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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1998
REGISTRATION NO. 333-61429
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BUDGET GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7514 59-3227576
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
125 BASIN STREET, SUITE 210, DAYTONA BEACH, FL 32114
TELEPHONE: (904) 238-7035
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
SANFORD MILLER, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
BUDGET GROUP, INC.
125 BASIN STREET, SUITE 210, DAYTONA BEACH, FL 32114
TELEPHONE: (904) 238-7035 FACSIMILE: (904) 226-8380
(Name, address, including zip code, and telephone number, including area code of
agent for service)
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COPIES TO: JEFFREY M. STEIN
KING & SPALDING
191 PEACHTREE STREET, ATLANTA, GEORGIA 30303
TELEPHONE: (404) 572-4600 FACSIMILE: (404) 572-5146
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
TITLE OF CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO BE AGGREGATE PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1)(2) FEE(3)
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<S> <C> <C> <C> <C>
6 1/4% Convertible Preferred Securities,
Remarketable Term Income Deferable Equity
Securities (HIGH TIDES).................... 6,000,000 $50 $300,000,000 $88,500
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HIGH TIDES Debentures Due 2028 of Budget
Group, Inc. ............................... (3) (3) (3) (3)
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Class A Common Stock, $0.01 par value, of
Budget Group, Inc.......................... 9,107,400 (4) (4) (4)
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Guarantee by Budget Group, Inc. of the
above-referenced HIGH TIDES................ (5) (5) (5) (5)
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Total................................ N/A N/A $300,000,000 $88,500(6)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457.
(2) Exclusive of accrued interest and distributions, if any.
(3) $309,278,400 in aggregate principal amount of 6 1/4% HIGH TIDES Debentures
Due 2028 were issued and sold to Budget Group Capital Trust in connection
with the issuance by Budget Group Capital Trust of its HIGH TIDES. The HIGH
TIDES Debentures Due 2028 may be distributed, under certain circumstances,
to holders of the HIGH TIDES for no additional consideration.
(4) The HIGH TIDES are convertible into Class A Common Stock, par value $.01 per
share, of Budget Group, Inc., at an initial conversion rate of 1.5179 shares
of Class A Common Stock for each HIGH TIDE, subject to adjustment under
certain circumstances. Shares of Class A Common Stock issued upon conversion
of the HIGH TIDES will be issued without the payment of additional
consideration.
(5) No separate consideration will be received for the Guarantee.
(6) The Registration Fee has been previously paid.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 16, 1998
PROSPECTUS
6,000,000 HIGH TIDES(SM)
BUDGET GROUP CAPITAL TRUST
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<S> <C> <C>
6 1/4% Convertible Preferred Securities
Remarketable Term Income Deferrable Equity Securities
(HIGH TIDES)(SM*)
(liquidation amount $50 per HIGH TIDE)
guaranteed to the extent set forth herein by,
BUGET GROUP LOGO and convertible into Class A Common Stock of,
</TABLE>
Budget Group, Inc.
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This Prospectus relates to the 6 1/4% Remarketable Term Income Deferrable
Equity Securities (HIGH TIDES)(SM) (the "HIGH TIDES"), which represent undivided
preferred beneficial ownership interests in the assets of Budget Group Capital
Trust, a statutory business trust formed under the laws of the State of Delaware
(the "Trust" or the "Issuer"), and the shares of Class A Common Stock, par value
$0.01 per share (the "Class A Common Stock"), of Budget Group, Inc., a Delaware
corporation (the "Company"), issuable upon conversion of the HIGH TIDES. The
HIGH TIDES were issued and sold (the "Original Offering") on June 19, 1998 (the
"Original Offering Date") to the Initial Purchasers (as defined herein) and were
simultaneously sold by the Initial Purchasers in transactions exempt from the
registration requirements of the Securities Act of 1933 (the "Securities Act"),
to persons reasonably believed by the Initial Purchasers to be qualified
institutional buyers as defined in Rule 144A under the Securities Act. The
Company owns all the common securities issued by the Trust (the "Common
Securities" and, together with the HIGH TIDES, the "Trust Securities"). The
Trust was formed for the sole purpose of issuing the Trust Securities and using
the proceeds thereof to purchase from the Company the HIGH TIDES Debentures Due
2028 (the "HIGH TIDES Debentures") having the terms described herein. The
holders of the HIGH TIDES have a preference with respect to payments in respect
of distributions and payments upon liquidation, redemption or otherwise over
holders of the Common Securities of the Trust.
The HIGH TIDES, the HIGH TIDES Debentures and the Class A Common Stock
issuable upon conversion of the HIGH TIDES (collectively the "Offered
Securities") may be offered and sold from time to time by the holders named
herein or by their transferees, pledgees, donees or successors (collectively,
the "Selling Holders") pursuant to this Prospectus. The Offered Securities may
be sold by the Selling Holders from time to time directly to purchasers or
through agents, underwriters or dealers. See "Selling Holders" and "Plan of
Distribution." If required, the names of any other Selling Holders, agents or
underwriters involved in the sale of the Offered Securities and the applicable
agent's commission, dealer's purchase price or underwriter's discount, if any,
will be set forth in an accompanying supplement to this Prospectus (a
"Prospectus Supplement"). The Selling Holders will receive all of the proceeds
from the sale of the Offered Securities and will pay all underwriting discounts
and selling commissions, if any, applicable to any such sale. The Company is
responsible for payment of all other expenses incident to the offer and sale of
the Offered Securities. The Selling Holders and any broker-dealers, agents or
underwriters which participate in the distribution of the Offered Securities may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commission received by them and any profit on the resale of the Offered
Securities purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. See "Plan of Distribution" for a description
of indemnification arrangements.
