holders of the Subordinated Debentures, any supplemental indenture for certain
other usual purposes including the creation of any new series of debt
securities.
CONSOLIDATION, MERGER AND SALE
WPSR shall not consolidate with, or merge into, any corporation or convey or
transfer its properties and assets substantially as an entirety to any entity
unless (a) the successor entity is a corporation organized under the laws of any
State in the United States or the District of Columbia and expressly assumes the
obligations of WPSR under the Indenture, and (b) immediately thereafter no Event
of Default and no event which, after notice or lapse of time, or both, would
become an Event of Default under the Indenture shall have occurred and be
continuing. Upon any such consolidation, merger, conveyance or transfer, the
successor corporation shall succeed to, and be substituted for, WPSR under the
Indenture and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under the Indenture and the Subordinated Debentures.
DEFEASANCE AND DISCHARGE
The Indenture provides that WPSR, at WPSR's option, will be discharged from
any and all obligations in respect of the Subordinated Debentures (except for
certain obligations to register the transfer or exchange of Subordinated
Debentures, replace stolen, lost or mutilated Subordinated Debentures, maintain
paying agencies and hold moneys for payment in trust) if WPSR deposits, in trust
with the Debt Trustee, money or U.S. government obligations which through the
payment of interest thereon and principal thereof in accordance with their terms
will provide money, in an amount sufficient to pay all the principal of, and
interest and premium, if any, on, the Subordinated Debentures on the dates such
payments are due in accordance with the terms of such Subordinated Debentures.
To exercise any such option, WPSR is required to deliver to the Debt Trustee an
opinion of counsel, based upon then applicable United States federal income tax
law, to the effect that the deposit and related defeasance would not cause the
holders of the Subordinated Debentures to recognize income, gain or loss for
federal income tax purposes and will be subject to United States federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit, defeasance or discharge had not occurred.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee, prior to default, undertakes to perform such duties as are
specifically set forth in the Indenture and, after default, shall exercise the
same degree of care and skill as a prudent man would exercise in the conduct of
his own affairs. Subject to such provision, the Debt Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby; but the foregoing shall not relieve the Debt Trustee, upon
the occurrence of an Indenture Event of Default, from the obligation to exercise
the rights and powers vested in it by the Indenture and to use, in such
exercise, the same degree of care and skill as a prudent man would use in the
conduct of his own affairs. The Debt 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 Debt Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
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WPSR and its affiliates may have normal banking relationships with the Debt
Trustee in the ordinary course of business. The Debt Trustee currently acts as
trustee of the WPSR Employee Stock Ownership Plan and of various other employee
benefit plans of WPSR and its subsidiaries.
MISCELLANEOUS
The Indenture provides that WPSR will pay all fees and expenses related to
(i) the offering of the Trust Securities and the Subordinated Debentures and the
organization, operation and termination of the Trust, including the fees and
expenses of the Trustees and (ii) any and all taxes of the Trust (other than
withholding taxes of the United States or any State thereof attributable to the
Trust or its assets).
WPSR will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned subsidiary
of WPSR; provided that, in the event of any such assignment, WPSR will remain
liable for all such obligations. Subject to the foregoing, the Indenture will be
binding upon and inure to the benefit of the parties thereto and their
respective successors and assigns. The Indenture provides that it may not
otherwise be assigned by the parties thereto.
EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to (i)
issue the Trust Securities evidencing undivided beneficial interests in the
assets of the Trust, (ii) invest the proceeds from such issuance and sale in the
Subordinated Debentures and (iii) engage in only those other activities
necessary or incidental thereto.
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because: (i) the aggregate principal
amount of Subordinated Debentures will be equal to the sum of the aggregate
liquidation amount of the Trust Securities; (ii) the interest rate and the
interest and other payment dates on the Subordinated Debentures will match the
distribution rate and distribution and other payment dates for the Trust
Preferred Securities; (iii) WPSR shall pay any costs and expenses, related to
the Trust and (iv) the Declaration provides that the Trustees shall not cause or
permit the Trust to, among other things, engage in any activity that is not
consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Trust Preferred Securities (to the extent funds
therefor are available) are guaranteed by WPSR as and to the extent set forth
under "Description of the Guarantee." If WPSR does not make interest and/or
principal payments on the Subordinated Debentures purchased by the Trust, the
Trust will not have sufficient funds to pay distributions on the Trust Preferred
Securities. The Guarantee does not apply to the payment of distributions and
other payments on the Trust Preferred Securities unless and until the Trust has
sufficient funds to make such distributions or other payments. The Guarantee
will constitute an unsecured obligation of WPSR and will rank (i) subordinate
and junior in right of payment to all other liabilities of WPSR except those
made PARI PASSU or subordinate by their terms, (ii) PARI PASSU with the most
senior preferred or preference stock, if any, hereafter issued by WPSR and with
any guarantee now or hereafter entered into by WPSR in respect of any preferred
or preference securities of any affiliate of WPSR and (iii) senior to WPSR's
common shares.
