Rule 424(b)(1)
Registration Statement No. 333-37787
333-37787-01
$50,000,000
SCE&G TRUST I
7.55% Trust Preferred Securities, Series A
(Liquidation Amount $25 per Trust Preferred Security)
fully and unconditionally guaranteed, as described herein, by
SOUTH CAROLINA ELECTRIC & GAS COMPANY
------------------
The 7.55% Trust Preferred Securities, Series A (the "Trust
Preferred Securities"), offered hereby represent preferred
undivided beneficial interests in the assets of SCE&G Trust I, a
statutory business trust created under Delaware law (the "Issuer").
South Carolina Electric & Gas Company, a South Carolina corporation
(the "Company"), will be the owner of all of the common undivided
beneficial interests in the assets of the Issuer ("Common
Securities" and, collectively with the Trust Preferred Securities,
the "Trust Securities"). The Issuer exists for the sole purpose of
issuing the Trust Securities and investing the proceeds thereof in
$50,000,000 aggregate principal amount of 7.55% Junior Subordinated
Deferrable Interest Debentures, Series A (the "Junior Subordinated
Debentures"), to be issued by the Company. The Junior Subordinated
Debentures will mature on September 30, 2027 (the "Stated
Maturity"). The Trust Preferred Securities will have a preference
under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise over the
Common Securities. See "Description of Trust Preferred Securities
- -- Subordination of Common Securities."
(Continued on inside facing page)
The Trust Preferred Securities have been approved for listing on
The New York Stock Exchange ("NYSE") under the symbol SAC PrT.
For a discussion of certain factors that should be considered in
connection with an investment in the Trust Preferred Securities,
see "Risk Factors" on page 7 herein.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Underwriting
Price to Discounts and Proceeds to the
Public(1) Commission Issuer (1)(2)(3)
Per Trust Preferred Security $ 25.00 (2) $ 25.00
Total $50,000,000 (2) $50,000,000
_________________________
(1) Plus accrued Distributions, if any, from October 28, 1997.
(2) In view of the fact that the proceeds of the sale of the Trust
Preferred Securities will be invested in the Junior Subordinated
Debentures, the Company has agreed to pay to the Underwriters, as
compensation for their arranging the investment therein of such
proceeds, $0.7875 per Trust Preferred Security (or $1,575,000
in the aggregate); provided, however, that compensation for sales
of the Trust Preferred Securities to certain institutions
will be $0.50 per Trust Preferred Security. See "Underwriting."
(3) Before deduction of expenses payable by the Company estimated at
$156,000.
The Trust Preferred Securities are offered by the several
Underwriters when, as and if issued by the Issuer, delivered to and
accepted by the Underwriters and subject to their right to reject
orders in whole or in part. It is expected that delivery of the
Trust Preferred Securities will be made through the facilities of
The Depository Trust Company ("DTC") on or about October 28, 1997,
against payment in immediately available funds.
CREDIT SUISSE FIRST BOSTON PAINEWEBBER INCORPORATED
Prospectus dated October 22, 1997.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE
OF THE SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTMENT,
STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS AND
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
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Cover page continued
Pursuant to the Guarantee, the Company has guaranteed the
payment of Distributions (as defined below) and payments on
liquidation or redemption of the Trust Preferred Securities, but
only in each case to the extent of funds held by the Issuer, as
described herein. The obligations of the Company under the
Guarantee and the Junior Subordinated Debentures are unsecured and
rank subordinate and junior in right of payment to all Senior Debt
(as defined herein) of the Company. The Company has, through the
Guarantee, the Junior Subordinated Debentures, the Trust Agreement
and the Indenture, taken together, fully, irrevocably and
unconditionally guaranteed all of the Issuer's obligations under
the Trust Preferred Securities. See "Description of Junior
Subordinated Debentures," "Description of Trust Preferred
Securities," "Description of Guarantee" and "Relationship Among the
Trust Preferred Securities, the Junior Subordinated Debentures and
the Guarantee."
Holders of the Trust Preferred Securities will be entitled to
receive preferred cumulative cash distributions ("Distributions")
accumulating from the date of original issue and payable, unless
deferred, quarterly in arrears on March 31, June 30, September 30,
and December 31 of each year, commencing December 31, 1997, at the
annual rate of 7.55% of the Liquidation Amount (as defined herein)
of $25 per Trust Preferred Security. Subject to certain
exceptions, as described herein, the Company has the right to defer
payment of interest on the Junior Subordinated Debentures at any
time or from time to time for a period not exceeding 20 consecutive
quarterly periods with respect to each deferral period (each, an
"Extension Period"), provided that no Extension Period may extend
beyond the Stated Maturity of the Junior Subordinated Debentures.
Upon the termination of any such Extension Period and the payment
of all interest then accrued and unpaid (together with interest
thereon at the rate of 7.55% per annum, compounded quarterly, to
the extent permitted by applicable law), the Company may elect to
begin a new Extension Period subject to the requirements set forth
herein. If interest payments on the Junior Subordinated Debentures
are so deferred, Distributions on the Trust Preferred Securities
will also be deferred and the Company will not be permitted,
subject to certain exceptions, to declare or pay any cash
distributions with respect to the Company's capital stock or debt
securities that rank on a parity with or junior to the Junior
Subordinated Debentures. During an Extension Period, interest on
the Junior Subordinated Debentures will (to the extent permitted by
law) continue to accrue (and the amount of Distributions to which
holders of the Trust Preferred Securities are entitled will
accumulate) at the rate of 7.55% per annum, compounded quarterly
from the relevant payment date for such interest, and holders of
Trust Preferred Securities will be required to accrue interest
income for United States federal income tax purposes prior to the
receipt of cash related to such interest income. See "Description
of Junior Subordinated Debentures -- Option to Defer Interest
Payments" and " -- Restrictions on Certain Payments" and "Certain
Federal Income Tax Consequences -- Interest Income and Original
Issue Discount."
3
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The Trust Preferred Securities are subject to mandatory
redemption, in whole or in part, upon repayment of the Junior
Subordinated Debentures at their Stated Maturity or their earlier
redemption. The Junior Subordinated Debentures are redeemable prior
to their Stated Maturity at the option of the Company (i) on or
after September 30, 2002, in whole at any time or in part from time
to time, or (ii) prior to September 30, 2002, in whole (but not in
part), at any time within 90 days following the occurrence of a Tax
Event (as defined herein), in either case at a redemption price of
100% of the principal amount thereof, plus accrued interest to the
redemption date. See "Description of Trust Preferred Securities --
Redemption" and "Description of Junior Subordinated Debentures --
Redemption."
The Company will have the right at any time to dissolve the
Issuer and, after satisfaction of liabilities to creditors of the
Issuer as required by applicable law, cause the Junior Subordinated
Debentures to be distributed to the holders of the Trust Preferred
Securities in exchange therefor upon liquidation of the Issuer. See
"Description of Trust Preferred Securities -- Dissolution and
Liquidation; Distribution Upon Dissolution."
In the event of the dissolution of the Issuer, after
satisfaction of liabilities to creditors of the Issuer as required
by applicable law, the holders of the Trust Preferred Securities
will be entitled to receive the Liquidation Amount of $25 per Trust
Preferred Security plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the form of a
distribution of such amount in Junior Subordinated Debentures in
exchange therefor, subject to certain exceptions. See "Description
of Trust Preferred Securities -- Dissolution and Liquidation;
Distribution Upon Dissolution."
If the Junior Subordinated Debentures are distributed to the
holders of Trust Preferred Securities upon the liquidation of the
Issuer, the Company will use its best efforts to list the Junior
Subordinated Debentures on the NYSE or on such other stock
exchange, if any, on which the Trust Preferred Securities are then
listed or traded.
The Trust Preferred Securities will be represented by global
certificates registered in the name of DTC or its nominee.
Beneficial interests in the Trust Preferred Securities will be
shown on, and transfers thereof will be effected only through,
records maintained by participants in DTC. Except as described
herein, Trust Preferred Securities in certificated form will not be
issued in exchange for the global certificates. See "Description of
Trust Preferred Securities -- Book-Entry Issuance."
4
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy and information statements and other
information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at 450
Fifth Street NW, Washington, D.C. 20549 and the Commission's
regional offices at Seven World Trade Center, Suite 1300, New York,
New York 10048, and at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2551. Copies of such material can also be
obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street NW, Washington, D.C. 20549, at
prescribed rates. The Company's 5% Cumulative Preferred Stock, par
value $50 per share, is listed for trading on the NYSE. Reports,
proxy and information statements, and other information containing
the Company may also be inspected at the offices of the NYSE at 20
Broad Street, New York, New York 10005. The Commission maintains
a Web site that contains reports, proxy and information statements
and other information regarding registrants, like the Company, that
file electronically with the Commission. The address of the
Commission Web site is http.//www.sec.gov.
The Company and the Issuer have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments
and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered hereby. This Prospectus does not
contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement and the
exhibits and the financial statements, notes and schedules filed as
a part thereof or incorporated by reference therein, which may be
inspected at the public reference facilities of the Commission at
the addresses set forth above or through the Commission Web site.
Statements made in this Prospectus concerning the contents of any
documents referred to herein are not necessarily complete, and in
each instance are qualified in all respects by reference to the
copy of such document filed as an exhibit to the Registration
Statement.
5
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No separate financial statements of the Issuer have been
included herein. The Company and the Issuer do not consider that
such financial statements would be material to holders of the Trust
Preferred Securities because the Issuer is a newly formed special
purpose entity, has no operating history or independent operations
and is not engaged in and does not propose to engage in any
activity other than holding as trust assets Junior Subordinated
Debentures of the Company. Furthermore, taken together, the
Company's obligations under the Junior Subordinated Debentures, the
Indenture, the Trust Agreement and the Guarantee (as such terms are
defined herein) provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of Distributions and other
amounts due on the Trust Preferred Securities. See "The Issuer,"
"Description of Trust Preferred Securities," "Description of Junior
Subordinated Debentures," "Description of Guarantee" and
"Relationship Among the Trust Preferred Securities, the Junior
Subordinated Debentures and the Guarantee." In addition, the
Company does not expect that the Issuer will be filing reports
under the Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission by the
Company pursuant to the Exchange Act (File No. 1-3375), are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year
ended December 31, 1996; and
2. The Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997 and June 30, 1997.
All documents filed by the Company pursuant to Section 13, 14
or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the securities made by
this Prospectus 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 that 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.
6
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The Company hereby undertakes to provide without charge to
each person, including any beneficial owner, to whom a copy of this
Prospectus has been delivered, on the written or oral request of
any such person, a copy of any and all of the documents referred to
above that have been incorporated by reference in this reference to
such documents. Written or telephone requests for such copies
should be directed to H. John Winn, III, Manager - Investor
Relations and Shareholders Services, SCANA Corporation, Columbia,
South Carolina 29218, telephone number (803) 748-3240.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
South Carolina Electric & Gas Company
The Company, a wholly-owned subsidiary of SCANA Corporation
("SCANA"), is a regulated utility engaged in the generation,
transmission, distribution and sale of electricity and in the
purchase and sale, primarily at retail, of natural gas in South
Carolina. The Company also renders urban bus service in the
metropolitan area of Columbia, South Carolina. The Company's
electric service covers over 15,000 square miles and extends into
24 counties in central, southern and southwestern portions of South
Carolina. The service area for natural gas encompasses all or part
of 30 counties of the 46 counties in South Carolina. The total
population of the Company's combined electric and gas service area
is approximately 2.4 million. The Company is a South Carolina
corporation organized in 1924.
SCE&G Trust I
The Issuer is a statutory business trust created under
Delaware law pursuant to the filing of a certificate of trust with
the Delaware Secretary of State on October 8, 1997, and will be
governed by the Trust Agreement among the Company, as Depositor,
The Bank of New York, as Property Trustee and The Bank of New York
(Delaware), as Delaware Trustee, the Administrative Trustees named
therein and the holders of the Trust Securities from time to time.
The Issuer's business and affairs are conducted by its trustees.
The Issuer exists for the exclusive purpose of (i) issuing and
selling the Trust Securities, (ii) using the proceeds from the sale
of the Trust Securities to acquire the Junior Subordinated
Debentures and (iii) engaging in only those other activities
necessary or incidental thereto (such as registering the transfer
of the Trust Securities). Accordingly, the Junior Subordinated
Debentures will be the sole assets of the Issuer, and payments
under the Junior Subordinated Debentures will be the sole source of
revenue of the Issuer.
7
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The Offering
Securities Offered $50,000,000 aggregate Liquidation Amount of
7.55% Trust Preferred Securities, Series A
(Liquidation Amount $25 per Trust Preferred
Security).
Offering Price $25 per Trust Preferred Security (Liquidation
Amount $25), plus accumulated Distributions, if
any, from the date of original issuance.
Distribution Dates March 31, June 30, September 30 and December
31 of each year, commencing December 31, 1997,
payable to the holder of record as of (so long
as the Trust Preferred Securities are held in
book-entry form by DTC) the last Business Day
before such dates.
Extension Periods Distributions on Trust Preferred Securities
may be deferred for the duration of any
Extension Period selected by the Company with
respect to the payment of interest on the
Junior Subordinated Debentures. No Extension
Period will exceed 20 consecutive quarters or
extend beyond the Stated Maturity of the
Junior Subordinated Debentures. See
"Description of Trust Preferred Securities --
Distributions," "Description of Junior
Subordinated Debentures -- Option to Defer
Interest Payments" and " -- Restrictions on
Certain Payments" and "Certain Federal Income
Tax Consequences --Interest Income and
Original Issue Discount."
Ranking Payments on the Trust Preferred Securities
will be made pro rata with the Common
Securities except as described under
"Description of Trust Preferred Securities--
Subordination of Common Securities." The
Junior Subordinated Debentures will be
unsecured and subordinate and junior in
right of payment to the extent and in the
manner set forth in the Indenture to all
Senior Debt. See "Description of Junior
Subordinated Debentures." The Guarantee will
constitute an unsecured obligation of the
Company and will rank subordinate and junior
in right of payment to the extent and in the
manner set forth in the Indenture to all
Senior Debt. See "Description of Guarantee."
8
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Redemption The Trust Preferred Securities are subject to
mandatory redemption in whole but not in part
at the Stated Maturity upon repayment of the
Junior Subordinated Debentures at a redemption
price equal to 100% of the Liquidation Amount
of such Trust Preferred Securities plus
accumulated and unpaid Distributions thereon
to the date fixed for redemption. The Junior
Subordinated Debentures are subject to
redemption at the option of the Company (i) at
any time on or after September 30, 2002 and
(ii) within 90 days of the occurrence of a Tax
Event, in each case at a redemption price
equal to the principal amount plus accrued and
unpaid interest to the redemption date. See
"Description of Preferred Securities--
Redemption" and "Description of Junior
Subordinated Debentures - Redemption."
A "Tax Event" means the receipt by the Issuer
of an opinion of counsel experienced in such
matters to the effect that, as a result of any
amendment to, or change (including any
announced proposed change) in, the laws (or
any regulations thereunder) of the United
States or any political subdivision or taxing
authority thereof or therein, or as a result
of any official administrative pronouncement
or judicial decision interpreting or applying
such laws or regulations, which amendment or
change is effective or such pronouncement or
decision is announced on or after the date of
issuance of the Trust Preferred Securities
under the Trust Agreement, there is more than
an insubstantial risk that (i) the Issuer is,
or will be within 90 days of the date of such
opinion, subject to United States federal
income tax with respect to income received or
accrued on the Junior Subordinated Debentures,
(ii) interest payable by the Company on the
Junior Subordinated Debentures is not, or
within 90 days of such opinion, will not be,
deductible by the Company, in whole or in
part, for United States federal income tax
purposes or (iii) the Issuer is, or will be
within 90 days of the date of the opinion,
subject to more than a de minimis amount of
other taxes, duties or other governmental
charges.