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* Credit Suisse First Boston Corporation has filed an application with the
United States Patent and Trademark Office for the registration of Remarketable
Term Income Deferrable Equity Securities (HIGH TIDES)(SM) or HIGH TIDES(SM)
servicemarks.
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PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
THE CAPTION INVESTMENT CONSIDERATIONS BEGINNING ON PAGE 8.
APPLICATION WILL BE MADE TO LIST THE COMMON STOCK REGISTERED PURSUANT
HERETO ON THE NEW YORK STOCK EXCHANGE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS , 1998.
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As used herein, unless the context otherwise requires: (i) the "Indenture"
means the HIGH TIDES Debentures Indenture between the Company and The Bank of
New York, as trustee (the "Debenture Trustee"); (ii) the "Declaration" means the
Amended and Restated Declaration of Trust among the Company, as Depositor (the
"Depositor"), The Bank of New York, as Property Trustee (the "Property
Trustee"), The Bank of New York (Delaware), as Delaware Trustee (the "Delaware
Trustee"), and the individuals named as Administrative Trustees therein (the
"Administrative Trustees") (collectively with the Property Trustee and the
Delaware Trustee, the "Issuer Trustees") and the holders, from time to time, of
undivided beneficial interests in the assets of the Trust; (iii) the "Company,"
"Budget" or "Budget Group" refers to Budget Group, Inc. and its subsidiaries
after giving effect to Budget Group, Inc.'s acquisition of Budget Rent A Car
Corporation on April 29, 1997; and (iv) the "Budget System" refers to the
business of renting cars and trucks and retailing late model vehicles conducted
by Budget and its franchisees under the Budget name.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"SEC" or the "Commission"). Such reports, proxy statements, and other
information filed by the Company can be inspected and copied at the public
reference facilities of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street,
NW, Washington, DC 20549, and at the following Regional Offices of the
Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511;
and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of
such material may also be obtained from the Public Reference Section of the SEC
at Judiciary Plaza. 450 Fifth Street, NW, Washington, DC 20549, at prescribed
rates. Such material can also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. In addition, material may
be accessed electronically by means of the Commission's home page on the
Internet (http://www.sec.gov).
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the Offered
Securities. This Prospectus, which forms a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement.
For further information with respect to the Trust and the Offered Securities,
reference is made to the Registration Statement and the exhibits and schedules
filed as a part thereof. Any statements made in this Prospectus concerning the
provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. The
Registration Statement and the exhibits and schedules thereto may be inspected,
without charge, at the public reference section or regional offices of the SEC
at the addresses indicated above. Copies of the Registration Statement can be
obtained from the public reference section of the SEC upon payment of prescribed
fees.
No separate financial statements of the Issuer have been included herein.
The Company does not consider that such financial statements would be material
to holders of the HIGH TIDES because (i) all of the voting securities of the
Issuer are owned by the Company, a reporting company under the Exchange Act,
(ii) the Issuer has no independent operations but exists for the sole purpose of
issuing securities representing undivided beneficial interests in the assets of
the Issuer and investing the proceeds thereof in HIGH TIDES Debentures issued by
the Company and (iii) the obligations of the Issuer under the Trust Securities
are fully and unconditionally guaranteed by the Company to the extent that the
Issuer has funds available to meet such obligations. See "Description of HIGH
TIDES Debentures" and "Description of the Guarantee."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
(File No. 0-23962) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1997;
(b) Quarterly Reports on Form 10-Q for the quarters ended June 30,
1998 and March 31, 1998;
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(c) The Company's Current Reports on Form 8-K dated September 4, 1998,
July 2, 1998, June 19, 1998, May 28, 1998, April 6, 1998, March 4, 1998,
January 28, 1998 and May 13, 1997, each as amended (if applicable);
(d) The consolidated balance sheets of Ryder TRS, Inc. as of December
31, 1996 and 1997 and the related consolidated statements of operations,
stockholders' equity and cash flows for the period from September 5, 1996
(date of inception) to December 31, 1996 and the year ended December 31,
1997, contained in the Company's Registration Statement on Form S-4 (File
No. 333-49679) filed on April 8, 1998, as amended on April 27, 1998;
(e) The combined balance sheet of Ryder Consumer Truck Rental (a
division of Ryder Truck Rental, Inc., a wholly-owned subsidiary of Ryder
System, Inc.) as of October 16, 1996, and the related combined statements
of earnings and changes in Ryder investment and cash flows for the period
from January 1, 1996 to October 16, 1996, contained in the Company's
Registration Statement on Form S-4 (File No. 333-49679) filed on April 8,
1998, as amended on April 27, 1998; and
(f) The description of the Class A Common Stock of the Company
included in the Company's Registration Statement on Form 8-A, dated April
15, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities made hereby shall be deemed to
be incorporated by reference in this Prospectus and made a part hereof from the
date of the 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 document subsequently filed with the
Commission which also 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.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference herein (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to: Budget Rent A Car Corporation, 4225 Naperville Road, Lisle,
Illinois 60532, Attention: General Counsel, telephone (630) 955-7571.