The Guarantee, when taken together with the back-up undertakings, consisting
of obligations of WPSR as set forth in the Declaration (including the obligation
to pay expenses of the Trust), the Indenture and the Subordinated Debentures
issued to the Trust, provide a full and unconditional guarantee by WPSR of the
Trust Preferred Securities. If the Guarantee Trustee fails to enforce the
Guarantee, any record holder of Trust Preferred Securities may institute a legal
proceeding directly against WPSR to enforce the Guarantee Trustee's rights under
the Guarantee without first instituting a legal proceeding against the Trust,
the Guarantee Trustee or any other person or entity. In addition, if WPSR has
failed to make a Guarantee Payment, a record holder of Trust Preferred
Securities may directly institute a proceeding against WPSR for enforcement of
the Guarantee for such payment to the record holder of the Trust Preferred
Securities of the principal of or interest on the
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Subordinated Debentures on or after the respective due dates specified in the
Subordinated Debentures, and the amount of the payment will be based on the
holder's pro rata share of the amount due and owing on all of the Trust
Preferred Securities. WPSR has waived any right or remedy to require that any
action be brought first against the Trust or any other person or entity before
proceeding directly against WPSR. The record holder in the case of the issuance
of one or more global Trust Preferred Securities certificates will be DTC acting
at the direction of its Direct Participants, who in turn will be acting at the
direction of the beneficial owners of the Trust Preferred Securities.
If the Property Trustee fails to enforce its rights with respect to the
Subordinated Debentures held by the Trust any record holder of Trust Preferred
Securities may, to the fullest extent permitted by law, institute legal
proceedings directly against WPSR to enforce the Property Trustee's rights under
the Subordinated Debentures without first instituting any legal proceedings
against the Property Trustee or any other person or entity. In addition, if a
Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of WPSR to pay interest, principal or other required
payment on the Subordinated Debentures on the date such interest, principal or
other payment is otherwise payable, then a record holder of Trust Preferred
Securities may institute Direct Action against WPSR for enforcement of payment
on the Subordinated Debentures on or after the respective due dates specified in
the Subordinated Debentures. To the extent WPSR makes a payment to a record
holder of Trust Preferred Securities in connection with proceedings by such
record holder directly against WPSR, WPSR will be subrogated to the rights of
the record holder of Trust Preferred Securities to the extent of payments made
by WPSR to the record holder. The record holder in the case of the issuance of
one or more global Trust Preferred Securities certificates will be DTC acting at
the direction of its Direct Participants, who in turn will be acting at the
direction of the beneficial owners of the Trust Preferred Securities.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
In the opinion of Foley & Lardner, counsel to WPSR and the Trust, the
following is a summary of certain of the material United States federal income
tax consequences of the purchase, ownership and disposition of Trust Preferred
Securities. Unless otherwise stated, this summary deals only with Trust
Preferred Securities held as capital assets by holders who purchase the Trust
Preferred Securities upon original issuance ("Initial Holders"). 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, or persons that will hold the
Trust Preferred Securities as a position in a "straddle," as part of a
"synthetic security" or "hedge," as part of a "conversion transaction" or other
integrated investment, or as other than a capital asset. This summary also does
not address the tax consequences to persons that have a functional currency
other than the U.S. Dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of Trust Preferred 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 Trust Preferred Securities. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
thereunder and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change, possibly on a retroactive
basis.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
In connection with the issuance of the Subordinated Debentures, Foley &
Lardner counsel to WPSR and the Trust, will render its opinion generally to the
effect that under then current law and assuming full compliance with the terms
of the Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Subordinated Debentures will be
classified for United States federal income tax purposes as indebtedness of
WPSR. WPSR, the Trust, and, by its acceptance of a Trust Preferred Security, the
holder of such Trust Preferred Security agree to treat the Subordinated
Debentures as indebtedness and the Trust Preferred Securities as evidence of an
indirect beneficial interest in the Subordinated Debentures. Nevertheless, the
Internal Revenue Service ("IRS") could attempt to treat the Subordinated
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Debentures as equity rather than indebtedness, which if the IRS were to prevail,
would result in WPSR not being able to deduct interest payable on the
Subordinated Debentures. The IRS is asserting this position with respect to
securities issued in circumstances with certain similarities to the issuance of
the Subordinated Debentures in a case pending in the United States Tax Court. If
this case is in fact litigated and if the IRS were to prevail, such decision
could constitute a Tax Event which could result in an early mandatory redemption
of the Trust Preferred Securities. See "Description of Trust Preferred
Securities--Special Event Redemption."