9
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Junior Subordinated The Company will have the right at any time to
Debentures dissolve the Issuer and, after satisfaction
of liabilities to creditors of the Issuer as
required by applicable law, cause the Junior
Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities
in exchange therefor upon liquidation of the
Issuer. See "Description of Trust Preferred
Securities -- Dissolution and Liquidation;
Distribution Upon Dissolution."
Ratings The Trust Preferred Securities are expected to
be rated "a2" by Moody's Investors Service,
Inc. ("Moody's") and "A-" by Standard &
Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc.("Standard &
Poor's"). A security rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal
at any time by the assigning rating
organization.
RISK FACTORS
Prospective purchasers of the Trust Preferred Securities should
carefully review the information contained elsewhere, or incorporated by
reference, in this Prospectus and should particularly consider the
following matters. In addition, because holders of Trust Preferred
Securities may receive Junior Subordinated Debentures in exchange
therefor upon liquidation of the Issuer, prospective purchasers of Trust
Preferred Securities are also making an investment decision with regard
to the Junior Subordinated Debentures and should carefully review all
the information regarding the Junior Subordinated Debentures contained
herein.
Ranking of Subordinated Obligations
The ability of the Issuer to pay amounts due on the Trust Preferred
Securities is solely dependent upon the Company making payments on the
Junior Subordinated Debentures as and when required. The obligations of
the Company under the Guarantee and under the Junior Subordinated
Debentures are unsecured and rank subordinate and junior in right of
payment to all Senior Debt of the Company. Substantially all of the
Company's existing indebtedness constitutes Senior Debt. None of the
Indenture, the Guarantee or the Trust Agreement places any limitation on
the amount of secured or unsecured debt, including Senior Debt, that may
be incurred by the Company or its subsidiaries. See "Description of
Junior Subordinated Debentures -- Subordination" and "Description of
Guarantee -- Status of the Guarantee."
10
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Option to Defer Interest Payments; Tax Consequences; Market Price
Consequences
So long as no event of default under the Indenture (a "Debenture
Event of Default," as more particularly defined herein) has occurred and
is continuing, the Company has the right under the Indenture to defer
payment of interest on the Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 20 consecutive quarterly
periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of any such deferral,
Distributions on the Trust Preferred Securities by the Issuer would also
be deferred (and the amount of Distributions to which holders of the
Trust Preferred Securities are entitled would accumulate additional
Distributions thereon at the rate of 7.55% per annum, compounded
quarterly from the relevant payment date for such Distributions) during
any such Extension Period and the Company will not be permitted, subject
to certain exceptions to declare or pay any distributions with respect
to the Company's capital stock or debt securities that rank on a parity
with or junior to the Junior Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all interest then
accrued and unpaid (together with interest thereon at the annual rate of
7.55%, compounded quarterly from the interest payment date for such
interest, to the extent permitted by applicable law), the Company may
elect to begin a new Extension Period subject to the above requirements
and restrictions. There is no limitation on the number of
times that the Company may elect to begin an Extension Period. See
"Description of Trust Preferred Securities -- Distributions" and
"Description of Junior Subordinated Debentures -- Option to Defer
Interest Payments" and "-- Restrictions on Certain Payments."
Should an Extension Period occur, a holder of Trust Preferred
Securities will be required to accrue income (in the form of original
issue discount) in respect of its pro rata share of the Junior
Subordinated Debentures held by the Issuer for United States federal
income tax purposes. As a result, a holder of Trust Preferred Securities
will be required to include such income in gross income for United
States federal income tax purposes in advance of the receipt of cash
attributable to such income, and will not receive the cash related to
such income from the Issuer if the holder disposes of the Trust
Preferred Securities prior to the record date for the payment of
Distributions. See "Certain Federal Income Tax Consequences -- Interest
Income and Original Issue Discount" and "-- Sale or Redemption of Trust
Preferred Securities."
The Company has no current intention of exercising its right to
defer payments of interest on the Junior Subordinated Debentures.
However, should the Company elect to exercise such right in the future,
the market price of the Trust Preferred Securities is likely to be
affected. 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 hold its Trust Preferred
Securities until the end of such Extension Period.
11
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Tax Event
Upon the occurrence and continuation of a Tax Event prior to
September 30, 2002, the Company has the right to redeem the Junior
Subordinated Debentures in whole (but not in part) within 90 days
following the occurrence of such Tax Event and thereby cause a mandatory
redemption of the Trust Preferred Securities at a redemption price equal
to the Liquidation Amount plus accrued Distributions to but excluding
the date fixed for redemption. See "Certain Terms of Trust Preferred
Securities -- Redemption" and "Certain Terms of Junior Subordinated
Debentures -- Redemption."
Exchange of Trust Preferred Securities for Junior Subordinated
Debentures
The Company will have the right at any time to dissolve the Issuer
and, after satisfaction of liabilities to creditors of the Issuer as
required by applicable law, cause the Junior Subordinated Debentures to
be distributed to the holders of the Trust Preferred Securities in
exchange therefor upon liquidation of the Issuer. See "Description of
Trust Preferred Securities -- Liquidation of Issuer and Distribution of
Junior Subordinated Debentures to Holders." Under current United States
federal income tax law and interpretations, a distribution of the Junior
Subordinated Debentures upon liquidation of the Issuer should not be a
taxable event to holders of the Trust Preferred Securities. However, if
a Tax Event were to occur which would cause the Issuer to be subject to
United States federal income tax with respect to income received or
accrued on the Junior Subordinated Debentures, a distribution of the
Junior Subordinated Debentures by the Issuer could be a taxable event to
the Issuer and the holders of the Trust Preferred Securities. See
"Certain Federal Income Tax Consequences -- Distribution of the Junior
Subordinated Debentures to Holders of Trust Preferred Securities."
Market Prices
There can be no assurance as to the market prices for Trust
Preferred Securities or Junior Subordinated Debentures that may be
distributed in exchange for Trust Preferred Securities upon liquidation
of the Issuer. Accordingly, the Trust Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in
the secondary market, or the Junior Subordinated Debentures that a
holder of Trust Preferred Securities may receive on liquidation of the
Issuer, may trade at a discount to the price that the investor paid to
purchase the Trust Preferred Securities offered hereby. As a result of
the existence of the Company's right to defer interest payments, the
market price of the Trust Preferred Securities (which represent
preferred undivided beneficial ownership interests in the Issuer) may be
more volatile than the market prices of other securities that are not
subject to such deferrals. See "Description of Trust Preferred
Securities -- Dissolution and Liquidation; Distribution Upon
Dissolution" and "Description of Junior Subordinated Debentures --
Distribution of Junior Subordinated Debentures."
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Rights Under the Guarantee; Direct Action
Pursuant to the Guarantee, the Company guarantees to the holders of
the Trust Preferred Securities the following payments, to the extent not
paid by the Issuer: (i) any accumulated and unpaid Distributions
required to be paid on the Trust Preferred Securities, to the extent
that the Issuer has funds on hand available therefor at such time, (ii)
the redemption price with respect to any Trust Preferred Securities
called for redemption, to the extent that the Issuer has funds on hand
available therefor at such time and (iii) upon a voluntary or
involuntary dissolution, winding-up or liquidation of the Issuer (unless
the Junior Subordinated Debentures are distributed to holders of the
Trust Preferred Securities), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the
date of payment (the "Liquidation Distribution"), to the extent that the
Issuer has funds on hand available therefor at such time and (b) the
amount of assets of the Issuer remaining available for distribution to
holders of the Trust Preferred Securities.
The holders of more than 50% of the aggregate 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 (as herein defined) in respect of the Guarantee or to
direct the exercise of any trust power conferred upon the Guarantee
Trustee under the Guarantee. Any holder of Trust Preferred Securities
may institute a legal proceeding directly against the Company to enforce
its rights under the Guarantee without first instituting a legal
proceeding against the Issuer, the Guarantee Trustee or any other person
or entity. If the Company were to default on its obligation to pay
amounts payable under the Junior Subordinated Debentures, the Issuer
would lack 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, if a
Debenture Event of Default shall have occurred and be continuing and
such event is attributable to the failure of the Company to pay interest
or premium, if any, on or principal of the Junior Subordinated
Debentures on the date on which such payment is due and payable, then a
holder of Trust Preferred Securities may, pursuant to the Indenture,
institute a legal proceeding directly against the Company for
enforcement of payment to such holder of the principal of or interest or
premium, if any, on such Junior Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Trust
Preferred Securities of such holder (a "Direct Action"). In connection
with such Direct Action, the Company will have a right of setoff under
the Indenture to the extent of any payment made by the Company to such
holder of Trust Preferred Securities in the Direct Action. Except as
described herein, holders of Trust Preferred Securities will not be able
to exercise directly any other remedy available to the holders of the
Junior Subordinated Debentures or assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of
Junior Subordinated Debentures -- Enforcement of Certain Rights by
Holders of Trust Preferred Securities" and "-- Debenture Events of
Default" and "Description of Guarantee."
13
<PAGE>
Limited Voting Rights
Holders of Trust Preferred Securities generally will have limited
voting rights relating only to the modification of the Trust Preferred
Securities and the exercise of the Issuer's and the Guarantee Trustee's
rights as holders of the Junior Subordinated Debentures and under the
Guarantee, respectively. Either or both of the Delaware Trustee or the
Property Trustee, unless a Debenture Event of Default shall have
occurred and be continuing, and any of the Property Trustees, may be
removed and replaced at any time by the holders of the Common
Securities. If a Debenture Event of Default shall have occurred and be
continuing, either or both of the Property Trustee or the Delaware
Trustee may be removed by act of the holders of more than 50% of the
Trust Preferred Securities. In no event will holders of the Trust
Preferred Securities have the right to remove or replace the
Administrative Trustees. The Property Trustee, the Administrative
Trustees and the Company may amend the Trust Agreement without the
consent of holders of Trust Preferred Securities to ensure that the
Issuer will be classified for United States federal income tax purposes
as a grantor trust or as other than as an association taxable as a
corporation unless such action materially and adversely affects the
interests of such holders. See "Description of Trust Preferred
Securities -- Resignation and Removal of Issuer Trustees; Appointment of
Successors."
THE COMPANY
The Company, a wholly-owned subsidiary of SCANA, is a regulated
utility engaged in the generation, transmission, distribution and sale
of electricity and in the purchase and sale, primarily at retail, of
natural gas in South Carolina. The Company also renders urban bus
service in the metropolitan area of Columbia, South Carolina. The
Company's electric service area covers over 15,000 square miles and
extends into 24 counties in central, southern and southwestern portions
of South Carolina. The service area for natural gas encompasses all or
part of 30 counties of the 46 counties in South Carolina. The total
population of the Company's combined electric and gas service area is
approximately 2.4 million. The Company is a South Carolina corporation
organized in 1924 and has its principal executive offices at 1426 Main
Street, Columbia, South Carolina 29201, telephone number (803) 748-3000.
THE ISSUER
The Issuer is a statutory business trust created under Delaware law
on October 8, 1997 pursuant to (i) a trust agreement executed by the
Company, as depositor (in such capacity, the "Depositor"), the Delaware
Trustee and the Administrative Trustees named therein and (ii) the
filing of a certificate of trust with the Delaware Secretary of State.
The trust agreement will be amended and restated in its entirety (as so
amended and restated, the "Trust Agreement") substantially in the form
filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The Issuer exists for the exclusive purposes
of (i) issuing and selling the Trust Securities, (ii) using the proceeds
from the sale of the Trust Securities to acquire Junior Subordinated
Debentures and (iii) engaging in only those other activities necessary
or incidental thereto (such as registering the transfer of the Trust
14
<PAGE>
Securities). Accordingly, the Junior Subordinated Debentures will be
the sole assets of the Issuer, and payments under the Junior
Subordinated Debentures will be the sole source of revenue of the
Issuer. The Issuer may not borrow money or issue debt or mortgage or
pledge any of its assets.
All of the Common Securities will be owned by the Company.
Payments of Distributions (including Additional Amounts (as defined
herein) on, the redemption price of and the Liquidation Distribution in
respect of the Trust Securities, as applicable, will be made pro rata
among the Common Securities and the Trust Preferred Securities except
that upon the occurrence and continuance of an event of default under
the Trust Agreement (an "Event of Default," as more particularly
defined herein) resulting from a Debenture Event of Default attributable
to the failure of the Company to pay interest or premium, if any, on or
principal of the Junior Subordinated Debentures on the date on which
such payment is due and payable, the rights of the Company, as holder of
the Common Securities, to payment in respect of Distributions and
payments upon liquidation or redemption will be subordinated to the
rights of the holders of the Trust Preferred Securities. See
"Description of the Trust Preferred Securities -- Subordination of
Common Securities." The Company will acquire Common Securities in an
aggregate Liquidation Amount equal to not less than 3% of the total
capital of the Issuer.
The Issuer has a term of approximately 55 years, but may dissolve
earlier as provided in the Trust Agreement. The Issuer's business and
affairs are conducted by its trustees, each appointed by the Company as
holder of the Common Securities. See "Description of the Trust
Preferred Securities -- Dissolution and Liquidation; Distribution Upon
Dissolution." The trustees for the Issuer will be The Bank of New York,
as Property Trustee (the "Property Trustee"), The Bank of New York
(Delaware), as Delaware Trustee (the "Delaware Trustee"), and individual
administrative trustees (the "Administrative Trustees") who are
employees or officers of or affiliated with the Company (collectively,
the "Issuer Trustees"). The Bank of New York, as Property Trustee, will
act as sole indenture trustee under the Trust Agreement for purposes of
compliance with the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The Bank of New York will also act as trustee under the
Guarantee and the Indenture (in such capacity under the Guarantee, the
"Guarantee Trustee," and in such capacity under the Indenture, the
"Debenture Trustee"). The duties and obligations of the Issuer Trustees
are governed by the Trust Agreement. The Company will pay all fees and
expenses related to the Issuer and the offering of the Trust Preferred
Securities and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of the Issuer.
It is anticipated that the Issuer will not be subject to the
reporting requirements under the Exchange Act.
The principal executive office of the Issuer is c/o South Carolina
Electric & Gas Company, 1426 Main Street, Columbia, South Carolina 29202
and its telephone number is (803) 748-3000.
15
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended June 30, Year Ended December 31,
1997 1996 1996 1995 1994
(Thousands of Dollars)
(Unaudited)
Consolidated Statements of
Income Data:
Operating Revenues.............$ 626,893 $ 664,829 $1,344,597 $1,211,087 $1,181,274
Operating Income............... 125,922 138,633 285,525 255,854 230,418
Income Before Interest Charges. 128,928 141,413 289,645 265,407 237,689
Interest Charges............... 48,845 50,132 99,163 96,222 85,646
AFC (includes allowance
for both equity and
borrowed funds).............. 5,518 5,239 9,408 20,962 14,893
Net Income..................... 80,083 91,281 190,482 169,185 152,043
Net Utility Plant................ 3,243,293 3,129,484 3,196,897 3,157,657 2,998,132
As of June 30, 1997
Actual Percentage Adjusted Percentage
(Thousands of Dollars, Except Percentages)
(Unaudited)
Capitalization:
Long-Term Debt $1,278,659 44.5% $1,278,659 44.5%
Cumulative Preferred Stock (not subject
(to purchase or sinking funds) 126,027 4.4 106,260 3.7
Cumulative Preferred Stock
(subject to purchase or sinking funds) 41,033 1.4 11,397 .4
Company Obligated Preferred Securities
of Subsidiary Trust Holding Solely
Junior Subordinated Debentures -0- -0- 50,000 1.7
Common Stock Equity 1,430,273 49.7 1,430,273 49.7
Total $2,875,992 100.0% $2,876,589 100.0%
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's historical ratio of earnings to fixed
charges of the Company for each of the periods presented:
<C> <C> <C> <C> <C> <C>
Twelve Months
Ended
June 30, Years Ended December 31,
1997 1996 1995 1994 1993 1992
3.65 3.80 3.41 3.46 3.57 2.73
For purposes of this ratio, earnings represent net income plus taxes and fixed charges.