CAUTIONARY INFORMATION
CERTAIN INFORMATION INCLUDED IN THIS PROSPECTUS CONTAINS, AND OTHER
MATERIALS FILED OR TO BE FILED BY THE COMPANY WITH THE COMMISSION INCORPORATED
BY REFERENCE HEREIN (AS WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS MADE OR
TO BE MADE BY THE COMPANY) CONTAIN OR WILL CONTAIN, FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
EXCHANGE ACT. THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF
OR CURRENT EXPECTATIONS OF THE COMPANY AND MEMBERS OF ITS MANAGEMENT TEAM, AS
WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE
INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES AND THAT
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING
STATEMENTS ARE SET FORTH IN THE SAFE HARBOR COMPLIANCE STATEMENT FOR
FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 AND ANNEX A TO THE COMPANY'S
ANNUAL REPORT ON FORM 10-K, WHICH ARE HEREBY INCORPORATED BY REFERENCE. THE
COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS
TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR
CHANGES TO FUTURE OPERATING RESULTS OVER TIME.
ii
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OFFERING SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus or
incorporated by reference herein. Certain capitalized terms used but not defined
are used as defined elsewhere in this Prospectus.
THE OFFERING
The Issuer................. Budget Group Capital Trust, a Delaware business
trust. Substantially all of the assets of the Trust
consist of the HIGH TIDES Debentures of the
Company. The Company owns, directly or indirectly,
100% of the outstanding Common Securities of the
Issuer.
Securities Registered
Pursuant Hereto............ 6,000,000 HIGH TIDES, the HIGH TIDES Debentures,
the Class A Common Stock issuable upon conversion
of the HIGH TIDES and the Guarantee of Budget
Group, Inc. with respect to the HIGH TIDES.
Distributions.............. Distributions on the HIGH TIDES accrue from the
date of original issuance of the HIGH TIDES and are
payable on the HIGH TIDES at the Applicable Rate
applied to the stated liquidation amount of $50 per
HIGH TIDE. The Applicable Rate is 6 1/4% per annum
(the "Initial Rate") from the date of original
issuance of the HIGH TIDES to (but excluding) the
Reset Date, and the Term Rate from and after the
Reset Date. The Term Rate will be set based on the
outcome of the Remarketing. The Applicable Rate
will also increase upon a Registration Default, if
any. See "The Remarketing" and "Registration
Rights." Subject to the distribution deferral
provisions described below, Distributions are
payable quarterly in arrears on each March 15, June
15, September 15 and December 15, commencing
September 15, 1998. Because Distributions on the
HIGH TIDES constitute interest, corporate holders
thereof are not entitled to a dividends received
deduction. See "Description of HIGH
TIDES -- Distributions."
Distribution Deferral
Provisions................. The ability of the Issuer to pay Distributions on
the HIGH TIDES is solely dependent on its receipt
of interest payments from the Company on the HIGH
TIDES Debentures. The Company has the right at any
time, and from time to time, to defer the interest
payments due on the HIGH TIDES Debentures for
successive periods (a "Deferral Period") not
exceeding 20 consecutive quarters for each such
Deferral Period. Quarterly Distributions on the
HIGH TIDES will be deferred by the Issuer during
any Deferral Period, but will continue to
accumulate additional Distributions thereon,
compounded quarterly until the end of any such
Deferral Period. The Company will cause the Issuer
to give written notice of its deferral of an
interest payment and the deferral of Distributions
on the HIGH TIDES to the holders of the HIGH TIDES
not later than 10 days prior to the related record
date. The Company has agreed, among other things,
not to declare or pay any dividend on its capital
stock (subject to certain exceptions) during any
Deferral Period. If a deferral of an interest
payment occurs, the holders of the HIGH TIDES will
continue to recognize interest income for United
States federal income tax purposes in advance of
the receipt of any corresponding cash distribution.
If a holder of HIGH TIDES converts its HIGH TIDES
during any Deferral Period, the holder will not
receive any cash
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related to any deferred Distributions. See
"Investment Considerations -- Option to Extend
Interest Payment Period; Tax Considerations,"
"Description of HIGH TIDES -- Distributions,"
"Description of HIGH TIDES Debentures -- Option to
Extend Interest Payment Date" and "United States
Federal Tax Considerations -- Interest Income and
Original Issue Discount."
Conversion into Class A
Common Stock............. On or prior to the Tender Notification Date, each
HIGH TIDE is convertible, at the option of the
holder, into shares of Class A Common Stock of the
Company at the rate of 1.5179 shares of Class A
Common Stock for each HIGH TIDE (the "Initial
Conversion Ratio") (equivalent to a conversion
price of $32.94 liquidation amount of HIGH TIDES
per share (the "Initial Conversion Price") of Class
A Common Stock), subject to adjustment in certain
circumstances. The last reported sale price of the
Class A Common Stock on the New York Stock Exchange
on September 11, 1998 was $18.375 per share. On and
after the Reset Date, each HIGH TIDE may, at the
option of the Issuer and subject to the results of
Remarketing, become nonconvertible or convertible
into a different number of shares of Class A Common
Stock. See "The Remarketing." The conversion price
and conversion ratio in effect at any time shall
hereinafter be referred to as the Applicable
Conversion Price and the Applicable Conversion
Ratio, respectively, each of which will be subject
to adjustment in certain circumstances. In
connection with any conversion of the HIGH TIDES,
the conversion agent will exchange such HIGH TIDES
for a Like Amount of HIGH TIDES Debentures held by
the Issuer and immediately convert such HIGH TIDES
Debentures into Class A Common Stock. No fractional
shares of Class A Common Stock will be issued as a
result of conversion, but in lieu thereof such
fractional interest will be paid by the Company in
cash based on the then current market value of the
Class A Common Stock. In addition, no additional
shares of Class A Common Stock will be issued upon
conversion of HIGH TIDES to account for any accrued
but unpaid Distributions on the HIGH TIDES at the
time of conversion. See "Description of HIGH
TIDES -- Conversion Rights."