In the recent past, the Clinton Administration has proposed tax law changes
that would deny interest deductions to a corporate issuer with terms and
characteristics similar to the Subordinated Debentures. As noted above, Foley &
Lardner is of the opinion that interest on the Subordinated Debentures is
deductible under current law. There can be no assurance, however, that future
legislation will not affect the ability of WPSR to deduct interest on the
Subordinated Debentures and thereby give rise to a Tax Event, which could result
in an early redemption of the Trust Preferred Securities. See "Description of
Trust Preferred Securities--Special Event Redemption."
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Trust Preferred Securities, Foley &
Lardner counsel to WPSR and the Trust, will render its opinion generally to the
effect that, under the 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
Trust Preferred Securities generally will be considered the owner of an
undivided interest in the Subordinated Debentures, and each holder will be
required to include in its gross income all interest on (including OID accrued,
if any) with respect to its allocable share of the Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations (the "Regulations"), the existence of
certain contingencies on the timely payment of stated interest can result in the
application of the original issue discount ("OID") rules applying to a debt
instrument. The option of WPSR to defer payments of interest on the Subordinated
Debentures for up to 20 quarters could be interpreted as a contingency under the
Regulations. However, under the Regulations "remote" contingencies that stated
interest will not be timely paid are ignored in determining whether a debt
instrument is issued with OID. WPSR has concluded that the likelihood of its
exercising its option to defer payments of interest is remote. This conclusion
is based upon WPSR's analysis, as of the date of issue of the Subordinated
Debentures, of various facts and circumstances deemed relevant to exercising
such deferred option, including, among other things, the inability of WPSR to
declare or pay a dividend, to engage in certain other capital transactions with
respect to its stock, to make any payment of interest or principal on or repay,
purchase or redeem any debt that ranks PARI PASSU with or junior to the
Subordinated Debentures if the deferral option is exercised. Based upon this
conclusion and in the absence of any specific definition of "remote" in the
Regulations or published IRS interpretations thereof, WPSR intends to take the
position that the Subordinated Debentures do not include OID. Consequently,
holders of Trust Preferred Securities should report interest under their own
regular method of accounting (e.g., cash or accrual) instead of under the daily
economic accrual rules for OID instruments. It is possible that the IRS could
take a contrary position.
Should WPSR exercise its option to defer any payment of interest, the
Subordinated Debentures would at that time be treated as issued with OID and all
stated interest on the Subordinated Debentures would thereafter be treated as
OID as long as the Subordinated Debentures remain outstanding. In such event,
all of the interest income of a holder of Trust Preferred Securities would be
accounted for as OID on an economic accrual basis regardless of such holders'
method of tax accounting, and actual distributions of stated interest would not
be
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reported as taxable income. Consequently, a holder of Trust Preferred Securities
would be required to include in gross income OID even though WPSR would not make
any actual cash payments during an Extension Period.