Fixed charges represent interest charges and the estimated interest portion of annual
rentals.
</TABLE>
16
<PAGE>
USE OF PROCEEDS
All of the proceeds from the sale of Trust Preferred Securities and the
Common Securities will be invested by the Issuer in the Junior Subordinated
Debentures. The Company intends that the proceeds from the sale of the
Junior Subordinated Debentures will be used to reimburse the Company for
amounts deposited to redeem the Company's 7.70% Cumulative Preferred Stock
outstanding at October 10, 1997 in the aggregate par amount of $8,100,000,
8.12% Cumulative Preferred Stock outstanding at October 10, 1997 in the
aggregate par amount of $11,436,800, 8.40% Cumulative Preferred Stock
outstanding at October 10, 1997 in the aggregate par amount of $19,766,800,
8.72% Cumulative Preferred Stock outstanding at October 10, 1997 in the
aggregate par amount of $1,599,650 and 9.40% Cumulative Preferred Stock
outstanding at October 10, 1997 in the aggregate par amount of $8,500,000,
constituting all of the outstanding Preferred Stock of the respective series,
at the applicable redemption prices to the redemption date, or for general
corporate purposes.
ACCOUNTING TREATMENT
For financial reporting purposes, the Issuer will be treated as a
subsidiary of the Company and, accordingly, the accounts of the Issuer will
be included in the consolidated financial statements of the Company. The
Trust Preferred Securities will be presented as a separate line item in the
consolidated balance sheets of the Company entitled "Company Obligated
Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated
Debentures." For financial reporting purposes, the Company will record
Distributions payable on the Trust Preferred Securities as an expense in the
consolidated statements of income.
DESCRIPTION OF TRUST PREFERRED SECURITIES
Pursuant to the Trust Agreement, the Issuer will issue the Trust
Preferred Securities and the Common Securities. The Trust Preferred
Securities will represent preferred undivided beneficial interests in the
assets of the Issuer and the holders thereof will be entitled to a preference
in certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation over the Common Securities of the Issuer, as well
as other benefits as described in the Trust Agreement. This summary of
certain provisions of the Trust Preferred Securities and the Trust Agreement,
which summarizes the material terms thereof, does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Trust Agreement, including the definitions therein of
certain terms, and the Trust Indenture Act, to which reference is hereby
made. Wherever particular defined terms of the Trust Agreement are referred
to herein, such defined terms are incorporated herein or therein by
reference. The form of the Trust Agreement has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.
17
<PAGE>
Distributions
Distributions on the Trust Preferred Securities will be payable at the
annual rate of 7.55% of the stated liquidation amount (the "Liquidation
Amount") of $25, payable quarterly in arrears on March 31, June 30, September
30 and December 31 of each year (each a "Distribution Date"), commencing
December 31, 1997. Distributions on the Trust Preferred Securities with
respect to a Distribution Date will be payable to the holders of record of
the Trust Preferred Securities as they appear on the close of business on the
fifteenth day next preceding the relevant Distribution Date; provided that so
long as the Trust Preferred Securities are held in book-entry form by DTC
Distributions will be payable to the holders of record on the last Business
Day preceding such Distribution Date. Distributions will accumulate from the
date of original issuance. 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 the actual number of days elapsed in a partial month period. In
the event that any date on which Distributions are payable 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 that is a
Business Day (and without any additional Distributions 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 the date such payment was originally payable. As used herein,
"Business Day" means a day other than (i) a Saturday or Sunday, (ii) a day on
which banking institutions in the City of New York are authorized or required
by law or executive order to remain closed or (iii) a day on which the
Property Trustee's corporate trust office or the corporate trust office of
the Debenture Trustee is closed for business. Distributions in respect of
the Trust Preferred Securities will be made pro rata with the Common
Securities of the Issuer except as described under "-- Subordination of
Common Securities."
The sole source of revenue of the Issuer available for distribution to
holders of the Trust Preferred Securities will be limited to payments under
the Junior Subordinated Debentures. If the Company does not make interest
payments on the Junior Subordinated Debentures, the Property Trustee will not
have funds available to pay Distributions on the Trust Preferred Securities.
The payment of Distributions (if and to the extent the Issuer has funds
legally available for the payment of such Distributions and cash sufficient
to make such payments) is guaranteed by the Company on a limited basis as set
forth under "Description of Guarantee."
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer payment of interest on
the Junior Subordinated Debentures at any time or from time to time for an
Extension Period of not exceeding 20 consecutive quarterly periods, provided
that no Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of any such deferral of interest
payments by the Company, Distributions on the Trust Preferred Securities
would also be deferred by the Issuer during any such Extension Period, and
the Company will not be permitted, subject to certain exceptions, to declare
or pay any cash distributions with respect to the Company's capital stock or
debt securities that rank on a parity with or junior to the Junior
Subordinated Debentures. See "Description of Trust Preferred Securities --
18
<PAGE>
Restrictions on Certain Payments." Distributions to which holders of the
Trust Preferred Securities are entitled would accumulate additional
Distributions thereon at the rate per annum of 7.55% thereof, compounded
quarterly from the relevant payment date for such Distributions to but
excluding the date of payment. The term "Distributions" as used herein shall
include any such additional Distributions. Upon the termination of any such
Extension Period and the payment of all interest then accrued and unpaid
(together with interest thereon at the rate of 7.55% per annum, compounded
quarterly, to the extent permitted by applicable law), the Company may elect
to begin a new Extension Period. There is no limitation on the number of
times that the Company may elect to begin an Extension Period. See
"Description of Junior Subordinated Debentures -- Option to Defer Interest
Payments" and "Certain Federal Income Tax Consequences -- Interest Income and
Original Issue Discount." Within five Business Days after the receipt of
notice of the Company's exercise of its right to defer the payment of
interest on the Junior Subordinated Debentures pursuant to the Indenture, the
Administrative Trustees shall transmit, in the manner and to the extent
provided in the Trust Agreement, notice of such exercise to the holders of
the Trust Preferred Securities, unless such exercise shall have been revoked.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
Redemption
While the Securities are outstanding, upon the repayment or redemption,
in whole or in part, of the Junior Subordinated Debentures, whether at Stated
Maturity or upon earlier redemption as provided in the Indenture, the
proceeds from such repayment or redemption shall be applied by the Property
Trustee to redeem a Like Amount (as defined below) of the Trust Securities,
at a redemption price, with respect to the Trust Preferred Securities equal
to the aggregate Liquidation Amount of such Trust Preferred Securities plus
accumulated and unpaid Distributions thereon to the date of redemption (the
"Redemption Date"). If less than all of the Junior Subordinated Debentures
are to be repaid or redeemed on a Redemption Date, then the proceeds from
such repayment or redemption, including any premium paid by the Company,
shall be allocated to the redemption pro rata of the Trust Preferred
Securities and Common Securities based upon the relative Liquidation Amounts
of such Trust Securities except as described under "-- Subordination of
Common Securities." Redemptions of the Trust Preferred Securities shall be
made and the redemption price shall be payable on each Redemption Date only
to the extent that the Issuer has funds on hand available for the payment of
the redemption price.
The Company has the right to redeem the Junior Subordinated Debentures
(i) on or after September 30, 2002, in whole at any time or in part from time
to time or (ii) prior to September 30, 2002, in whole (but not in part),
within 90 days following the occurrence of a Tax Event. A redemption of the
Junior Subordinated Debentures would cause a mandatory redemption of the
Trust Securities. See "Description of Junior Subordinated Debentures --
Redemption."
19
<PAGE>
In the event a Tax Event has occurred and is continuing and the Company
does not elect to redeem the Junior Subordinated Debentures and thereby cause
a mandatory redemption of Trust Preferred Securities or to dissolve the
Issuer and cause the Junior Subordinated Debentures to be distributed to
holders of the Trust Securities in exchange therefor upon liquidation of the
Issuer as described above, such Trust Securities will remain outstanding and
Additional Sums (as defined below) may be payable on the Junior Subordinated
Debentures.
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Issuer on
the outstanding Trust Securities shall not be reduced as a result of any
additional taxes, duties and other governmental charges to which the Issuer
has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed, the proceeds of which will be used to pay the redemption price of
such Trust Securities, (ii) with respect to a distribution of Junior
Subordinated Debentures to holders of any series of Trust Securities in
connection with a dissolution or liquidation of the Issuer, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities in respect of which such distribution is made
and (iii) with respect to any distribution of Additional Amounts (as defined
herein), Junior Subordinated Debentures having a principal amount equal to
the Liquidation Amount of the Trust Securities in respect of which such
distribution is made.
Notice of redemption of Trust Preferred Securities not held in book-
entry form shall be given not less than 30 nor more than 60 days notice prior
to the Redemption Date. If the Property Trustee gives a notice of redemption
in respect of Trust Preferred Securities, then, by 12:00 noon, New York City
time, on the Redemption Date, to the extent funds are available, the Property
Trustee will, with respect to Trust Preferred Securities held in book-entry
form, deposit irrevocably with the Depositary funds sufficient to pay the
redemption price and will give the Depositary irrevocable instructions and
authority to pay the redemption price to the holders of such Trust Preferred
Securities. See "-- Book-Entry Issuance." If such Trust Preferred Securities
are no longer in book-entry form, the Property Trustee, to the extent funds
are available, will irrevocably deposit with the paying agent for the Trust
Preferred Securities funds sufficient to pay the redemption price and will
give such paying agent irrevocable instructions and authority to pay the
redemption price to the holders thereof upon surrender of their certificates
evidencing such Trust Preferred Securities. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date for any Trust
Preferred Securities called for redemption shall be payable to the holders of
such Trust Preferred Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of 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,
and such Trust Preferred Securities will cease to be outstanding. 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
20
<PAGE>
will be made on the next succeeding day which is a Business Day (and without
any interest or other payment in respect of any such delay), except that, if
such Business Day falls in the next calendar year, such payment will be made
on the immediately preceding Business Day, in each case, with the same force
and effect as if made on such date. In the event that payment of the
redemption price in respect of Trust Preferred Securities called for
redemption is improperly withheld or refused and not paid either by the
Issuer or by the Company pursuant to the Guarantee as described under
"Description of Guarantee," Distributions on such Trust Preferred Securities
will continue to accumulate at the then applicable rate from the Redemption
Date originally established by the Issuer for such Trust Preferred Securities
to the date such redemption price is actually paid, in which case the actual
payment date will be the date fixed for redemption for purposes of
calculating the redemption price.
If less than all of the Trust Preferred Securities and Common Securities
subject to redemption are to be redeemed on a Redemption Date, then with
respect to Trust Preferred Securities not held in book-entry form, the
particular Trust Preferred Securities to be redeemed shall be selected on a
pro rata basis not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Trust Preferred Securities not
previously called for redemption. With respect to Trust Preferred
Securities held in book-entry form, the Trust Preferred Securities to be
redeemed shall be selected as described under "-- Book-Entry Issuance." The
Property Trustee shall promptly notify the securities registrar in writing of
the Trust Preferred Securities selected for redemption and, in the case of
any Trust Preferred Securities selected for partial redemption, the
Liquidation Amount thereof to be redeemed. For all purposes of the Trust
Agreement, unless the context otherwise requires, the provisions relating to
the redemption of Trust Preferred Securities shall relate, in the case of any
Trust Preferred Securities redeemed or to be redeemed only in part, to the
portion of the aggregate Liquidation Amount of Trust Preferred Securities
which has been or is to be redeemed.
Book-Entry Issuance
DTC will initially act as securities depositary for all of the Trust
Preferred Securities. The Trust Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered Trust Preferred Security certificate
will be issued for the Trust Preferred Securities, representing in the
aggregate the total number of Trust Preferred Securities, and will be
deposited with DTC.
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 (the "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 (the "Direct Participants")
include securities brokers and dealers, banks, trust companies, clearing
21
<PAGE>
corporations and certain other organizations. 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 through
or maintain custodial relationships with Direct Participants, either directly
or indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
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 (the "Beneficial Owner") is
in turn to be recorded on the Direct Participant 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 Participant 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 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 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
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 and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder
of the Trust Preferred Securities. If less than all of the Trust Preferred
Securities are being redeemed, DTC's current practice is to determine by lot
the amount of the interest of each Direct Participant to be redeemed.
Neither DTC nor Cede & Co. will itself consent or vote with respect to
Trust Preferred Securities. Under its usual procedures, DTC would mail an
omnibus proxy (the "Omnibus Proxy") to the Issuer as soon as possible after
the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts such Trust Preferred
Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
22
<PAGE>
Redemption proceeds and distributions on the Trust Preferred Securities
held in book entry only form will be made to Cede & Co., as nominee of DTC.
DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt
of funds and correspondence detail information from the Issuer or the paying
agent for the Trust Preferred Securities on the relevant payment date in
accordance with their respective holdings shown on DTC's records 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 and will be the responsibility of such
Participant and not of DTC, the paying agent for the Trust Preferred
Securities, the Issuer or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of redemption
proceeds and Distributions to DTC is the responsibility of the Issuer or the
paying agent for the Trust Preferred Securities, disbursement of such
payments to Direct Participants is the responsibility of DTC and
disbursements of such payments to the Beneficial Owners is the responsibility
of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Trust Preferred Securities at any time by giving
reasonable notice to the Issuer or the paying agent for the Trust Preferred
Securities. Under such circumstances, in the event that a successor
securities depositary is not obtained, definitive Trust Preferred Security
certificates representing such Trust Preferred Securities are required to be
printed and delivered. The Company, at its option, may decide to discontinue
use of the system of book-entry transfers through DTC (or a successor
depositary). After a Debenture Event of Default, any holder of a Trust
Preferred Security may request his Trust Preferred Security in certificated
form. In any such event, definitive certificates for such Trust Preferred
Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Issuer and the Company believe
to be accurate, but the Issuer and the Company assume no responsibility for
the accuracy thereof. The Issuer and the Company have no responsibility for
the performance by DTC or the Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
Registrar and Transfer Agent
The Property Trustee will initially act as registrar and transfer agent
for the Trust Preferred Securities. Registration of transfers of Trust
Preferred Securities not held in book-entry form will be effected, subject to
such reasonable regulations as the Property Trustee may prescribe, without
charge by or on behalf of the Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The registrar and transfer agent shall not be required (i) to
issue, register the transfer of or exchange any Trust Preferred Security not
held in book-entry form during a period beginning at the opening of business
15 days before the day of selection for redemption of such Trust Preferred
Securities and ending at the close of business on the day of mailing of the
notice of redemption or (ii) to register the transfer of or exchange any
Trust Preferred Security so selected for redemption in whole or in part,
except, in the case of any such Trust Preferred Security to be redeemed in
part, any portion thereof not to be redeemed. So long as the Trust Preferred
23
<PAGE>
Securities are held in book-entry form by DTC, registrations and transfers of
Trust Preferred Securities will be made as set forth under "-- Book-Entry
Issuance."