Liquidation Amount......... In the event of any liquidation of the Issuer
(after satisfaction of liabilities of creditors to
the Trust), a holder of a HIGH TIDE will be
entitled to receive the liquidation amount thereof
($50 per HIGH TIDE) plus an amount equal to any
accrued and unpaid Distributions thereon to the
date of payment, unless a HIGH TIDE Debenture is
distributed to such holder. See "Description of
HIGH TIDES -- Liquidation of the Trust and
Distribution of the HIGH TIDES Debentures."
Maturity................... Although the HIGH TIDES do not have a stated
maturity, they are subject to mandatory redemption,
at the applicable Redemption Price, upon the
repayment or redemption, in whole or in part, of
the HIGH TIDES Debentures. The HIGH TIDES
Debentures will mature on June 15, 2028, unless
earlier redeemed as described below under
"-- Optional Redemption" or "-- Tax Event or
Investment Company Event Redemption." The Company
has covenanted in the Indenture to fund any
repayment of the principal of, and accrued and
unpaid interest on, any outstanding HIGH TIDES
Debentures on June 15, 2028 with the proceeds of
the offering of nonconvertible preferred securities
or noncon-
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vertible trust preferred securities of the Company.
See "-- Effect of Redemption" and "Description of
HIGH TIDES Debentures -- Repayment at Maturity;
Redemption of HIGH TIDES."
The Remarketing............ The Remarketing Agent has agreed to use its best
efforts to remarket (the "Remarketing") all HIGH
TIDES tendered for remarketing. The Remarketing
Agent will establish (i) the rate per annum (the
"Term Rate") at which distributions will accrue on
the HIGH TIDES, (ii) the number of shares of Class
A Common Stock, if any, into which each HIGH TIDE
may be converted (the "Term Conversion Ratio") and
(iii) the price, manner and time, if any, at which
the HIGH TIDES may be redeemed from the proceeds of
a Common Stock Offering, at the option of the
Company, prior to the stated maturity date of the
HIGH TIDES Debentures (the "Term Call Protections"
and together with the Term Rate and Term Conversion
Ratio, the "Term Provisions"), to be effective
beginning on June 15, 2005 (or, if such day is not
a Business Day, the next succeeding Business Day)
or such earlier day as may be determined by the
Remarketing Agent, in its sole discretion, for
settlement of a successful remarketing (the "Reset
Date"). See "The Remarketing -- Effect of Failed
Remarketing" and "-- Settlement." The Remarketing
Agent will use its best efforts to establish the
Term Provisions most favorable to the Company
consistent with the remarketing of all HIGH TIDES
tendered therefor at a price (the "Reset Price")
equal to 101% of the liquidation amount thereof.
At least 40 days but not more than 60 days prior to
June 15, 2005, the Issuer will send a notice to the
holders of HIGH TIDES ("a Remarketing Notice")
stating whether it intends to remarket the HIGH
TIDES as securities which will be convertible into
Class A Common Stock (a "Convertible Remarketing")
or which will be nonconvertible (a "Nonconvertible
Remarketing"). All HIGH TIDES will be deemed
tendered for remarketing unless the holder thereof
delivers irrevocable notice to the contrary to the
Tender Agent (which the Tender Agent will promptly
remit to the Remarketing Agent) prior to May 20,
2005 (or, if such day is not a Business Day, the
next succeeding Business Day) (the "Tender
Notification Date").
If no HIGH TIDES are tendered for remarketing, the
Remarketing will not take place, and the
Remarketing Agent will set the Term Provisions in a
manner consistent with the Remarketing Notice in
the manner that it believes, in its sole
discretion, would result in a price per HIGH TIDE
equal to 101% of the liquidation amount thereof
were a Remarketing actually to occur.
If any HIGH TIDES are tendered for remarketing, the
Remarketing Agent will commence a Convertible
Remarketing or a Nonconvertible Remarketing, as the
case may be (in either case, an "Initial
Remarketing"), pursuant to the instructions set
forth in the Remarketing Notice. The Initial
Remarketing will fail (an "Initial Failed
Remarketing") if (i) despite using its best
efforts, the Remarketing Agent is unable to
establish a Term Rate less than or equal to the
Maximum Rate during the Initial Remarketing Period,
(ii) the Remarketing Agent is excused from its
obligations because of the failure by the Company
or the Trust to satisfy certain conditions or the
occurrence of certain market events specified in
the Remarketing Agreement or (iii) there is no
Remarketing
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Agent on the first day of the Initial Remarketing
Period. In the event of an Initial Failed
Remarketing, the Remarketing Agent will commence a
second remarketing (the "Final Remarketing") during
the Final Remarketing Period which will be a
Convertible Remarketing if the Initial Remarketing
was a Nonconvertible Remarketing and vice versa. If
the Remarketing Agent is still not able to
establish a Term Rate less than or equal to the
Maximum Rate during the Final Remarketing Period or
upon the failure by the Company or the Trust to
satisfy certain conditions or the occurrence of
certain market events specified in the Remarketing
Agreement, the Final Remarketing will fail (a
"Failed Final Remarketing"). In the event of a
Failed Final Remarketing, the Company will be
required to redeem in whole, but not in part, the
outstanding HIGH TIDES Debentures on the Reset Date
at 101% of the aggregate liquidation amount
thereof, plus any accrued and unpaid interest
thereon (the "Failed Remarketing Redemption
Price"). See "Effect of Redemption" below, "The
Remarketing" and "Description of HIGH TIDES
Debentures -- Redemption -- Mandatory Redemption."