Because income on the Trust Preferred Securities will constitute interest or
OID, corporate holders will not be entitled to a dividend received deduction
with respect to any income recognized with respect to the Trust Preferred
Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Trust Preferred Securities other than Initial Holders may be
considered to have acquired their undivided interests in the Subordinated
Debentures with market discount or acquisition premium as such phrases are
defined for United States federal income tax purposes. Such holders are advised
to consult their tax advisors as to the income tax consequences of the
acquisition, ownership and disposition of the Trust Preferred Securities.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON DISSOLUTION OF THE TRUST
At any time, WPSR will have the right to dissolve the Trust and, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, cause the Subordinated Debentures to be distributed to holders of Trust
Preferred Securities in exchange for the Trust Preferred Securities and in
liquidation of the Trust. See "Description of the Trust Preferred
Securities--Distribution of the Subordinated Debentures." Under current law,
such a distribution, for United States federal income tax purposes, would be
treated as a non-taxable event to each holder, and each holder would receive an
aggregate tax basis in the Subordinated Debentures equal to such holder's
aggregate tax basis in its Trust Preferred Securities. A holder's holding period
in the Subordinated Debentures so received upon dissolution of the Trust would
include the period during which the Trust Preferred Securities were held by such
holder. If, however, the related special event is a Tax Event which results in
the Trust being treated as an association taxable as a corporation, the
distribution would likely constitute a taxable event to holders of the Trust
Preferred Securities.
Under certain circumstances described herein (see "Description of the Trust
Preferred Securities"), the Subordinated Debentures may be redeemed for cash and
the proceeds of such redemption distributed to holders in redemption of their
Trust Preferred Securities. Under current law, such redemption would, for United
States federal income tax purposes, constitute a taxable disposition of the
redeemed Trust Preferred Securities, and a holder could recognize gain or loss
as if it sold such redeemed Trust Preferred Securities for cash. See "--Sales of
Trust Preferred Securities."
SALES OF TRUST PREFERRED SECURITIES
A holder that sells Trust Preferred Securities will recognize gain or loss
equal to the difference between its adjusted tax basis in the Trust Preferred
Securities and the amount realized on the sale of such Trust Preferred
Securities. Assuming that WPSR does not exercise its option to defer payment of
interest on the Subordinated Debentures and they are not considered issued with
OID, a holder's adjusted tax basis in the Trust Preferred Securities generally
will be the initial purchase price. If the Subordinated Debentures are deemed to
be, or become, subject to the OID rules, a holder's adjusted tax basis in the
Trust Preferred Securities will be the initial purchase price, increased by OID
previously includable in such holder's gross income to the date of disposition
and decreased by payments received on the Trust Preferred Securities. Any such
gain or loss will be capital gain or loss. In the case of a taxpayer who is an
individual, any capital gain on the sale of a Preferred Security will be taxed
at a maximum rate of 39.6% if the Trust Preferred Security is held for 12 months
or less and at 20% if the Trust Preferred Security is held for more than 12
months. Additional rate reductions may apply beginning in 2001. Capital losses
of a corporate taxpayer can only be used to offset the capital gains. Capital
losses of an individual taxpayer generally may be used to offset capital gains
plus $3,000 of other income.
Should WPSR exercise its option to defer any payment of interest on the
Subordinated Debentures, the Trust Preferred Securities may trade at a price
that does not accurately reflect the value of accrued but unpaid
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interest with respect to the underlying Subordinated Debentures. In the event of
such a deferral, a holder who disposes of his Trust Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the Subordinated Debentures through the date of
disposition in income as ordinary income, and to add such amount to his adjusted
tax basis in his pro rata share of the underlying Subordinated Debentures deemed
disposed of. To the extent the selling price is less than the holder's adjusted
tax basis, a holder will recognize a capital loss.
FOREIGN HOLDERS
Interest paid to a holder of Trust Preferred Securities who is a nonresident
alien, foreign corporation or other non-United States person (a "foreign
person") generally will be considered "portfolio interest," and generally will
not be subject to United States Federal income tax and withholding tax, if the
interest is not effectively connected with the conduct of a trade or business
within the United States by the foreign person and the foreign person (i) is not
actually or constructively a "10 percent shareholder" of WPSR or a "controlled
foreign corporation" that is related to WPSR through stock ownership and (ii)
satisfies the statement requirement set forth in section 871(h) and section
881(c) of the Code and the regulations thereunder. To satisfy this requirement,
the foreign person, or a financial institution holding the Trust Preferred
Securities on behalf of such foreign person, must provide, in accordance with
specified procedures, a paying agent of the Trust with a statement to the effect
that the foreign person is not a United States person. Currently these
requirements will be met if (x) the foreign person provides his name and
address, and certifies, under penalties of perjury, that he is not a United
States person (which certification may be made on an IRS Form W-8) or (y) a
financial institution holding the Trust Preferred Securities on behalf of the
foreign person certifies, under penalties of perjury, that such statement has
been received by it and furnishes a paying agent with a copy thereof. Under
recently finalized Treasury regulations (the "Final Regulations"), the statement
requirement may also be satisfied with other documentary evidence with respect
to an offshore account or through certain foreign intermediaries. The Final
Regulations will generally be effective for payments made after December 31,
1999.