Subordination of Common Securities
Payment of Distributions (including any Additional Amounts) on, and the
redemption price of, and the Liquidation Distributions in respect of the
Trust Securities, as applicable, shall be made subject to allocation
provisions relating to the proceeds of partial redemptions of Junior
Subordinated Debentures described under the first paragraph under "--
Redemption," pro rata based on the Liquidation Amount of such Trust
Securities; provided, however, that if on any Distribution Date, Redemption
Date or Liquidation Date a Debenture Event of Default attributable to the
failure of the Company to pay interest or premium, if any, on or principal of
the Junior Subordinated Debentures on the date on which such payment is due
and payable, shall have occurred and be continuing, no payment of any
Distribution on, or redemption price of, or Liquidation Distribution in
respect of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid
Distributions (including any Additional Amounts) 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 called for redemption, or in the case of payment of the
Liquidation Distribution the full amount of such Liquidation Distribution on
all outstanding Trust Preferred Securities, shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied
to the payment in full in cash of all Distributions (including any Additional
Amounts) on, or redemption price of, the Trust Preferred Securities then due
and payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, the Company as holder of the Common Securities will have no right to
act with respect to any such Event of Default under the Trust Agreement until
the effect of all such Events of Default with respect to such Trust Preferred
Securities have been cured, waived or otherwise eliminated. Until all such
Events of Default with respect to the Trust Preferred Securities have been so
cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of such Trust Preferred Securities and not on behalf
of the Company as holder of the Common Securities, and only the holders of
such Trust Preferred Securities will have the right to direct the Property
Trustee to act on their behalf.
Dissolution and Liquidation; Distribution Upon Dissolution
Pursuant to the Trust Agreement, the Issuer shall automatically dissolve
upon the expiration of its term and shall dissolve on the first to occur of:
(i) certain events of bankruptcy, dissolution or liquidation of the Company;
(ii) the distribution of a Like Amount of the Junior Subordinated Debentures
to the holders of the Trust Securities, if the Company, as holder of the
Common Securities, has given written direction to the Property Trustee to
dissolve the Issuer; (iii) redemption of all of the outstanding Trust
Preferred Securities in connection with a redemption of all of the Junior
Subordinated Debentures; and (iv) the entry of an order for the dissolution
of the Issuer by a court of competent jurisdiction.
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Except as set forth in the following paragraph if an early dissolution
occurs as the result of an event described in clause (i), (ii) or (iv) above,
or upon the expiration of the term of the Issuer, the Issuer shall be
liquidated by the Issuer Trustees as expeditiously as the Issuer Trustees
determine to be possible by distributing, after satisfaction of liabilities
to creditors of the Issuer as provided by applicable law, to the holders of
such Trust Securities in exchange therefor a Like Amount of the Junior
Subordinated Debentures. Notice of liquidation shall be given by the Property
Trustee not less than 30 nor more than 60 days prior to the liquidation to
each holder of Trust Securities (which, with respect to Trust Preferred
Securities in book-entry form, will be DTC) at such holder's address as it
appears in its register.
Notwithstanding the preceding paragraph, if the distribution of Junior
Subordinated Debentures is determined by the Property Trustee not to be
practical, the holders of the Trust Securities will be entitled to receive
out of the assets of the Issuer available for distribution to holders, after
satisfaction of liabilities to creditors of the Issuer as provided by
applicable law, an amount equal to the Liquidation Distribution in respect
thereof. If such Liquidation Distribution can be paid only in part because
the Issuer has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Issuer on
the Trust Securities shall be paid on a pro rata basis (based upon
Liquidation Amounts) except as provided under "-- Subordination of Common
Securities."
In order to effect the distribution of the Junior Subordinated
Debentures to the Holders of Trust Securities, the Property Trustee, either
itself acting as exchange agent or through the appointment of a separate
exchange agent, shall establish a record date for such distribution (which
shall be not more than 30 days prior to the liquidation date) and, establish
such procedures as it shall deem appropriate to effect the distribution of
Debentures in exchange for the outstanding Trust Securities. After the
liquidation date, (i) the Trust Securities will no longer be deemed to be
outstanding under the Trust Agreement, (ii) certificates representing a Like
Amount of Junior Subordinated Debentures will be issued to holders of Trust
Securities upon surrender of such Trust Securities to the exchange agent
for exchange, (iii) the Company shall use its best efforts to have the Junior
Subordinated Debentures listed on the national stock exchange, the Nasdaq
National Market or on such other exchange, interdealer quotation system or
self-regulatory organization as the Trust Preferred Securities are then
listed, (iv) any Trust Securities not so surrendered for exchange will be
deemed to represent a Like Amount of Junior Subordinated Debentures bearing
accrued and unpaid interest in an amount equal to the accumulated and unpaid
Distributions on such Trust Securities until such certificates are so
surrendered (and until such certificates are so surrendered, no payments of
interest or principal will be made to holders of Trust Securities with
respect to such Junior Subordinated Debentures) and (v) all rights of holders
holding Trust Securities will cease, except the right of such holders to
receive Junior Subordinated Debentures upon surrender of Trust Securities.
See "Description of Junior Subordinated Debentures -- Distribution of Junior
Subordinated Debentures."
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Under current United States federal income tax law, a distribution of
Junior Subordinated Debentures in exchange for Trust Preferred Securities
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 of the Junior
Subordinated Debentures could be a taxable event to holders of the Trust
Preferred Securities. See "Certain Federal Income Tax Consequences --
Distribution of Junior Subordinated Debentures to Holders of Trust Preferred
Securities." If the Company elects neither to redeem the Junior Subordinated
Debentures prior to their Stated Maturity nor to dissolve the Issuer and
distribute the Junior Subordinated Debentures to holders of the Trust
Preferred Securities in exchange therefor, the Trust Preferred Securities
will remain outstanding until the Stated Maturity of the Junior Subordinated
Debentures.
There can be no assurance as to the market prices for the Trust
Preferred Securities or the Junior Subordinated Debentures that may be
distributed in exchange for Trust Preferred Securities if a dissolution and
liquidation of the Issuer were to occur. Accordingly, the Trust Preferred
Securities that an investor may purchase, or the Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of
the Issuer, may trade at a discount to the price that the investor paid to
purchase the Trust Preferred Securities offered hereby.
Events of Default; Notice; Right to Direct Remedies
Any one of the following events constitutes an "Event of Default" under
the Trust Agreement (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see
"Description of Junior Subordinated Debentures -- Debenture Events of
Default"); or
(ii) default by the Issuer in the payment of any Distribution
when it becomes due and payable and continuation of such default for
a period of 30 days; or
(iii) default by the Issuer in the payment of any redemption
price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Issuer Trustees in the
Trust Agreement (other than those specified in clause (ii) or (iii)
above), and continuation of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to
the defaulting Issuer Trustees and the Company, as Depositor, by the
holders of at least 25% in aggregate Liquidation Amount of the
outstanding Trust Preferred Securities, a written notice specifying
such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under the Trust Agreement;
or
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(v) the occurrence of certain events of bankruptcy or
insolvency with respect to the Property Trustee and the failure by
the Company to appoint a successor Property Trustee within 90 days
thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
in the manner specified in the Trust Agreement notice of such Event of
Default to the holders of the Trust Preferred Securities, the Administrative
Trustees and the Company, as Depositor, unless such Event of Default shall
have been cured or waived. The Property Trustee shall not be deemed to have
knowledge of any Event of Default unless the Property Trustee shall have
received written notice or a responsible officer of the Property Trustee
charged with the administration of the Trust Agreement shall have obtained
actual knowledge of such Event of Default.
For so long as any Trust Preferred Securities remain outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the holders
of not less than 25% in principal amount of the outstanding Junior
Subordinated Debentures fail to declare the principal of all of the Junior
Subordinated Debentures to be immediately due and payable, the holders of at
least 25% in Liquidation Amount of the Trust Preferred Securities then
outstanding shall have the right to make such declaration by a notice in
writing to the Company and the Debenture Trustee.
At any time after a declaration of acceleration with respect to the
Junior Subordinated Debentures has been made and before a judgment or decree
for payment of the money due has been obtained by the Debenture Trustee as in
the Indenture provided, if the Property Trustee fails to annul any such
declaration and waive such default, the holders of more than 50% of the
aggregate Liquidation Amount of the Trust Preferred Securities, by written
notice to the Property Trustee, the Company,as Depositor, and the Debenture
Trustee, may rescind and annul such declaration and its consequences if (i)
the Company, as Depositor, has paid or deposited with the Debenture Trustee
a sum sufficient to pay (a) all overdue installments of interest on all of
the Junior Subordinated Debentures, (b) any accrued Additional Interest on
all of the Junior Subordinated Debentures, (c) the principal of (and premium,
if any, on) any Junior Subordinated Debentures that have become due otherwise
than by such declaration of acceleration and interest and Additional Interest
thereon at the rate borne by the Junior Subordinated Debentures and (d) all
sums paid or advanced by the Debenture Trustee under the Indenture and the
reasonable compensation, expenses, disbursements and advances of the
Debenture Trustee and the Property Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Junior Subordinated
Debentures, other than the non-payment of the principal of the Junior
Subordinated Debentures that has become due solely by such acceleration, have
been cured or waived as provided in the Indenture.
The Holders of more than 50% of the aggregate Liquidation Amount of the
Trust Preferred Securities may, on behalf of the holders of all the Trust
Preferred Securities, waive any past default under the Indenture as to the
Junior Subordinated Debentures, except a default in the payment of principal
or interest (unless such default has been cured and a sum sufficient to pay
all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee) or a default in
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respect of a covenant or provision that under the Indenture cannot be
modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture. No such rescission shall affect any subsequent
default or impair any right consequent thereon.
For so long as any Trust Preferred Securities remain outstanding, to the
fullest extent permitted by law and subject to the terms of the Trust
Agreement and the Indenture, upon a Debenture Event of Default attributable
to the failure of the Company to pay interest or premium, if any, on or
principal of the Junior Subordinated Debentures on the date on which such
payment is due and payable, any holder of Trust Preferred Securities shall
have the right to institute a Direct Action under the Indenture against the
Company. Except as set forth in this paragraph and the previous three
paragraphs, the holders of Trust Preferred Securities shall have no right to
exercise directly any right or remedy available to the holders of, or in
respect of, the Junior Subordinated Debentures.
Subject to the limitations described in the previous four paragraphs,
the holders of more than 50% of the Liquidation Amount of the Trust Preferred
Securities may, on behalf of the holders of all the Trust Preferred
Securities, waive any past default or Event of Default and its consequences.
Upon such waiver, any such default or Event of Default shall cease to exist
and any default or Event of Default arising therefrom shall be deemed to have
been cured for every purpose of the Trust Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Property Trustee shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture
Trustee, or execute any trust or power conferred on the Property Trustee with
respect to such Junior Subordinated Debentures, (ii) waive any past default
that is waivable under the Indenture, (iii) exercise any right to rescind or
annul a declaration that the principal of all the Junior Subordinated
Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or such Junior Subordinated
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of more than 50% of the aggregate
Liquidation Amount of all outstanding Trust Preferred Securities; provided,
however, that where a consent under the Indenture would require the consent
of each holder of Junior Subordinated Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior consent of
each holder of the Trust Preferred Securities. The Property Trustee shall
not revoke any action previously authorized or approved by a vote of the
holders of the Trust Preferred Securities except by subsequent vote of the
holders of the Trust Preferred Securities. The Property Trustee shall notify
each holder of Trust Preferred Securities of any notice of default with
respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of the holders of the Trust Preferred Securities, prior
to taking any of the foregoing actions, the Property Trustee shall obtain an
opinion of counsel experienced in such matters to the effect that the Issuer
will not be classified as an association taxable as a corporation for United
States federal income tax purposes on account of such action and such action
would not cause the Issuer to be classified as other than a grantor trust for
United States federal income tax purposes.
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Mergers, Consolidations, Amalgamations or Replacements of the Issuer
The Issuer may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below or as described in "Dissolution and Liquidation;
Distribution Upon Dissolution." The Issuer may, at the request of the
Company, with the consent of the Administrative Trustees and without the
consent of the holders of the Trust Preferred Securities, merge with or into,
consolidate, amalgamate or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as
such under the laws of any state provided that (i) such successor entity
either (a) expressly assumes all of the obligations of the Issuer with
respect to the Trust Preferred Securities or (b) substitutes for the Trust
Preferred Securities other securities having substantially the same terms as
the Trust Preferred Securities (the "Successor Securities") so long as the
Successor Securities rank the same as the Trust Preferred Securities in
priority with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Company expressly appoints a trustee of
such successor entity possessing the same powers and duties as the Property
Trustee as the holder of the Junior Subordinated Debentures, (iii) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause the Trust Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization which assigns ratings to the Trust Preferred Securities, (iv)
the Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
other self-regulatory organization on which the Trust Preferred Securities
are then listed, if any, (v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the Trust Preferred
Securities (including any Successor Securities) in any material respect, (vi)
such successor entity has a purpose substantially identical to that of the
Issuer, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Company has received an opinion from
independent counsel to the Issuer experienced in such matters to the effect
that (a) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Trust Preferred Securities (including any
Successor Securities) in any material respect and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Issuer nor such successor entity will be required to register as
an investment company under the Investment Company Act of 1940, as amended
(the "Investment Company Act") and (viii) the Company or any permitted
successor or assignee owns all of the common securities of such successor
entity and guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee (the
"Successor Guarantees") or any permitted successor or assignee guarantees the
obligations of the Company or such successor entity under the Successor
Guarantees at least to the extent provided by the Guarantee. Notwithstanding
the foregoing, the Issuer shall not, except with the consent of holders of
all of the Trust Preferred Securities, consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if such
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consolidation, amalgamation, merger, replacement, conveyance, transfer or
lease would cause the Issuer or the successor entity to be classified as an
association taxable as a corporation or as other than a grantor trust for
United States federal income tax purposes.
Resignation and Removal of Issuer Trustees; Appointment of Successors
No resignation or removal of any Issuer Trustee (the "Relevant Trustee")
and no appointment of a successor Issuer Trustee pursuant to the Trust
Agreement shall become effective until the acceptance of appointment by the
successor Issuer Trustee in accordance with the applicable requirements of
the Trust Agreement.
Subject to the immediately preceding paragraph, the Relevant Trustee may
resign at any time by giving written notice thereof to the Holders. If an
instrument of acceptance by the successor Trustee shall not have been
delivered to the Relevant Trustee within 30 days after the giving of such
notice of resignation, the Relevant Trustee may petition, at the expense of
the Trust, any court of competent jurisdiction for the appointment of a
successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Issuer Trustee may be removed at any time by act of the
holders of the Common Securities. If a Debenture Event of Default shall have
occurred and be continuing, the Property Trustee or the Delaware Trustee, or
both of them, may be removed at such time by act of the holders of more than
50% of the Liquidation Amount of the Trust Preferred Securities. An
Administrative Trustee may be removed by the holders of Common Securities at
any time. In no event will the Holders of the Trust Preferred Securities
have a right to vote to appoint, remove or replace the Administrative
Trustees.
Co-trustees and Separate Property Trustee
Unless an Event of Default shall have occurred and be continuing, at any
time or from time to time, for the purpose of meeting the legal requirements
of the Trust Indenture Act or of any jurisdiction in which any part of the
Trust Property (as defined below) may at the time be located, the Company, as
Depositor, and the Administrative Trustees shall have power to appoint one or
more persons either to act as a co-trustee, jointly with the Property
Trustee, of all or any part of the Trust Property, or to the extent required
by law, act as separate trustee of any such property, in either case with
such powers as may be provided in the instrument of appointment, and to vest
in such person or persons in such capacity any property, title, right or
power deemed necessary or desirable, subject to the provisions of the Trust
Agreement. In case a Debenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment.
"Trust Property" means (i) the Junior Subordinated Debentures, (ii) any
cash on deposit in, or owing to the payment account created under the Trust
Agreement and (iii) all proceeds and rights in respect of the foregoing and
any other property or assets held by the Property Trustee pursuant to the
trusts of the Trust Agreement.
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Merger or Consolidation of Issuer Trustees
Any person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or
converted or with which it may be consolidated, or any person resulting from
any merger, conversion or consolidation to which such Trustee shall be a
party, or any person succeeding to all or substantially all the corporate
trust business of such Trustee, shall be the successor of such Trustee under
the Trust Agreement, provided such person shall be otherwise qualified and
eligible.