If the Remarketing Agent is able to establish a
Term Rate less than or equal to the Maximum Rate
during the Initial Remarketing Period or the Final
Remarketing Period, as the case may be, new holders
will deliver the Reset Price for the remarketed
HIGH TIDES, and the Term Provisions will become
effective on the Reset Date. See "The Remarketing."
If for any reason Term Provisions are established
by the Remarketing Agent but on the Reset Date the
Remarketing Agent is unable to sell one or more
HIGH TIDES tendered for remarketing, the
Remarketing Agent will be obligated (subject to
certain conditions) to purchase such HIGH TIDES for
the Reset Price on the Reset Date.
The Remarketing Agent...... Credit Suisse First Boston Corporation will act as
the initial Remarketing Agent, but may resign or be
replaced by the Company prior to the Remarketing in
accordance with the Remarketing Agreement. The
Remarketing will be done without charge to the
holders of HIGH TIDES, but the Company will pay the
Remarketing Agent a fee equal to 1% of the
aggregate liquidation amount of the HIGH TIDES
outstanding on the Reset Date upon settlement of
the transactions contemplated by the Remarketing.
See "The Remarketing Agent."
Optional Redemption........ The Company may redeem the HIGH TIDES Debentures
solely from the proceeds of a Common Stock
Offering, (i) in whole or in part, at any time
after June 20, 2001 until (but excluding) the
Tender Notification Date, at a redemption price
equal to 103.13% of the aggregate principal amount
thereof, declining ratably to 100% of the aggregate
principal amount thereof after June 15, 2004, plus
any accrued and unpaid interest thereon and (ii)
after the Reset Date, in accordance with the Term
Call Protections established in the Remarketing.
Upon the redemption in whole or in part of the HIGH
TIDES Debentures, the proceeds of such redemption
shall concurrently be applied to redeem, at the
applicable Redemption Price, the related Trust
Securities having an aggregate liquidation amount
equal to the aggregate principal amount of HIGH
TIDES Debentures so redeemed, upon the terms and
conditions described herein. See "-- Effect of
Redemption" and "Description of HIGH TIDES
Debentures -- Redemption -- Optional Redemption."
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Mandatory Redemption....... The HIGH TIDES Debentures must be redeemed in the
event of a Failed Final Remarketing, on the Reset
Date at 101% of the aggregate principal amount
thereof plus any accrued and unpaid interest
thereon (the "Failed Remarketing Redemption
Price"). See "-- Effect of Redemption" and
"Description of HIGH TIDES Debentures -- Redemption
Mandatory Redemption."
Tax Event or Investment
Company Event Redemption
or Distribution.......... Upon the occurrence of a Tax Event, except in
certain limited circumstances, or an Investment
Company Event, the Company will cause the Issuer
Trustees to liquidate the Issuer and cause the HIGH
TIDES Debentures to be distributed to the holders
of the HIGH TIDES. In certain limited
circumstances, the Company will have the right to
redeem the HIGH TIDES Debentures in whole, but not
in part, at a price equal to the aggregate
principal amount thereof plus accrued and unpaid
interest thereon (the "Tax Event Redemption
Price"), in lieu of a distribution of the HIGH
TIDES Debentures. See "-- Effect of Redemption." In
the case of a Tax Event, the Company may also elect
to cause the HIGH TIDES to remain outstanding and
pay Additional Amounts on the HIGH TIDES
Debentures. See "Description of HIGH TIDES -- Tax
Event or Investment Company Event Redemption or
Distribution" and "Description of HIGH TIDES
Debentures -- Additional Amounts."
Effect of Redemption....... "Stated Maturity Price," "Failed Remarketing
Redemption Price," "Initial Redemption Price,"
"Term Redemption Price" (if applicable) and "Tax
Event Redemption Price" shall each hereinafter be
referred to as a Redemption Price. Upon the
repayment or redemption of any HIGH TIDES
Debentures (other than following the distribution
of the HIGH TIDES Debentures to the holders of
Trust Securities), the proceeds from such repayment
or redemption shall concurrently be applied to
redeem, at the applicable Redemption Price, the
related Trust Securities with an aggregate
liquidation amount equal to the aggregate principal
amount of such HIGH TIDES Debentures; provided that
in the case of a Debenture Event of Default or an
Event of Default under the Declaration, the HIGH
TIDES will receive a preference over the Common
Securities. See "Description of HIGH
TIDES -- Subordination of Common Securities" and
"Description of HIGH TIDES Debentures -- Redemption
-- Repayment at Maturity; Redemption of Convertible
Preferred Securities" and "-- Optional Redemption."
Guarantee.................. The Company has irrevocably guaranteed, on a
subordinated basis and to the extent set forth
herein, the payment in full of (i) the
Distributions on the HIGH TIDES to the extent of
funds of the Trust available therefor, (ii) the
amount payable upon redemption of the HIGH TIDES to
the extent of funds of the Trust available therefor
and (iii) generally, the liquidation amount of the
HIGH TIDES to the extent of the assets of the Trust
available for distribution to holders of HIGH
TIDES. The Guarantee is unsecured and is
subordinate to all Senior Debt of the Company. Upon
the liquidation, dissolution or winding up of the
Company, its obligations under the Guarantee will
rank junior to all of its Senior Debt, and, as a
result, funds may not be available for payment
under the Guarantee. See "Investment
Considerations -- Ranking of
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<PAGE> 10
Obligations Under the Guarantee and the HIGH TIDES
Debentures" and "-- Rights Under the Guarantee" and
"Description of Guarantee." Effectively, the
Company has, through the Guarantee, the HIGH TIDES
Debentures, the Indenture and the Declaration,
taken together, fully, irrevocably and
unconditionally guaranteed all of the Issuer's
obligations under the HIGH TIDES. 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
HIGH TIDES. See "Description of the Guarantee" and
"Effect of Obligations Under the HIGH TIDES
Debentures and the Guarantee."