If such interest is not "portfolio interest," then it will be subject to a
30% withholding tax unless the foreign person provides the Trust or its paying
agent, as the case may be, with a properly executed (i) IRS Form 1001 (or
successor form) claiming an exemption from withholding tax or a reduction in
withholding tax under the benefit of a tax treaty or (ii) IRS Form 4224 (or
successor form) stating that interest paid on the Trust Preferred Securities is
not subject to withholding tax because it is effectively connected with the
foreign person's conduct of a trade or business in the United States. Under the
Final Regulations, a foreign person will generally be required to provide IRS
Form W-8 in lieu of IRS Form 1001 and IRS Form 4224, although alternative
documentation may be applicable in certain situations.
If a foreign person is engaged in a trade or business and interest on the
Trust Preferred Securities is effectively connected with the conduct of such
trade or business in the United States, the foreign person, although exempt from
the withholding tax discussed above, will be subject to United States federal
income tax on such interest on a net income basis in the same manner as if it
were a United States person. In addition, if such foreign person is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or lower
treaty rate) of its effectively connected earnings and profits for the taxable
year, subject to adjustments.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of Trust Preferred Securities by a foreign person will be
exempt from United States Federal income and withholding tax; PROVIDED that (i)
such gain is not effectively connected with the conduct of a trade or business
in the United States by the foreign person and (ii) in the case of an individual
foreign person, the foreign person is not present in the United States for 183
days or more in the taxable year.
BACKUP WITHHOLDING. Each holder of Trust Preferred Securities (other than
an exempt holder such as a corporation, tax-exempt organization, qualified
pension and profit-sharing trust, individual retirement account or nonresident
alien who provides certification as to status as a nonresident) will be required
to provide, under penalties of perjury, a certificate containing the holder's
name, address, correct Federal taxpayer identification
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number and a statement that the holder is not subject to backup withholding.
Should a nonexempt holder fail to provide the required certification, the Trust
will be required to withhold 31% of the amount otherwise payable to the holder,
and remit the withheld amount to the IRS as a credit against the holder's
Federal income tax liability. The Final Regulations make certain modifications
to the backup withholding and information reporting rules. Prospective investors
are urged to consult their own tax advisors regarding the Final Regulations.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Trust Preferred Securities will be reported to
holders on Forms 1099, which forms should be mailed to holders of Preferred
Securities by January 31 each calendar year.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, 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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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters, has
severally agreed to purchase the number of Trust Preferred Securities set forth
opposite its name below. In the Underwriting Agreement, the several Underwriters
have agreed, subject to the terms and conditions set forth therein, to purchase
all of the Trust Preferred Securities offered hereby if any of the Trust
Preferred Securities are purchased. In the event of default by an Underwriter,
the Underwriting Agreement provides that, in certain circumstances, the purchase
commitments of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
A.G. Edwards & Sons, Inc...................................................................... 666,668
Robert W. Baird & Co. Incorporated............................................................ 666,666
Legg Mason Wood Walker, Incorporated.......................................................... 666,666
--------
Total..................................................................................... 2,000,000
</TABLE>
The Underwriters propose to offer the Trust Preferred Securities in part
directly to the public at the initial public offering price, as set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $0.50 per Trust Preferred Security. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $0.25 per
Trust Preferred Security to certain brokers and dealers. After the Trust
Preferred Securities are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Trust Preferred
Securities will be used to purchase the Subordinated Debentures of WPSR, the
Underwriting Agreement provides that WPSR will agree to pay as compensation
("Underwriters' Compensation") to the Underwriters for the Underwriters'
arranging the investment therein of such proceeds, an amount in immediately
available funds of $0.7875 per Trust Preferred Security (or $1,575,000 in the
aggregate) for the accounts of the several Underwriters.