Responsibilities of the Property Trustee
The Property Trustee, other than during the occurrence and continuance
of an Event of Default, undertakes to perform only such duties as are
specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to
this provision, the Property Trustee is under no obligation to exercise any
of the powers vested in it by the Trust Agreement at the request of any
holder of Trust Preferred Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby; provided that, such right to indemnity shall in no event relieve the
Property Trustee upon the occurrence of an Event of Default of its obligation
to exercise the rights and powers vested in it by the Trust Agreement. If no
Event of Default has occurred and is continuing and the Property Trustee is
required to decide between alternative causes of action, construe ambiguous
provisions in the Trust Agreement or is unsure of the application of any
provision of the Trust Agreement, and the matter is not one on which holders
of Trust Preferred Securities are entitled under the Trust Agreement to vote,
then the Property Trustee shall take such action as is directed by the
Company and if not so directed, shall take such action as it deems advisable
and in the best interests of the holders of the Trust Securities and will
have no liability except for its own bad faith, gross negligence or willful
misconduct.
Amendment of Trust Agreement
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Preferred Securities, (i) to cure any ambiguity, correct
or supplement any provisions in the Trust Agreement that may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under the Trust Agreement, which shall not be
inconsistent with the other provisions of the Trust Agreement or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as shall be necessary to ensure that the Issuer will be classified for
United States federal income tax purposes as a grantor trust or as other than
an association taxable as a corporation at all times that any Trust
Securities are outstanding or to ensure that the Issuer will not be required
to register as an"investment company" under the Investment Company Act;
provided, however, that in the case of either clause (i) or clause (ii), such
action shall not adversely affect in any material respect the interests of
any holder of Trust Preferred Securities, and any such amendments of such
Trust Agreement shall become effective when notice thereof is given to the
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holders of Trust Securities. The Trust Agreement may be amended by the
Issuer Trustees and the Company with (i) the consent of holders more than 50%
of the aggregate Liquidation Amount of the outstanding Trust Securities and
(ii) receipt by the Issuer Trustees of an opinion of counsel to the effect
that such amendment or the exercise of any power granted to the Issuer
Trustees in accordance with such amendment will not cause the Issuer to
be taxable as a corporation or affect the Issuer's status as a grantor trust
for United States federal income tax purposes or the Issuer's exemption from
status as an "investment company" under the Investment Company Act; provided
that without the consent of each holder of Trust Securities, the Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount
of any Distribution required to be made in respect of the Trust Securities as
of a specified date or (ii) restrict the right of a holder of Trust
Securities to institute suit for the enforcement of any such payment on or
after such date.
Any required approval of holders of Trust Preferred Securities may be
given at a meeting of holders of Trust Preferred Securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a
notice of any meeting at which holders of Trust Preferred Securities are
entitled to vote to be given to each holder of record of Trust Preferred
Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of Trust Preferred Securities will be
required for the Issuer to redeem and cancel the Trust Preferred Securities
in accordance with the Trust Agreement.
Governing Law
The Trust Agreement will be governed by and construed in accordance with
the laws of the State of Delaware.
Miscellaneous
The Company, as Depositor, and the Administrative Trustees are required
to file annually with the Property Trustee a certificate as to whether or not
they are in compliance with all the conditions and covenants applicable to
them under the Trust Agreement.
The Property Trustee and the Administrative Trustees are authorized and
directed to conduct the affairs of and to operate the Issuer in such a way
that no Issuer will be deemed to be an "investment company" required to be
registered under the Investment Company Act or classified as an association
taxable as a corporation or as other than a grantor trust for United States
federal income tax purposes and so that the Junior Subordinated Debentures
will be treated as indebtedness of the Company for United States federal
income tax purposes. In this connection, each Administrative Trustee, the
Property Trustee and the holders of more than 50% of the aggregate
Liquidation Amount of the Common Securities are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Issuer or the Trust Agreement, that the Administrative Trustees, the Property
Trustee or the holders of more than 50% of the aggregate Liquidation Amount
of the Common Securities determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Trust Preferred
Securities.
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The Property Trustee will initially serve as paying agent under the
Trust Agreement with respect to the Trust Preferred Securities. Any paying
agent with respect to the Trust Preferred Securities shall be permitted to
resign as paying agent upon 30 days written notice to the Property Trustee
and the Company. In the event that the Property Trustee shall no longer be
the paying agent, the Administrative Trustees shall appoint a successor
(which shall be a bank or trust company acceptable to the Administrative
Trustees and the Company) to act as paying agent.
Holders of the Trust Preferred Securities have no preemptive or similar
rights.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under a Junior
Subordinated Indenture, as supplemented from time to time (as so
supplemented, the "Indenture"), between the Company and The Bank of New York,
as trustee (the "Debenture Trustee"). This summary of certain terms and
provisions of the Junior Subordinated Debentures and the Indenture, which
summarizes the material provisions thereof, does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Indenture, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and to the Trust Indenture
Act, to each of which reference is hereby made. Whenever particular defined
terms of the Indenture are referred to herein, such defined terms are
incorporated herein or therein by reference.
The Indenture permits the issuance from time to time of debt securities
thereunder in addition to the Junior Subordinated Debentures ("Additional
Junior Subordination Debt Securities," which, together with the Junior
Subordinated Debentures, will be referred to herein as the "Junior
Subordinated Debt Securities"), and the Junior Subordinated Debentures will
rank on a parity with such Additional Junior Subordinated Debt Securities,
all of which will be unsecured and subordinate and junior in right of
payment to the extent and in the manner set forth in the Indenture to all
Senior Debt of the Company. The Indenture does not limit the incurrence or
issuance of other secured or unsecured debt of the Company, including Senior
Debt, whether under the Indenture, any other existing indenture or any other
indenture that the Company may enter into in the future or otherwise. See "
- -- Subordination." The Company expects from time to time to incur additional
indebtedness constituting Senior Debt.
Concurrently with the issuance of the Trust Preferred Securities, the
Issuer will invest the proceeds thereof, together with the consideration paid
by the Company for the Common Securities, in the Junior Subordinated
Debentures. The Junior Subordinated Debentures will be issued in an
aggregate principal amount equal to the aggregate Liquidation Amount of the
Trust Preferred Securities plus the aggregate Liquidation Amount of the
Common Securities. The Junior Subordinated Debentures will mature on
September 30, 2027 and will bear interest at the annual rate of 7.55% of the
principal amount thereof, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each, an "Interest Payment Date"),
commencing December 31, 1997, to the person in whose name each Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the date that is 15 days preceding such Interest Payment
Date. It is anticipated that, until the liquidation, if any, of the Issuer,
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the Junior Subordinated Debentures will be held in the name of the Property
Trustee in trust for the benefit of the Issuer and the holders of the Trust
Securities. The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. In the event that
any date on which interest is payable on the Junior Subordinated Debentures
is not a Business Day, then payment of the interest payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), 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 the date such payment was originally payable.
Accrued interest that is not paid on the applicable Interest Payment Date
will bear additional interest on the amount thereof (to the extent permitted
by law) at the rate per annum of 7.55% thereof, compounded quarterly from the
relevant Interest Payment Date. The term "interest" as used herein shall
include quarterly interest payments, interest on quarterly interest payments
not paid on the applicable Interest Payment Date and Additional Sums, as
applicable.
Redemption
The Junior Subordinated Debentures are redeemable prior to Stated
Maturity at the option of the Company (i) on or after September 30, 2002, in
whole at any time or in part from time to time or (ii) prior to September 30,
2002, in whole (but not in part) within 90 days following the occurrence of
a Tax Event. The Junior Subordinated Debentures will not be subject to any
sinking or purchase fund.
Junior Subordinated Debentures in denominations larger than $25 may be
redeemed in part but only in integral multiples of $25. The redemption price
for any Junior Subordinated Debenture so redeemed shall equal any accrued and
unpaid interest (including Additional Interest) thereon to the redemption
date, plus 100% of the principal amount thereof.
Notice of any redemption will be mailed at least 45 days but not more
than 75 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Company
defaults in payment of the redemption price, on and after the redemption date
interest shall cease to accrue on such Junior Subordinated Debentures or
portions thereof called for redemption.
Denominations, Registration and Transfer
The Junior Subordinated Debentures will be issuable only in registered
form without coupons in denominations of $25 and any integral multiple
thereof. Junior Subordinated Debentures not held in book-entry form will be
exchangeable for other Junior Subordinated Debentures of any authorized
denominations, of a like aggregate principal amount, of the same original
issue date and Stated Maturity and bearing the same interest rate.
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Junior Subordinated Debentures not held in book-entry form may be
presented for exchange as provided above and may be presented for
registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed) at the office of
the securities registrar or at the office of any transfer agent designated by
the Company for such purpose with respect to any series of Junior
Subordinated Debentures without service charge and upon payment of any taxes
and other governmental charges as described in the Indenture. The Company
will appoint the Debenture Trustee as securities registrar and transfer agent
under the Indenture. The Company may at any time rescind the designation of
any such transfer agent or approve a change in the location through which any
such transfer agent acts, provided that the Company maintains a transfer
agent in each place of payment for such series. The Company may at any time
designate additional transfer agents with respect to any series of Junior
Subordinated Debentures.
In the event of any redemption, neither the Company nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during the period beginning at the opening of
business 15 days before the day of selection for redemption of the Junior
Subordinated Debentures and ending at the close of business on the day of
mailing of the relevant notice of redemption or (ii) transfer or exchange any
Junior Subordinated Debentures so selected for redemption, except, in the
case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
Option to Defer Interest Payments
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture at any time or from time to
time during the term of the Junior Subordinated Debentures to defer payment
of interest on the Junior Subordinated Debentures for a period not exceeding
20 consecutive quarterly periods with respect to each Extension Period,
provided that no Extension Period may extend beyond the Stated Maturity of
the Junior Subordinated Debentures. At the end of such Extension Period, the
Company must pay all interest then accrued and unpaid on the Junior
Subordinated Debentures (together with interest on such unpaid interest at
the annual rate of 7.55%, compounded quarterly from the relevant Interest
Payment Date, to the extent permitted by applicable law ("Additional
Interest")). During an Extension Period, interest will continue to accrue
and holders of Junior Subordinated Debentures (or holders of Trust Preferred
Securities while the Trust Preferred Securities are outstanding) will be
required to accrue interest income for United States federal income tax
purposes. See "-- Restrictions on Certain Payments" and "Certain Federal
Income Tax Consequences -- Interest Income and Original Issue Discount."
During any such Extension Period, the Company will not be permitted,
subject to certain exceptions, to declare or pay any cash distributions with
respect to the Company's capital stock or debt securities that rank on a
parity with or junior to the Junior Subordinated Debentures as described
under "-- Restrictions on Certain Payments." Prior to the termination of any
such Extension Period, the Company may further defer the payment of interest
on the Junior Subordinated Debentures, provided that no Extension Period may
exceed 20 consecutive quarterly periods or extend beyond the Stated Maturity
of the Junior Subordinated Debentures or end on a date other than an Interest
Payment Date. Upon the termination of any such Extension Period and the
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payment of all interest then accrued and unpaid and any Additional Interest
then due on the Interest Payment Date, the Company may elect to begin a new
Extension Period subject to the above conditions. No interest or Additional
Interest shall be due and payable during an Extension Period, except at the
end thereof.
The Company must give the holders of the Junior Subordinated Debentures
and the Debenture Trustee notice of its election to begin such Extension
Period at least one Business Day prior to the next succeeding Interest
Payment Date, or with respect to the Junior Subordinated Debentures while
held by the Property Trustee, at least one Business Day prior to the earlier
of (i) the next succeeding date on which Distributions on the Trust Preferred
Securities would be payable but for such deferral and (ii) the date on which
the Property Trustee is required to give notice to any securities exchange or
other applicable self-regulatory organization or to holders of the Trust
Preferred Securities of the applicable record date or the date such
Distribution is payable. The Debenture Trustee shall give notice of the
Company's election to begin a new Extension Period to the holders of the
Junior Subordinated Debentures. There is no limitation on the number of
times that the Company may elect to begin an Extension Period.
Additional Sums
If the Issuer is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
Additional Sums on the Junior Subordinated Debentures such amounts as shall
be required so that the Distributions payable by the Issuer shall not be
reduced as a result of any such additional taxes, duties or other
governmental charges.
Restrictions on Certain Payments
The Company will covenant as to the Junior Subordinated Debentures that
it will not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock or (ii) make any payment of principal of or interest
or premium, if any, on or repay or repurchase or redeem any debt securities
of the Company (including other Junior Subordinated Debentures) that rank
pari passu in all respects with or junior in interest to the Junior
Subordinated Debentures (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan or other similar arrangement with or for
the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or
in connection with the issuance of capital stock of the Company (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the
applicable Extension Period, (b) as a result of an exchange or conversion of
any class or series of the Company's capital stock (or any capital stock of
a subsidiary of the Company) for any class or series of the Company's capital
stock, or of any class or series of the Company's indebtedness for any class
or series of the Company's capital stock, (c) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted
or exchanged, (d) any declaration of a dividend in connection with any Rights
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Plan (as defined below) or the issuance of rights, stock or other property
under any Rights Plan, or the redemption or repurchase of rights pursuant
thereto or (e) any dividend in the form of stock, warrants, options or other
rights where the dividend stock or the stock issuable upon exercise of such
warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock), if
at such time (i) there shall have occurred any event of which the Company has
actual knowledge that with the giving of notice or the lapse of time, or
both, would constitute an Event of Default with respect to the Junior
Subordinated Debentures of such series and in respect of which the Company
shall not have taken reasonable steps to cure, (ii) if such Junior
Subordinated Debentures are held by the Issuer, the Company shall be in
default with respect to its payment of any obligations under the Guarantee or
(iii) the Company shall have given notice of its election to begin an
Extension Period as provided in the Indenture with respect to the Junior
Subordinated Debentures and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
"Rights Plan" means a plan of the Company providing for the issuance to
all holders of its common stock of rights entitling the holders thereof to
subscribe for or purchase shares of any class or series of capital stock of
the Company which rights (i) are deemed to be transferred with such shares of
common stock and (ii) are also issued in respect of future issuances of such
common stock, in each case until the occurrences of a specified event or
events.
Subordination
The Junior Subordinated Debt Securities will be subordinate in right of
payment, to the extent set forth in the Indenture, to all Senior Debt of the
Company. Substantially all of the existing indebtedness of the Company
constitutes Senior Debt. If the Company defaults in the payment of any
principal, premium, if any, or interest, if any, or any other amount payable
on any Senior Debt when the same becomes due and payable, whether at maturity
or at a date fixed for redemption or by declaration of acceleration or
otherwise, then, unless and until such default has been cured or waived or
has ceased to exist or all Senior Debt of the Company has been paid, no
direct or indirect payment (in cash, property, securities, by setoff or
otherwise) may be made or agreed to be made on the Junior Subordinated Debt
Securities or in respect of any redemption, repayment, retirement, purchase
or other acquisition of any of the Junior Subordinated Debt Securities.
"Senior Indebtedness" means any obligation of the Company to its
creditors, whether now outstanding or subsequently incurred, other than any
obligation as to which, in the instrument creating or evidencing the
obligation or pursuant to which the obligation is outstanding, it is provided
that such obligation is not Senior Indebtedness. "Senior Subordinated
Indebtedness" means any obligation of the Company to its creditors, whether
now outstanding or subsequently incurred, where the instrument creating or
evidencing the obligation or pursuant to which the obligation is outstanding,
provides that it is subordinate and junior in right of payment to Senior
Indebtedness. Senior Subordinated Indebtedness also includes any
subordinated debt securities issued in the future by the Company with
substantially similar subordination terms, but does not include the Junior
Subordinated Debt Securities of any series or any junior subordinated debt
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securities issued in the future with subordination terms substantially
similar to those of the Junior Subordinated Debt Securities. Senior
Indebtedness does not include Senior Subordinated Indebtedness or the Junior
Subordinated Debt Securities.