Liquidation of the Trust... The Company, as the holder of the outstanding
Common Securities, has the right at any time
(including, without limitation, upon the occurrence
of a Tax Event or Investment Company Event) to
dissolve the Trust (subject to certain conditions).
In the event of such dissolution of the Trust,
after satisfaction of liabilities to creditors of
the Trust as required by applicable law, the
holders of the Trust Securities generally will be
entitled to receive per related Trust Security the
liquidation amount plus accumulated and unpaid
Distributions thereon to the date of payment, which
may be in the form of a distribution of related
HIGH TIDES Debentures in certain circumstances on a
pro rata basis in accordance with the respective
liquidation amounts of such Trust Securities. If
HIGH TIDES Debentures are distributed to the
holders of the Trust Securities prior to the Reset
Date, the procedures in respect of the Remarketing
of the HIGH TIDES will apply mutatis mutandis to
the HIGH TIDES Debentures. See "Description of HIGH
TIDES -- Liquidation of the Trust and Distribution
of HIGH TIDES Debentures."
Voting Rights.............. Generally, holders of the HIGH TIDES do not have
any voting rights. However, if (i) an Event of
Default with respect to the HIGH TIDES Debentures
occurs and is continuing or (ii) the Company
defaults under the Guarantee with respect to the
HIGH TIDES, the holders of the HIGH TIDES will be
entitled, by majority vote, to appoint a Special
Trustee of the Trust. See "Description of HIGH
TIDES -- Voting Rights; Amendment of the
Declaration."
Ranking.................... Payments on the HIGH TIDES are made pro rata with
the Common Securities except as described under
"Description of HIGH TIDES -- Subordination of
Common Securities." The HIGH TIDES Debentures are
unsecured and subordinate and junior in right of
payment in the manner set forth in the Indenture to
all Senior Debt of the Company. See "Description of
HIGH TIDES Debentures -- Subordination." At June
30, 1998, the Company had approximately $45 million
of Senior Debt. In addition, the Company is
principally a holding company and the HIGH TIDES
Debentures are effectively subordinated to all
existing and future liabilities of the Company's
subsidiaries, which totaled $4.4 billion at June
30, 1998.
Form of HIGH TIDES......... The HIGH TIDES are represented by a global
certificate registered in the name of Cede & Co.,
as nominee for The Depository Trust Company
("DTC"). Beneficial interests in such HIGH TIDES
are evidenced by, and transfers thereof are
effected only through, records maintained by
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<PAGE> 11
the participants in DTC. Except under the limited
circumstances described herein, HIGH TIDES in
certificated form will not be issued in exchange
for the global certificate. See "Description of
HIGH TIDES -- Form, Book-Entry Procedures and
Transfer."
Registration Rights........ Pursuant to the Registration Agreement, the Company
and the Issuer have agreed to use their best
efforts to keep the Registration Statement
effective and useable (subject to certain
exceptions) for two years or such other period as
shall be required under Rule 144(k) of the
Securities Act or any successor rule thereto or
such shorter period ending when all the Registrable
Securities have been sold thereunder. The
Applicable Rate will increase to the Registration
Default Rate if the Company and the Trust are not
in compliance with certain of their obligations
under the Registration Agreement. See "Registration
Rights."
Use of Proceeds............ The Selling Holders will receive all of the
proceeds from the sale of the Offered Securities.
Neither the Company nor the Issuer will receive any
proceeds from the sale of the Offered Securities.
See "Use of Proceeds."
Trading.................... The HIGH TIDES are eligible for trading on the
PORTAL Market. Application will be made to list the
shares of Class A Common Stock issuable upon
conversion of the HIGH TIDES on the New York Stock
Exchange.
Ratings.................... The HIGH TIDES have been rated "BB-" by Standard &
Poor's Ratings Group and "B2" by Moody's Investors
Services, Inc. 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.
Ratio of Earnings to Fixed
Charges.................. The Company's ratio of earnings to fixed charges:
(i) on an historical basis for the fiscal years
ended December 31, 1995, 1996 and 1997 and for the
six-month period ended June 30, 1998 were 1.14,
1.32, 1.39, and 1.01, respectively; and (ii) on a
pro forma basis for the year ended December 31,
1997 was 1.01. Additional earnings of $2.4 million
and $.6 million on an historical basis would have
been required to bring the ratio to 1.0 for the
fiscal years ended December 31, 1993 and 1994,
respectively. Additional earnings of $7.6 million
on a pro forma basis would have been required to
bring the ratio to 1.0 for the six-month period
ended June 30, 1998. See "Ratio of Earnings to
Fixed Charges."
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<PAGE> 12
INVESTMENT CONSIDERATIONS
Prospective purchasers of the Offered Securities should carefully review
the information contained elsewhere in this Prospectus and should particularly
consider the following matters. This Prospectus contains certain forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements included in the risk factors set forth below and
elsewhere in this Prospectus as a result of any number of factors.