During a period beginning on the date of the pricing and ending 30 days from
the date of original issuance of the Trust Preferred Securities, neither the
Trust nor WPSR will, without the prior written consent of the Underwriters,
directly or indirectly, sell, offer to sell, contract to sell, grant any option
for the sale of, or otherwise dispose of, any Trust Preferred Securities, any
security convertible into or exchangeable into or exercisable for Trust
Preferred Securities or the Subordinated Debentures or any debentures
substantially similar to the Subordinated Debentures or any equity securities
substantially similar to the Trust Preferred Securities (except for the
Subordinated Debentures and the Trust Preferred Securities offered hereby).
Application will be made to list the Trust Preferred Securities on the New
York Stock Exchange. If approved, trading of the Trust Preferred Securities on
the New York Stock Exchange is expected to commence within a 30-day period after
the date of original issuance of the Trust Preferred Securities. The
Underwriters have advised the Trust that the Underwriters intend to make a
market in the Trust Preferred Securities prior to the commencement of trading on
the New York Stock Exchange. The Underwriters will have no obligation to make a
market in the Trust Preferred Securities, however, and may cease market making
activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Trust
Preferred Securities. In order to meet one of the requirements for listing the
Trust Preferred Securities on the New York Stock Exchange, the Underwriters will
undertake to sell lots of 100 or more Trust Preferred Securities to a minimum of
400 beneficial holders.
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In connection with this offering, the rules of the SEC permit the
Underwriters to engage in transactions that stabilize the price of the Trust
Preferred Securities. Such transactions may consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Trust Preferred
Securities.
If the Underwriters create a short position in the Trust Preferred
Securities in connection with the offering (I.E., if they sell more Trust
Preferred Securities than are set forth on the cover page of this Prospectus),
they may reduce that short position by purchasing Trust Preferred Securities in
the open market. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to underwriters or dealers in respect of the securities sold
in the offering may be reclaimed by the Underwriters if such Trust Preferred
Securities are repurchased by the Underwriters in stabilizing or covering
transactions.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of a security to the extent
that it were to discourage resales of the security by purchasers in the
offering.
None of WPSR, the Trust or any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Trust Preferred
Securities. In addition, none of WPSR, the Trust or any of the Underwriters
makes any representation that the Underwriters will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
WPSR and the Trust have agreed to indemnify the Underwriters against, or to
contribute to payments that the Underwriters may be required to make in respect
of, certain liabilities, including liabilities under the Securities Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, WPSR and its affiliates in the ordinary
course of business.
LEGAL MATTERS
Certain legal matters will be passed upon for WPSR and the Trust by Foley &
Lardner, Milwaukee, Wisconsin, and for the Underwriters by Schiff Hardin &
Waite, Chicago, Illinois. Certain matters of Delaware law relating to the
validity of the Trust Preferred Securities will be passed upon by Richards,
Layton & Finger, PA, Wilmington, Delaware, special Delaware counsel to WPSR and
the Trust.
EXPERTS
The audited financial statements and schedules incorporated by reference in
this Prospectus and elsewhere in this registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto and are incorporated by reference herein in reliance
on the authority of said firm as experts in giving said report.
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY WPS RESOURCES CORPORATION,
THE TRUST OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF WPS RESOURCES CORPORATION OR THE
TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 3
Prospectus Summary............................. 4
Risk Factors................................... 9
Ratios of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and
Preferred Dividend Requirement............... 14
Capitalization................................. 15
The Trust...................................... 15
WPS Resources Corporation...................... 16
Accounting Treatment........................... 17
Use of Proceeds................................ 17
Description of the Trust Preferred
Securities................................... 17
Description of the Guarantee................... 29
Description of the Subordinated Debentures..... 32
Effect of Obligations Under the Subordinated
Debentures and the Guarantee................. 41
United States Federal Income Taxation.......... 42
Underwriting................................... 47
Legal Matters.................................. 48
Experts........................................ 48
</TABLE>
2,000,000
TRUST PREFERRED SECURITIES
WPSR CAPITAL TRUST I
7.00% TRUST PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
[LOGO]
WPS RESOURCES CORPORATION
-----------------
PROSPECTUS
-----------------
A.G. EDWARDS & SONS, INC.
ROBERT W. BAIRD & CO.
INCORPORATED
LEGG MASON WOOD WALKER
INCORPORATED
JULY 27, 1998
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