"Senior Debt" means (i) Senior Indebtedness of the Company (but
excluding trade accounts payable and accrued liabilities arising in the
ordinary course of business) and (ii) the Allocable Amounts of Senior
Subordinated Indebtedness of the Company.
"Allocable Amounts," when used with respect to any Senior Subordinated
Indebtedness of the Company means the amounts necessary to pay all principal
of (and premium, if any) and interest, if any, on such Senior Subordinated
Indebtedness in full less, if applicable, any portion of such amounts which
would have been paid to and retained by the holders of such Senior
Subordinated Indebtedness (whether as a result of the receipt of payments by
the holders of such Senior Subordinated Indebtedness from the Company or any
other obligor thereon or from any holders of, or trustee in respect of, other
indebtedness that is subordinate and junior in right of payment to such
Senior Subordinated Indebtedness pursuant to any provision of such
indebtedness for the payment over of amounts received on account of such
indebtedness to the holders of such Senior Subordinated Indebtedness) but for
the fact that such Senior Subordinated Indebtedness is subordinate or junior
in right of payment to trade accounts payable or accrued liabilities arising
in the ordinary course of business.
In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other similar
proceeding relating to the Company, its creditors or its property, (ii) any
proceeding for the liquidation, dissolution or other winding up of the
Company, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (iii) any assignment by the Company for the benefit
of creditors or (iv) any other marshalling of the assets of the Company, all
Senior Debt (including any interest thereon accruing after the commencement
of any such proceedings) of the Company shall first be paid in full before
any payment or distribution, whether in cash, securities or other property,
shall be made on account of the Junior Subordinated Debt Securities. In such
event, any payment or distribution on account of the Junior Subordinated Debt
Securities, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least
to the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Junior Subordinated Debt Securities to the
payment of all Senior Debt of the Company at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment), that would otherwise (but for the subordination provisions) be
payable or deliverable in respect of the Junior Subordinated Debt Securities
of any series will be paid or delivered directly to the holders of Senior
Debt of the Company in accordance with the priorities then existing among
such holders until all Senior Debt of the Company (including any interest
thereon accruing after the commencement of any such proceedings) has been
paid in full.
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In the event of any such proceeding, after payment in full of all sums
owing with respect to Senior Debt of the Company, the holders of Junior
Subordinated Debt Securities, together with the holders of any obligations of
the Company ranking on a parity with the Junior Subordinated Debt Securities
(which for this purpose only shall include the Allocable Amounts of Senior
Subordinated Indebtedness), will be entitled to be paid from the remaining
assets of the Company the amounts at the time due and owing on the Junior
Subordinated Debt Securities and such other obligations before any payment or
other distribution, whether in cash, property or otherwise, will be made on
account of any capital stock or obligations of the Company ranking junior to
the Junior Subordinated Debt Securities and such other obligations. If any
payment or distribution by the Company on account of any character or any
security, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least
to the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Junior Subordinated Debt Securities to the
payment of all Senior Debt of the Company at the time outstanding and
to any securities issued in respect thereof under any such plan of
reorganization or readjustment) shall be received by the Debenture Trustee or
any holder of any Junior Subordinated Debt Security in contravention of any
of the terms of the Indenture and before all the Senior Debt of the Company
has been paid in full, such payment or distribution or security will be
received in trust for the benefit of, and must be paid over or delivered and
transferred to, the holders of the Senior Debt of the Company at the time
outstanding in accordance with the priorities then existing among such
holders for application to the payment of all Senior Debt of the Company
remaining unpaid to the extent necessary to pay all such Senior Debt of the
Company in full. By reason of such subordination, in the event of the
insolvency of the Company, holders of Senior Debt of the Company may receive
more, ratably, and holders of the Junior Subordinated Debt Securities may
receive less, ratably, than the other creditors of the Company. Such
subordination will not prevent the occurrence of any Debenture Event of
Default.
Distribution of Junior Subordinated Debentures
As described under "Description of Trust Preferred Securities --
Termination and Liquidation; Distribution Upon Termination," under certain
circumstances involving the termination of the Issuer, Junior Subordinated
Debentures may be distributed to the holders of the Trust Preferred
Securities in exchange therefor upon liquidation of the Issuer after
satisfaction of liabilities to creditors of the Issuer as provided by
applicable law. If distributed to holders of Trust Preferred Securities, the
Junior Subordinated Debentures will initially be issued in the form of one or
more global securities and DTC, or any successor depositary for the Trust
Preferred Securities, will act as depositary for the Junior Subordinated
Debentures. It is anticipated that the depositary arrangements for the
Junior Subordinated Debentures would be substantially identical to those in
effect for the Trust Preferred Securities. See "Description of Trust
Preferred Securities -- Book-Entry Issuance." If Junior Subordinated
Debentures are distributed to the holders of Trust Preferred Securities in
exchange therefor upon liquidation of the Issuer, the Company will use its
best efforts to include the Junior Subordinated Debentures for trading on
such stock exchanges or automated quotation system, if any, on which the
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Trust Preferred Securities are then listed or quoted. There can be no
assurance as to the market price of any Junior Subordinated Debentures that
may be distributed to the holders of Trust Preferred Securities.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debt Securities that
has occurred and is continuing constitutes a "Debenture Event of Default"
with respect to such series of Junior Subordinated Debt Securities:
(i) default in the payment of any interest upon any Junior
Subordinated Debt Security of that series, including any Additional
Interest in respect thereof, when it becomes due and payable, and
continuance of such default for a period of 30 days (subject to the
deferral of any due date in the case of an Extension Period); or
(ii) default in the payment of the principal of (or premium,
if any, on) any Junior Subordinated Debt Security of that series at
its maturity; or
(iii) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company in the Junior Subordinated Debt Securities of that series or
in the Indenture for a period of 90 days after the date on which
written notice of such failure, requiring the Company to remedy the
same, shall have been give to the Company by the Trustee by
registered or certified mail or to the Company and the Debenture
Trustee by the holders of at least 25% in aggregate principal amount
of the outstanding Junior Subordinated Debt Securities of that
series; or
(iv) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization of the Company under the Title 11 of the United States
Code or any successor statute, as amended (the "Bankruptcy Code") or
any other similar applicable federal or state law, which decree or
order shall have continued undischarged and unstayed for a period of
60 days; or the entry of a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of the
Company or of its property, or for the winding-up or liquidation of
its affairs, which decree or order shall have continued undischarged
and unstayed for a period of 60 days; or
(v) the commencement by the Company of voluntary proceedings
to be adjudicated a bankrupt, or consent by the Company to the filing
of a bankruptcy proceeding against it, or the filing by the Company
of a petition or answer or consent seeking reorganization under the
Bankruptcy Code or any other similar federal or state law, or consent
by the Company to the filing of any such petition, or the consent by
the Company to the appointment of a receiver or liquidator or trustee
or assignee in bankruptcy or insolvency of it or of its property, or
the making by the Company of an assignment for the benefit of
creditors, or the admission by the Company in writing of its
inability to pay its debts generally as they become due; or
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(vi) any other event of default provided with respect to
Junior Subordinated Debt Securities of that series.
If a Debenture Event of Default (other than a Debenture Event of Default
specified in clauses (iv) or (v) of the immediately preceding paragraph) with
respect to Junior Subordinated Debt Securities of any series at the time
outstanding occurs and is continuing, then and in every such case the Trustee
or the holders of not less than 25% in aggregate principal amount of the
outstanding Junior Subordinated Debt Securities of that series may declare
the principal amount (or, such portion of the principal amount as may be
specified in the terms of that series) of all the Junior Subordinated Debt
Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by holders), provided
that, in the case of the Junior Subordinated Debt Securities of a series
issued to a business trust, if, upon a Debenture Event of Default, the
Debenture Trustee or the holders of not less than 25% in principal amount of
the outstanding Junior Subordinated Debt Securities of such series fail to
declare the principal of all the outstanding Junior Subordinated Debt
Securities of such series to be immediately due and payable, the holders of
at least 25% in aggregate liquidation amount of the related series of
preferred beneficial interests issued by such Business Trust then outstanding
shall have the right to make such declaration by a notice in writing to the
Company and the Trustee; and upon any such declaration such principal amount
(or specified portion thereof) of and the accrued interest (including any
Additional Interest) on all the Junior Subordinated Debt Securities of such
series shall become immediately due and payable. If a Debenture Event of
Default specified in clauses (iv) or (v) of the immediately preceding
paragraph with respect to Junior Subordinated Debt Securities of any series
at the time outstanding occurs, the principal amount of all the Junior
Subordinated Debt Securities of such series (or such portion of the principal
amount of such Junior Subordinated Debt Securities as may be specified by the
terms of that series) shall automatically, and without any declaration or
other action on the part of the Debenture Trustee or any holder, become
immediately due and payable.
At any time after such a declaration of acceleration with respect to
Junior Subordinated Debt Securities of any series has been made and before a
judgment or decree for payment of the money due has been obtained by the
Debenture Trustee as in the Indenture provided, the holders of a majority in
aggregate principal amount of the outstanding Junior Subordinated Debt
Securities of that series, by written notice to the Company and the Debenture
Trustee, may rescind and annul such declaration and its consequences if (i)
the Company has paid or deposited with the Debenture Trustee a sum sufficient
to pay (a) all overdue installments of interest on all Junior Subordinated
Debt Securities of such series, (b) any accrued Additional Interest on all
Junior Subordinated Debt Securities of such series, (c) the principal of
(and premium, if any, on) any Junior Subordinated Debt Securities of such
series that have become due otherwise than by such declaration of
acceleration and interest and Additional Interest thereon at the rate borne
by the Junior Subordinated Debt Securities and (d) all sums paid or advanced
by the Debenture Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Debenture Trustee, its agents and
counsel and (ii) all Debenture Events of Default with respect to Junior
Subordinated Debt Securities of that series, other than the non-payment of
the principal of Junior Subordinated Debt Securities of that series that has
become due solely by such acceleration, have been cured or waived as provided
in the Indenture.
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In the case of Junior Subordinated Debt Securities of a series initially
issued to a business trust if the holders of such Junior Subordinated Debt
Securities fail to annul such declaration and waive such default, the holders
of a majority in aggregate liquidation amount of the related series of
preferred beneficial interests issued by such business trust then outstanding
shall also have the right to rescind and annul such declaration and its
consequences by written notice to the Company and the Debenture Trustee,
subject to the satisfaction of the conditions set forth in clauses (i) and
(ii) above of the immediately preceding paragraph.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Within 90 days after actual knowledge by a responsible officer of the
Debenture Trustee of the occurrence of any default under the Indenture with
respect to the Junior Subordinated Debt Securities of any series, the
Debenture Trustee shall transmit by mail to all holders of Junior
Subordinated Debt Securities of such series, as their names and addresses
appear in the register, notice of such default, unless such default shall
have been cured or waived; provided, however, that, except in the case of a
default in the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Junior Subordinated Debt Security
of such series, the Debenture Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or
a trust committee of directors and/or responsible officers of the Debenture
Trustee in good faith determines that the withholding of such notice is in
the interests of the holders of Junior Subordinated Debt Securities of such
series; and provided, further, that, in the case of any covenant default, no
such notice to holders of Junior Subordinated Debt Securities of such series
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this paragraph, the term "default" means any event that is, or
after notice or lapse of time or both would become, a Debenture Event of
Default with respect to Junior Subordinated Debt Securities of such series.
Enforcement of Certain Rights by Holders of Trust Preferred Securities
If a Debenture Event of Default with respect to the Junior Subordinated
Debentures has occurred and is continuing and such event is attributable to
the failure of the Company to pay interest or principal on the Junior
Subordinated Debentures on the date such interest or principal is due and
payable, a holder of Trust Preferred Securities may institute a Direct Action
against the Company under the Indenture. The Company may not amend the
Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Trust Preferred Securities
outstanding. If the right to bring a Direct Action is removed, the Issuer
may become subject to the reporting obligations under the Exchange Act. The
Company shall have the right under the Indenture to setoff any payment made
to such holder of Trust Preferred Securities by the Company in connection
with a Direct Action.
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The holders of the Trust Preferred Securities will not be able to
exercise directly any remedies other than those set forth in the preceding
paragraph available to the holders of the Junior Subordinated Debentures
unless there shall have been an Event of Default under the Trust Agreement.
See "Description of Trust Preferred Securities -- Events of Default; Notice;
Right to Direct Remedies."
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Company shall not consolidate with or
merge into any other Person (as defined below) or convey, transfer or lease
its properties and assets substantially as an entirety to any Person, and no
Person shall consolidate with or merge into the Company or convey, transfer
or lease its properties and assets substantially as an entirety to the
Company unless (i) in case the Company consolidates with or merges into
another Person or conveys or transfers its properties and assets
substantially as an entirety to any Person, the successor Person is organized
under the laws of the United States or any state or territory thereof or the
District of Columbia and such successor Person expressly assumes the
Company's obligations on the Junior Subordinated Debt Securities issued under
the Indenture, (ii) immediately after giving effect thereto, no Debenture
Event of Default, and no event which, after notice or lapse of time or both,
would become a Debenture Event of Default, shall have occurred and be
continuing and (iii) certain other conditions as prescribed by the Indenture
are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged
or other transaction involving the Company that may adversely affect holders
of the Junior Subordinated Debentures.
"Person," as used herein, means a legal person, including any
individual, corporation, estate, partnership, joint venture, trust,
unincorporated association, or government or any agency or political
subdivision thereof or any other entity of whatever nature.
Resignation and Removal of Debenture Trustee; Appointment of a Successor
The Debenture Trustee may resign at any time with respect to the Junior
Subordinated Debentures by giving written notice thereof to the Company. If
an instrument of acceptance by a successor Debenture Trustee shall not have
been delivered to the Debenture Trustee within 30 days after the giving of
such notice of resignation, the resigning Debenture Trustee may petition any
court of competent jurisdiction for the appointment of a successor Debenture
Trustee with respect to the Junior Subordinated Debentures.
The Debenture Trustee may be removed at any time with respect to the
Junior Subordinated Debentures of the holders of a majority in aggregate
principal amount of the Junior Subordinated Debentures delivered to the
Debenture Trustee and to the Company. In addition, if at any time (i) the
Debenture Trustee shall fail to comply with certain provisions of the
Indenture relating to conflicts of interest under the Trust Indenture Act
after written request therefor by the Company or by any holder who has been
a bona fide holder of a Junior Subordinated Debenture for at least six
months, (ii) the Debenture Trustee shall cease to meet the eligibility
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requirements under the Indenture and shall fail to resign after written
request therefor by the Company or by any such holder or (iii) the Debenture
Trust shall become incapable of acting or shall be adjudged a bankrupt or
insolvent or a receiver of the Debenture Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Debenture
Trustee or of its property or affairs for the purpose of rehabilitation,
conversation or liquidation, then, in any such case, (A) the Company may
remove the Debenture Trustee with respect to the Junior Subordinated Debt
Securities of all series issued under the Indenture or (B) subject to the
provisions of the Indenture requiring the holder to undertake to pay certain
related costs, any holder who has been a bona fide holder of a Junior
Subordinated Debenture for at least six months may, on behalf of such holder
and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Debenture Trustee with respect to the
Junior Subordinated Debt Securities of all series issued under the Indenture
and the appointment of a successor Debenture Trustee.