RISK FACTORS RELATING TO THE COMPANY
Ryder TRS Acquisition
On June 19, 1998 the Company acquired Ryder TRS, Inc. ("Ryder TRS"), one of
the largest providers of truck rentals and related moving supplies and services
to consumers and light commercial users in the United States (the "Ryder TRS
Acquisition"). The Company will be required to devote significant resources to
the combination and integration of the Ryder TRS business with the Company's
existing truck rental operations. The difficulties of managing such combination
and integration are increased by the necessity of coordinating the operations of
geographically diverse organizations, of integrating different strategies and
operating systems and of integrating management and operating personnel from
both businesses. The success of the Company following the Ryder TRS Acquisition
will depend on the ability of the Company's management team to: (i) manage a
significantly larger organization; (ii) maintain and further develop
relationships with Ryder TRS's independent dealers; and (iii) integrate Ryder
TRS with the Company's existing truck rental operations. There can be no
assurance that the Company's management team will be able to successfully manage
the combined truck rental operations of Ryder TRS and the Company. An inability
to successfully manage the integration of the truck rental operations of Ryder
TRS and the Company would have a material adverse effect on the Company's
financial condition and results of operations.
Pursuant to the Ryder TRS Acquisition, the Company issued 3,455,206 shares
of Class A Common Stock, paid $125 million in cash, issued warrants to purchase
Class A Common Stock with a value of up to $19 million and is obligated to
deliver a make-whole payment in the event that the market value of the Class A
Common Stock declines over stated measurement periods (two 30-day periods
ending, respectively, on June 19, 1999 and February 19, 2000). Such make-whole
payment may be made in cash or stock, at the Company's option, and could, if
made, have a dilutive effect on the earnings per share of Class A Common Stock.
Shares Eligible for Future Sale
The Company has filed a shelf registration statement under the Securities
Act with respect to up to 3,450,465 shares of Class A Common Stock issued in the
Ryder TRS Acquisition. The principal stockholders of Ryder TRS have, however,
agreed not to sell the shares of Class A Common Stock received by them in
connection with the Ryder TRS Acquisition until on or after September 17, 1998.
In connection with the Ryder TRS Acquisition, the Company may elect to pay
certain contingent additional consideration, if any is owed, by issuing shares
of Class A Common Stock. Further, in connection with various acquisitions, the
Company has granted to sellers certain unlimited "piggyback" registration rights
with respect to shares of Class A Common Stock.
The Company's outstanding 6.85% Series B Convertible Subordinated Notes Due
2007 (the "Series B Notes") and the 4,305,814 shares of Class A Common Stock
issued upon conversion of the Company's previously outstanding 7.0% Series A
Convertible Subordinated Notes Due 2007 (the "Series A Notes") have been
registered under the Securities Act. The Series B Notes are convertible into an
aggregate of 1,609,436 shares of Class A Common Stock which have been registered
under the Securities Act.
The Company also periodically grants options to purchase shares of Class A
Common Stock and Class B Common Stock $.01 par value per share (the "Class B
Common Stock" and together with the Class A Common Stock, the "Common Stock").
As of September 10, 1998, options to purchase 3,020,163 shares of Class A Common
Stock and 545,000 shares of Class B Common Stock were outstanding.
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<PAGE> 13
Upon the registration of any of the foregoing shares of common stock, such
shares will be freely tradeable without restriction or further registration
under the Securities Act and sales of these shares could adversely affect the
market price of the Common Stock.
Additional Risk Factors
Prospective purchasers of the Offered Securities should carefully review
the risk factors set forth in the Safe Harbor Compliance Statement for
forward-looking statements included as Exhibit 99.1 and Annex A to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, which Annual
Report is incorporated herein by reference.
RISK FACTORS RELATING TO THE HIGH TIDES
Ranking of Obligations Under the Guarantee and the HIGH TIDES Debentures
Since the Company is a holding company, the right of the Company to
participate in any distribution of assets of any subsidiary upon such
subsidiary's dissolution, winding-up, liquidation or reorganization or otherwise
(and thus the ability of holders of the HIGH TIDES to benefit indirectly from
such distribution), is subject to the prior claims of creditors of that
subsidiary, except to the extent that the Company may itself be a creditor of
that subsidiary and its claims are recognized. There are various legal
limitations on the extent to which certain of the Company's subsidiaries may
extend credit, pay dividends or otherwise supply funds to, or engage in
transactions with, the Company or certain of its other subsidiaries.
Accordingly, the HIGH TIDES Debentures and Guarantee are effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of HIGH TIDES Debentures and the Guarantee should look
only to the assets of the Company for payments on the HIGH TIDES Debentures and
the Guarantee. See "The Company." At June 30, 1998, the Company's subsidiaries
had liabilities totaling $4.4 billion. None of the Indenture, the Guarantee and
the Declaration places any limitation on the amount of secured or unsecured
debt, including Senior Debt, that may be incurred by the Company or the amount
of debt that may be incurred by the Company's subsidiaries. See "Description of
Guarantee -- Status of the Guarantee" and "Description of HIGH TIDES
Debentures -- Subordination."
The obligations of the Company arising and accruing under the Guarantee
issued by the Company for the benefit of the holders of HIGH TIDES and under the
HIGH TIDES Debentures are general unsecured obligations of the Company which are
subordinate and junior in right of payment, to the extent and in the manner set
forth in the Guarantee and the Indenture, to all Senior Debt of the Company. At
June 30, 1998, the aggregate outstanding Senior Debt of the Company was
approximately $45 million.