If the Debenture Trustee shall resign, be removed or become incapable of
acting, of if a vacancy shall occur in the office of Debenture Trustee for
any cause with respect to the Junior Subordinated Debt Securities of one or
more series, the Company shall promptly appoint a successor Debenture Trustee
with respect to the Junior Subordinated Debt Securities of that or those
series. If, within one year after such resignation, removal or incapability,
or the occurrence of such vacancy, a successor Debenture Trustee with respect
to the Junior Subordinated Debt Securities of any series shall be appointed
by the holders of a majority in aggregate principal amount of the outstanding
Junior Subordinated Debt Securities of such series delivered to the Company
and the retiring Debenture Trustee, the successor Debenture Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become
the successor Debenture Trustee with respect to the Junior Subordinated Debt
Securities of such series and supersede the successor Debenture Trustee
appointed by the Company. If no successor Debenture Trustee with respect to
the Junior Subordinated Debt Securities of any series shall have been so
appointed by the Company or the holders and accepted appointment in the
manner as in the Indenture provided, any holder who has been a bona fide
holder of a Junior Subordinated Debt Security of such series for at least six
months may, subject to the provisions of the Indenture requiring the holder
to undertake to pay certain related costs, on behalf of such holder and all
other similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Debenture Trustee with respect to the Junior
Subordinated Debt Securities of such series.
Merger or Consolidation of Debenture Trustee
Any corporation into which the Debenture Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Debenture Trustee
shall be a party, or any corporation succeeding to all or substantially all
of the corporate trust business of the Debenture Trustee, shall be the
successor of the Debenture Trustee under the Indenture, provided such
corporation shall be otherwise qualified and eligible under the Indenture,
without the execution or filing of any paper or any further act on the part
of any of the parties to the Indenture.
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Modification of Indenture
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of the Junior Subordinated Debt Securities, amend,
waive or supplement the Indenture for specified purposes, including, (i) to
evidence the succession of another person to the Company and the assumption
by the successor of the covenants of the Company contained in the Indenture
and the Junior Subordinated Debt Securities; (ii) to convey, transfer,
assign, mortgage or pledge any property to or with the Debenture Trustee or
surrender any right or power of the Company contained in the
Indenture; (iii) to provide for the issuance of and establish the form of any
Junior Subordinated Debt Securities; (iv) to add to the covenants of the
Company (which may be only for the benefit of a single series of Junior
Subordinated Debt Securities); (v) to add additional Debenture Events of
Default (which may be only for its benefit of a single series of Junior
Subordinated Debt Securities); (vi) to cure any ambiguity, to correct or
supplement any provision of the Indenture, or to make provisions with respect
to questions arising under the Indenture provided that such action does not
materially affect the intent of the holders of any series of Junior
Subordinated Debt Securities or, in the case of any Junior Subordinated Debt
Securities held by a business trust, the holders of the preferred beneficial
interests in such business trust; (vii) to evidence or provide for the
acceptance of appointment of a successor Debenture Trustee or to provide for
the administration of the trusts created under the Indenture by more than one
trustee; or (viii) to comply with the requirements of the Commission in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
The Indenture contains additional provisions permitting the Company and
the Debenture Trustee, with the consent of the holders of not less than a
majority in aggregate principal amount of each outstanding series of Junior
Subordinated Debt Securities affected, to modify the Indenture for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of modifying in any manner the
rights of the holders of the Junior Subordinated Debt Securities of such
series; provided, that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Debt Security so affected:
(i) change the Stated Maturity of the principal of, or any
installment of interest (including any Additional Interest) on, any
Junior Subordinated Debt Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon
the redemption thereof, or change the place of payment where, or the
coin or currency in which, any Junior Subordinated Debt Security or
interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment on or after the stated
maturity thereof (or, in the case of redemption, on or after the
redemption date);
(ii) reduce the percentage in aggregate principal amount of
the outstanding Junior Subordinated Debt Securities of any series,
the consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver
(of compliance with certain provisions of the Indenture or certain
defaults hereunder and their consequences) provided for in the
Indenture; or
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(iii) modify any of the provisions of the Indenture described
in this paragraph or certain other provisions of the Indenture
relating to waivers subject to the approval of a requisite principal
amount of Junior Subordinated Debt Securities, except to increase any
such percentage or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the
holder of each Junior Subordinated Debt Security affected thereby;
provided, that, in the case of the Junior Subordinated Debt Securities of a
series issued to a business trust, so long as any of the corresponding series
of preferred beneficial interests issued by such business trust remains
outstanding, (a) no such amendment shall be made that adversely affects the
holders of such preferred beneficial interests in any material respect, and
no termination of the Indenture shall occur, and no waiver of any Debenture
Event of Default or compliance with any covenant under the Indenture shall be
effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation amount of such preferred beneficial interests then
outstanding unless and until the principal of (and premium, if any, on) the
Junior Subordinated Debt Securities of such series and all accrued and unpaid
interest (including any Additional Interest) thereon have been paid in full
and (b) no amendment shall be made to the provisions of the Indenture that
would impair the rights of the holders of preferred beneficial interests
issued by a business trust to institute a Direct Action without the prior
consent of the holders of each such preferred beneficial interest then
outstanding unless and until the principal of (and premium, if any, on) the
Junior Subordinated Debt Securities of such series and all accrued and
(subject to the provisions of the Indenture permitting the deferral of
interest) unpaid interest (including any Additional Interest) thereon have
been paid in full.
A supplemental indenture that changes or eliminates any covenant or
other provision of the Indenture that has expressly been included solely for
the benefit of one or more particular series of Junior Subordinated Debt
Securities or any corresponding series of preferred beneficial interests of
a business trust that holds the Junior Subordinated Debt Securities of any
series, or that modifies the rights of the holders of Junior Subordinated
Debt Securities of such series or holders of such preferred beneficial
interests of such corresponding series with respect to such covenant or other
provision, shall be deemed not to affect the rights under the Indenture of
the holders of Junior Subordinated Debt Securities of any other series or
holders or preferred beneficial interests of the corresponding series.
Satisfaction and Discharge
The Indenture provides that when, among other things, all Junior
Subordinated Debt Securities not previously delivered to the Debenture
Trustee for cancellation (i) have become due and payable, (ii) will become
due and payable at their Stated Maturity within one year or (iii) are to be
called for redemption within one year under arrangements satisfactory to the
Debenture Trustee for the giving of notice of redemption thereof, and the
Company deposits or causes to be deposited with the Debenture Trustee funds,
in trust, for the purpose and in an amount in the currency or currencies in
which the Junior Subordinated Debt Securities are payable sufficient to pay
and discharge the entire indebtedness on the Junior Subordinated Debt
Securities not previously delivered to the Debenture Trustee for
cancellation, for the principal (and premium, if any) and interest (including
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any Additional Interest) to the date of the deposit or to the stated maturity
or redemption date, as the case may be, then the Indenture will cease to be
of further effect (except as to the Company's obligations to pay all other
sums due pursuant to the Indenture and to provide the officers' certificates
and opinions of counsel described therein) and the Company will be deemed to
have satisfied and discharged the Indenture.
Responsibilities of the Debenture Trustee
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures,
unless offered reasonable indemnity by such holder against the costs,
expenses and liabilities which might be incurred thereby. The Debenture
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the
Debenture Trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it.
Continued Ownership of Common Securities
The Company will covenant, as to the Junior Subordinated Debentures, (i)
to maintain directly or indirectly 100% ownership of the Common Securities
provided that certain successors are permitted pursuant to the Indenture to
succeed to the Company's ownership of the Common Securities, (ii) not to
voluntarily terminate, wind-up or liquidate the Issuer, except (a) in
connection with a distribution of Junior Subordinated Debentures to the
holders of the Trust Preferred Securities in exchange therefor upon
liquidation of the Issuer or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement and (iii) to
use its reasonable efforts, consistent with the terms and provisions of the
Trust Agreement, to cause the Issuer to be classified as a grantor trust and
not as an association taxable as a corporation for United States federal
income tax purposes.
Governing Law
The Indenture and the Junior Subordinated Debt Securities will be
governed by and construed in accordance with the laws of the State of New
York.
Miscellaneous
The Company is required to file annually with the Debenture Trustee a
certificate as to whether or not the Company is in compliance with all of the
covenants and conditions applicable to it under the Indenture.
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DESCRIPTION OF GUARANTEE
The Guarantee will be executed and delivered for the benefit of the
holders from time to time of the Trust Preferred Securities by the Company,
concurrently with the issuance of Trust Preferred Securities. This summary
of certain provisions of the Guarantee, which summarizes the material terms
thereof, does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of the Guarantee,
including the definitions therein of certain terms, and the Trust Indenture
Act, to each of which reference is hereby made. The form of the Guarantee
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The Guarantee Trustee will hold the Guarantee for
the benefit of the holders of the Trust Preferred Securities.
General
The Company will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
below) to the holders of the Trust Preferred Securities (without duplication
of amounts theretofore paid by or on behalf of the Issuer), as and when due,
regardless of any defense, right of setoff or counterclaim that the Issuer
may have or assert other than the defense of payment. The following payments
with respect to the Trust Preferred Securities, to the extent not paid by or
on behalf of the Issuer (the "Guarantee Payments"), will be subject to the
Guarantee: (i) any accumulated and unpaid Distributions required to be paid
on the Trust Preferred Securities, to the extent that the Issuer has funds on
hand available therefor at such time, (ii) the redemption price with respect
to any Trust Preferred Securities called for redemption, to the extent that
the Issuer has funds on hand available therefor at such time or (iii) upon a
voluntary or involuntary dissolution, winding-up or liquidation of the
Issuer, unless the Junior Subordinated Debentures are distributed to holders
of such Trust Preferred Securities in exchange therefor, the lesser of (a)
the Liquidation Distribution to the extent that the Issuer shall have funds
on hand available therefor at such time and (b) the amount of assets of the
Issuer remaining available for distribution to holders of Trust Preferred
Securities after satisfaction of liabilities to creditors of the Issuer as
required by applicable law.
The Company's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Company to the holders of the
applicable Trust Preferred Securities or by causing the Issuer to pay such
amounts to such holders.
The Company has, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures and the Indenture, taken together, fully, irrevocably
and unconditionally guaranteed all of the Issuer's obligations under the
Trust Preferred Securities. No single document standing alone or operating
in conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Issuer's obligations under the Trust Preferred Securities. See "Relationship
Among the Trust Preferred Securities, the Junior Subordinated Debentures and
the Guarantee."
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Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior
Indebtedness of the Company in the same manner as Junior Subordinated
Debentures.
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). The Guarantee will be held for the benefit of the holders of the
Trust Preferred Securities. The Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the
Issuer or upon distribution to the holders of the Trust Preferred Securities
of the Junior Subordinated Debentures. The Guarantee places no limitation on
the amount of additional Senior Debt that may be incurred by the Company.
The Company expects from time to time to incur additional indebtedness
constituting Senior Debt.
Amendments and Assignment
Except with respect to any changes which do not materially adversely
affect the rights of holders of the related Trust Preferred Securities (in
which case no vote will be required), the Guarantee may not be amended
without the prior approval (given in the manner set forth in the Trust
Agreement) of the holders of not less than more than 50% of the aggregate
Liquidation Amount of the outstanding Trust Preferred Securities. All
guarantees and agreements contained in the Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the holders of the Trust Preferred
Securities then outstanding.
Events of Default; Control of Remedies
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payment obligations thereunder or to
perform any non-payment obligations if such non-payment default remains
unremedied for 30 days.
The holders of more than 50% of the aggregate 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 to the Guarantee or to direct the exercise of any trust
power conferred upon the Guarantee Trustee under the Guarantee. Any holder
of the Trust Preferred Securities may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Issuer, the Guarantee Trustee or
any other person.
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Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon
(i) full payment of the redemption price of the outstanding Trust Preferred
Securities, (ii) upon full payment of the amounts payable upon liquidation of
the Issuer or (iii) upon distribution of Junior Subordinated Debentures to
the holders of the Trust Preferred Securities in exchange therefor. 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 the Trust Preferred Securities or the
Guarantee.
Responsibilities of the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Company in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of
his or her own affairs. Subject to this provision, the Guarantee Trustee is
under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of any Trust Preferred Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby; provided, however, that such
right to indemnity shall in no event relieve the Guarantee Trustee, upon the
occurrence of an event of default under the Guarantee, of its obligation to
exercise the rights and powers vested in it by the Guarantee Agreement.
Governing Law
The Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
Miscellaneous
The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE JUNIOR SUBORDINATED
DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent the Issuer has funds available for the payment of
such Distributions) are pursuant to the Guarantee irrevocably guaranteed by
the Company as and to the extent set forth under "Description of Guarantee."
Taken together, the Company's obligations under the Junior Subordinated
Debentures, the Indenture, the Trust Agreement and the Guarantee provide, in
the aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the Trust Preferred Securities. No
single document standing alone or operating in conjunction with fewer than
all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a
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full, irrevocable and unconditional guarantee of the Issuer's obligations
under the Trust Preferred Securities. If and to the extent that the Company
does not make payments on any series of Junior Subordinated Debentures, the
Issuer will not pay Distributions or other amounts due on the Trust Preferred
Securities. The Guarantee does not cover payment of Distributions when the
Issuer does not have sufficient funds to pay such Distributions. In such
event, the remedy of a holder of Trust Preferred Securities is to institute
a Direct Action against the Company. The obligations of the Company under
the Guarantee and the Junior Subordinated Debentures are subordinate and
junior in right of payment to all Senior Debt of the Company.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Preferred Securities,
primarily because (i) the aggregate principal amount of the Junior
Subordinated Debentures will be equal to the sum of the aggregate stated
Liquidation Amount of the Trust Securities; (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match the Distribution rate and Distribution and other payment dates for the
Trust Securities; (iii) the Company shall pay for all and any costs, expenses
and liabilities of the Issuer except the Issuer's obligations to holders of
the Trust Preferred Securities under the Trust Preferred Securities; and (iv)
the Trust Agreement provides that the Issuer will not engage in any activity
that is not consistent with the limited purposes of the Issuer.
Notwithstanding anything to the contrary in the Indenture, the Company
has the right to setoff any payment it is otherwise required to make
thereunder with and to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the
Guarantee.
Enforcement Rights of Holders of Trust Preferred Securities
A holder of any Trust Preferred Security may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Company would
not constitute an Event of Default or Debenture Event of Default. However,
in the event of payment defaults under, or acceleration of, Senior Debt of
the Company, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Junior Subordinated Debentures until
such Senior Debt has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on any series of
Junior Subordinated Debentures (absent a deferral of interest on the Junior
Subordinated Debentures as permitted under the Indenture) would constitute a
Debenture Event of Default.
Limited Purpose of Issuer
The Issuer exists for the sole purpose of issuing the Trust Preferred
Securities and Common Securities, investing the proceeds thereof in Junior
Subordinated Debentures and engaging in those activities necessary or
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incidental thereto. A principal difference between the rights of a holder of
a Trust Preferred Security and a holder of a Junior Subordinated Debenture is
that a holder of a Junior Subordinated Debenture is entitled to receive from
the Company the principal amount of and interest accrued on Junior
Subordinated Debentures held, while a holder of Trust Preferred Securities is
entitled to receive Distributions from the Issuer (or from the Company under
the Guarantee) if and to the extent the Issuer has funds available for the
payment of such Distributions.
Rights Upon Dissolution
Upon any voluntary or involuntary dissolution, winding-up or liquidation
of the Issuer involving the liquidation of the Junior Subordinated
Debentures, after satisfaction of liabilities to creditors of the Issuer as
provided by applicable law, the holders of the Trust Preferred Securities
will be entitled to receive, out of the assets held by the Issuer, the
Liquidation Distribution in cash. See "Description of Trust Preferred
Securities -- Dissolution and Liquidation; Distribution Upon Dissolution."
Upon any voluntary or involuntary liquidation or bankruptcy of the Company,
the Property Trustee, as holder of the Junior Subordinated Debentures would
be an unsecured creditor of the Company subordinated in right of payment to
all Senior Debt as set forth in the Indenture, but entitled to receive
payment in full of principal and interest, before any stockholders of the
Company receive payments or distributions. Since the Company is the
guarantor under the Guarantee, the positions of a holder of such Trust
Preferred Securities and a holder of such Junior Subordinated Debentures
relative to other creditors and to stockholders of the Company in the event
of liquidation or bankruptcy of the Company are expected to be substantially
the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income
tax consequences of the purchase, ownership and disposition of Trust
Preferred Securities. This summary only addresses the tax consequences to a
person that acquires Trust Preferred Securities on their original issue at
their original offering price and that is (i) an individual citizen or
resident of the United States, (ii) a corporation or partnership organized in
or under the laws of the United States or any state thereof or the District
of Columbia or (iii) an estate or trust the income of which is subject to
United States federal income tax regardless of source (a "United States
Person"). This summary does not address all tax consequences that may be
applicable to a United States Person that is a beneficial owner of Trust
Preferred Securities, nor does it address the tax consequences to (i) persons
that are not United States Persons, (ii) persons that may be subject to
special treatment under United States federal income tax law, such as banks,
insurance companies, thrift institutions, regulated investment companies,
real estate investment trusts, tax-exempt organizations and dealers in
securities or currencies, (iii) persons that will hold Trust Preferred
Securities as part of a position in a "straddle" or as part of a "hedging,"
"conversion" or other integrated investment transaction for federal income
tax purposes, (iv) persons whose functional currency is not the United States
dollar or (v) persons that do not hold Trust Preferred Securities as capital
assets.
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The statements of law or legal conclusion set forth in this summary
constitute the opinion of the McNair Law Firm, P.A., special tax counsel to
the Company and the Issuer. This summary is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue
Service ("IRS") rulings and pronouncements and judicial decisions now in
effect, all of which are subject to change at any time. Such changes may be
applied retroactively in a manner that could cause the tax consequences to
vary substantially from the consequences described below, possibly adversely
affecting a beneficial owner of Trust Preferred Securities. The authorities
on which this summary is based are subject to various interpretations, and it
is therefore possible that the federal income tax treatment of the purchase,
ownership and disposition of Trust Preferred Securities may differ from the
treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS
IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF TRUST PREFERRED
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
Classification of the Issuer
Under current law and assuming compliance with the terms of the Trust
Agreement, certain other documents and certain factual matters, the Issuer
will not be taxable as a corporation for United States federal income tax
purposes. As a result, each beneficial owner of Trust Preferred Securities
(a "Securityholder") will be required to include in its gross income its pro
rata share of the interest income, including original issue discount, paid or
accrued with respect to the Junior Subordinated Debentures whether or not
cash is actually distributed to the Securityholders. See "-- Interest Income
and Original Issue Discount." No amount included in income with respect to
the Trust Preferred Securities will be eligible for the dividends-received
deduction.
Interest Income and Original Issue Discount
Under Treasury regulations applicable to debt instruments issued on or
after August 13, 1996 (the "Regulations"), a contingency that stated interest
will not be timely paid that is "remote" because of the terms of the relevant
debt instrument will be ignored in determining whether such debt instrument
is issued with original issue discount ("OID"). As a result of terms and
conditions of the Junior Subordinated Debentures that prohibit certain
payments with respect to the Company's capital stock and indebtedness if the
Company elects to extend interest payment periods, the Company believes that
the likelihood of its exercising its option to defer payments is remote.
Based on the foregoing, the Company believes that the Junior Subordinated
Debentures will not be considered to be issued with OID at the time of their
original issuance and, accordingly, a Securityholder should include in gross
income such holder's allocable share of interest on the Junior Subordinated
Debentures, in accordance with such Securityholder's method of accounting.
The following discussion assumes that unless and until the Company exercises
its option to defer interest on the Junior Subordinated Debentures, the
Junior Subordinated Debentures will not be considered as issued with OID.
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Under the Regulations, if the Company exercises its option to defer any
payment of interest, then the Junior Subordinated Debentures would at that
time be treated as issued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the
Junior Subordinated Debentures remain outstanding. In such event, all of a
Securityholder's taxable interest income with respect to the Junior
Subordinated Debentures would be accounted for as OID on an economic-accrual
basis regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
Consequently, a Securityholder would be required to include in gross income
OID even though the Company would not make any actual cash payments during an
Extension Period.
The Regulations have not been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation herein.
Because income on the Trust Preferred Securities will constitute
interest or OID, corporate Securityholders will not be entitled to a
dividends-received deduction with respect to any income recognized with
respect to the Trust Preferred Securities.
Distribution of Junior Subordinated Debentures to Holders of Trust Preferred
Securities
Under current law, a distribution by the Issuer of the Junior
Subordinated Debentures as described under the caption "Description of Trust
Preferred Securities -- Dissolution and Liquidation; Distribution Upon
Dissolution" will be non-taxable and will result in the Securityholder
receiving directly its pro rata share of the Junior Subordinated Debentures
previously held indirectly through the Issuer, with a holding period and
aggregate-tax basis equal to the holding period and aggregate-tax basis such
Securityholder had in its Trust Preferred Securities before such
distribution. If, however, the liquidation of the Issuer were to occur
because the Issuer is subject to United States federal income tax with
respect to income accrued or received on the Junior Subordinated Debentures,
then the distribution of Junior Subordinated Debentures to Securityholders by
the Issuer would be a taxable event to the Issuer and each Securityholder,
and each Securityholder would recognize gain or loss as if the Securityholder
had exchanged its Trust Preferred Securities for the Junior Subordinated
Debentures it received upon the liquidation of the Issuer. A Securityholder
will include interest in income in respect of Junior Subordinated Debentures
received from the Issuer in the manner described above under "-- Interest
Income and Original Issue Discount."
Sale or Redemption of Trust Preferred Securities
A Securityholder that sells (including a redemption for cash) 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 the Company does not exercise its option to defer payment of interest on
the Junior Subordinated Debentures, a Securityholder's adjusted tax basis in
the Trust Preferred Securities generally will be its initial purchase price.
If the Junior Subordinated Debentures are deemed to be issued with OID, as a
result of the Company's deferral of interest payments, a Securityholder's
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adjusted tax basis in the Trust Preferred Securities generally will be its
initial purchase price, increased by OID previously includable in such
Securityholder's gross income to the date of disposition and decreased by
Distributions or other payments received on the Trust Preferred Securities
since and including the date of the first Extension Period. Such gain or
loss generally will be a capital gain or loss, except to the extent any
amount realized is treated as a payment of accrued interest with respect to
such Securityholder's pro rata share of the Junior Subordinated Debentures
required to be included in income. Generally gain or losses from the
disposition of Trust Preferred Securities held for more than one year will be
a long-term capital gain or loss and gain from the disposition of such
securities held for more the 18 months may be subject to tax at the lower
adjusted net capital gains rate.
Should the Company exercise its option to defer any payment of interest
on the Junior Subordinated Debentures, the Trust Preferred Securities may
trade at a price that does not accurately reflect the value of accrued but
unpaid interest with respect to the underlying Junior Subordinated
Debentures. In the event of such a deferral, a Securityholder who disposes
of its Trust Preferred Securities between record dates for payments of
distributions thereon will be required to include in income as ordinary
income accrued but unpaid interest on the Junior Subordinated Debentures to
the date of disposition and to add such amount to its adjusted tax basis in
its Trust Preferred Securities. To the extent the selling price is less than
the Securityholder's adjusted tax basis, such holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax
purposes.
Backup Withholding Tax and Information Reporting
The amount of interest income paid and OID accrued on the Trust
Preferred Securities held of record by United States Persons (other than
corporations and other exempt Securityholders) will be reported to the IRS.
"Backup" withholding at a rate of 31% will apply to payments of interest to
nonexempt United States Persons unless the Securityholder furnishes its
taxpayer identification number in the manner prescribed in applicable
Treasury Regulations, certifies that such number is correct, certifies as to
no loss of exemption from backup withholding and meets certain other
conditions.
Payment of the proceeds from the disposition of Trust Preferred
Securities to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner establishes an exemption from information reporting and backup
withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information
is furnished to the IRS.
It is anticipated that income on the Trust Preferred Securities will be
reported to holders on Form 1099 and mailed to holders of the Trust Preferred
Securities by January 31 following each calendar year.
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UNDERWRITING
Under the terms and subject to the conditions contained in an
Underwriting Agreement dated October 22, 1997 (the "Underwriting Agreement"),
the underwriters named below (the "Underwriters") have severally but not
jointly agreed to purchase from the Issuer, the following respective numbers
of the Trust Preferred Securities.
Underwriters Number of Securities
Credit Suisse First Boston Corporation 1,200,000
PaineWebber Incorporated 800,000
Total 2,000,000
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of the Trust Preferred Securities
offered hereby if any are taken.
The Issuer has been informed by the Underwriters that the Underwriters
propose to offer the Trust Preferred Securities to the public initially at
the public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession of $0.50 per Trust
Preferred Security, and the Underwriters and such dealers may allow a
discount of $0.25 per Trust Preferred Security on sales to certain other
dealers. After the initial public offering, the offering price and
concession and discount may be changed by the Underwriters.
In view of the fact that the proceeds from the sale of the Trust
Preferred Securities will be used to purchase the Junior Subordinated
Debentures issued by the Company, the Underwriting Agreement provides that
the Company will pay as Underwriters' compensation for the Underwriters
arranging the investment therein of such proceeds an amount of $0.7875 per
Trust Preferred Security for the account of the Underwriters; provided,
however, that compensation for sales of the Trust Preferred Securities to
certain institutions will be $0.50 per Trust Preferred Security.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with
Regulation M under the Exchange Act. Over-allotment involves syndicate sales
in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the Trust Preferred Securities in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Underwriters to reclaim
a selling concession from a syndicate member when the Trust Preferred
Securities originally sold by such syndicate member are purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the Trust Preferred Securities to be higher than it
would otherwise be in the absence of such transactions. These transactions
may be effected on the NYSE or otherwise and, if commenced, may be
discontinued at any time.
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The Trust Preferred Securities are a new issue of securities with no
established trading market. The Trust Preferred Securities have been
approved for listing, subject to notice of issuance, on the NYSE, under the
symbol SAC PrT. In order to meet one of the requirements for listing the
Trust Preferred Securities on the NYSE, the Underwriters have undertaken to
sell lots of 100 or more Trust Preferred Securities to a minimum of 400
beneficial holders. No assurance can be given as to the liquidity of the
trading market for the Trust Preferred Securities.
The Company and the Issuer have agreed to indemnify the Underwriters
against certain liabilities, including civil liabilities under the Securities
Act of 1933, as amended, or contribute to payments which the Underwriters may
be required to make in respect thereof.
The Underwriters or their affiliates have provided from time to time,
and expect to provide in the future, investment or commercial banking
services to the Company and its affiliates, for which the Underwriters or
their affiliates have received or will receive customary fees and
commissions.
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the Trust Preferred Securities in Canada is being
made only on a private placement basis exempt from the requirement that the
Company prepare and file a prospectus with the securities' regulatory
authorities in each province where trades of Trust Preferred Securities are
effected. Accordingly, any resale of the Trust Preferred Securities in Canada
must be made in accordance with applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to
any resale of the Trust Preferred Securities.
Representations of Purchasers
Each purchaser of Trust Preferred Securities in Canada who receives a
purchase confirmation will be deemed to represent to the Company and the
dealer from whom such purchase confirmation is received that (i) such
purchaser is entitled under applicable provincial securities laws to purchase
such Trust Preferred Securities without the benefit of a prospectus qualified
under such securities laws, (ii) where required by law, that such purchaser
is purchasing as principal and not as agent, and (iii) such purchaser has
reviewed the text above under "-Resale Restrictions."
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Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a
result, Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U. S. federal securities
laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets
of the issuer and such persons may be located outside of Canada and, as a
result, it may not be possible to satisfy a judgment against the issuer or
such persons in Canada or to enforce a judgment obtained in Canadian courts
against such issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of Trust Preferred Securities to whom the Securities Act
(British Columbia) applies is advised that such purchaser is required to file
with the British Columbia Securities Commission a report within ten days of
the sale of any Trust Preferred Securities acquired by such purchaser
pursuant to this offering. Such report must be in the form attached to
British Columbia Securities Commission Blanket Order BOR #95/17, a copy of
which may be obtained from the Company. Only one such report must be filed
in respect of Trust Preferred Securities acquired on the same date and under
the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of Trust Preferred Securities should consult their
own legal and tax advisors with respect to the tax consequence of an
investment in the Trust Preferred Securities in their particular
circumstances and with respect to the eligibility of the Trust Preferred
Securities for investment by the purchaser under relevant Canadian
legislation.
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VALIDITY
Certain legal matters in connection with this offering will be passed
upon for the Company by the McNair Law Firm, P.A., Columbia, South Carolina
and H. T. Arthur, Esquire, Columbia, South Carolina, who is General Counsel
and a full-time employee of SCANA, and for the Underwriters by Reid & Priest
LLP, New York, New York. Certain matters of Delaware law relating to the
validity of the Trust Preferred Securities, the enforceability of the Trust
Agreement and the creation of the Issuer will be passed upon by Richards,
Layton & Finger, Wilmington, Delaware, special Delaware counsel to the
Company and the Issuer. The McNair Law Firm, P.A., H. T. Arthur, Esquire and
Reid & Priest LLP will rely as to certain matters of Delaware law upon the
opinion of Richards, Layton & Finger, the McNair Law Firm, P.A. and H. T.
Arthur, Esquire, will rely on the opinion of Reid & Priest LLP as to all
matters of New York law, and Reid & Priest LLP will rely on the opinion of H.
T. Arthur, Esquire, as to all matters of South Carolina law. Certain matters
relating to United States federal income tax considerations will be passed
upon for the Company and the Issuer by the McNair Law Firm, P.A.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
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No dealer, salesperson or other
person has been authorized to give
any information or to make any
representation not contained in $50,000,000
this prospectus and, if given or
made, such information or represen- SCE&G TRUST I
tation must not be relied upon as
having been authorized by the 7.55%
Company, the Issuer or any under- Trust Preferred Securities, Series A
writer. This prospectus does not (Liquidation Amount $25
constitute an offer to sell or a per Trust Preferred Security)
solicitation of an offer to buy fully and unconditionally guaranteed
any of the securities offered hereby as described herein by
in any jurisdiction to any person
to whom it is unlawful to make such
offer in such jurisdiction. Neither SOUTH CAROLINA ELECTRIC &
the delivery of this prospectus nor GAS COMPANY
any sale made hereunder shall, under
any circumstances, create any impli-
cation that the information herein is
correct as of any time subsequent to
the date hereof or that there has been
no change in the affairs of the
Company or the Issuer since such date.
____________________
TABLE OF CONTENTS
Page PROSPECTUS
PROSPECTUS
Available Information........... 3
Incorporation of Certain
Documents by Reference........ 4
Prospectus Summary.............. 5
Risk Factors.................... 7
The Company..................... 9 Credit Suisse First Boston
The Issuer...................... 10
Selected Financial Data......... 11 PaineWebber Incorporated
Ratios of Earnings to Fixed
Charges....................... 11
Use of Proceeds................. 12
Accounting Treatment............ 12
Description of Trust Preferred
Securities.................... 12
Description of Junior
Subordinated Debentures....... 23
Description of Guarantee........ 34
Relationship Among the Trust
Preferred Securities, the
Junior Subordinated Debentures
and the Guarantee............. 36
Certain Federal Income Tax
Consequences.................. 37
Underwriting.................... 40
Notice to Canadian Residents.... 41
Validity........................ 42
Experts......................... 42
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