The ability of the Issuer to pay amounts due on the HIGH TIDES is solely
dependent upon the Company making payments on the HIGH TIDES Debentures as and
when required.
Option to Extend Interest Payment Period
Provided that no Event of Default (as defined in the Indenture) has
occurred and is continuing with respect to the HIGH TIDES Debentures (a
"Debenture Event of Default"), the Company has the right under the Indenture to
defer the payment of interest on the HIGH TIDES Debentures accruing at any time
or from time to time for a period not exceeding 20 consecutive quarters with
respect to each Deferral Period; provided that no Deferral Period may extend
beyond (i) the maturity (whether at June 15, 2028 or by declaration of
acceleration, call for redemption or otherwise) and (ii) in the case of a
Deferral Period that begins prior to the Reset Date, the Reset Date. See
"Description of HIGH TIDES Debentures -- Option to Extend Interest Payment
Period." As a consequence of any such deferral, quarterly Distributions on the
HIGH TIDES by the Issuer will be deferred (and the amount of Distributions to
which holders of the HIGH TIDES are entitled will accumulate additional
Distributions thereon at the Applicable Rate, compounded quarterly from the
relevant payment date for such Distributions) during any such Deferral Period.
During any such Deferral Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common stock and preferred stock) other than stock dividends paid by
the Company which consist of
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<PAGE> 14
stock of the same class as that on which the dividend is being paid or (ii) make
any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including its junior
subordinated deferrable interest debentures) that then rank pari passu in all
respects with or junior in interest to the HIGH TIDES Debentures (other than (a)
dividends or distributions in Common Stock of the Company, (b) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c) payments under
the Guarantee, (d) purchases or acquisitions of shares of the Company's Common
Stock in connection with the satisfaction by the Company of its obligations
under any employee benefit plan or any other contractual obligation of the
Company (other than a contractual obligation ranking pari passu with or junior
to the HIGH TIDES Debentures), (e) as a result of a reclassification of the
Company's capital stock or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of the Company's capital
stock or (f) the purchase of fractional interests in shares of the Company's
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged). A Deferral Period will terminate
upon the payment by the Company of all amounts then accrued and unpaid on the
HIGH TIDES Debentures (together with interest thereon accrued at the Applicable
Rate compounded quarterly, to the extent permitted by applicable law). Prior to
the termination of any such Deferral Period, the Company may further defer the
payment of interest; provided that no Deferral Period may exceed 20 consecutive
quarters or extend beyond (i) the maturity (whether at June 15, 2028 or by
declaration of acceleration, call for redemption or otherwise) and (ii) in the
case of a Deferral Period which begins prior to the Reset Date, the Reset Date.
Upon the termination of any Deferral Period, and subject to the foregoing
limitations, the Company may elect to begin a new Deferral Period subject to the
above conditions. There is no limitation on the number of times that the Company
may elect to begin a Deferral Period. See "Description of HIGH
TIDES -- Distributions" and "Description of HIGH TIDES Debentures -- Option to
Extend Interest Payment Date."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the HIGH TIDES
Debentures. However, should the Company elect to exercise such right in the
future, the market price of the HIGH TIDES would likely be adversely affected. A
holder that disposes of its HIGH TIDES during a Deferral Period, therefore,
might not receive the same return on its investment as a holder that continues
to hold its HIGH TIDES. In addition, as a result of the existence of the
Company's right to defer interest payments on the HIGH TIDES Debentures, the
market price of the HIGH TIDES may be more volatile than the market prices of
other securities on which original issue discount ("OID") accrues that are not
subject to such deferrals.
Tax Considerations
Holders of HIGH TIDES generally will include their allocable share of the
interest on the HIGH TIDES Debentures (in the form of OID) in taxable income for
United States federal income tax purposes on a constant yield basis, regardless
of their own methods of tax accounting. If the Company were to exercise its
right to defer payments of interest, holders of the HIGH TIDES would continue to
include their pro rata share of OID in gross income as it accrues in advance of
the receipt of cash attributable to such income. Such holders would not receive
the cash related to such income if they dispose of the HIGH TIDES prior to the
record date for payment of distributions thereafter. Moreover, because the Reset
Price exceeds the principal amount of the HIGH TIDES Debentures, during the
period through the Reset Date holders will accrue OID for federal income tax
purposes at a rate slightly in excess of the Initial Rate. See "United States
Federal Tax Considerations -- Interest Income and Original Issue Discount" and
"-- Sale of HIGH TIDES."
A holder which disposes of its HIGH TIDES between record dates for payments
of Distributions thereon will be required to include OID on the HIGH TIDES
Debentures through the date of disposition in income as ordinary income, and to
add such amount to its adjusted tax basis. To the extent the selling price is
less than the holder's adjusted tax basis (which basis will include all accrued
but unpaid OID), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "United States Federal Tax
Considerations -- Sale of HIGH TIDES."
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<PAGE> 15
In addition, there are a number of uncertainties concerning the proper
federal income tax treatment of the HIGH TIDES. As a result, there are certain
risks of adverse tax treatment to holders. See "United States Federal Tax
Considerations -- Tax Treatment of HIGH TIDES Debentures as Reset Bonds."
Remarketing of HIGH TIDES
The Remarketing Agent has agreed to use its best efforts to remarket all
HIGH TIDES which have been tendered for remarketing. All HIGH TIDES will be
deemed so tendered unless the holder thereof duly provides irrevocable notice to
the Tender Agent (which the Tender Agent will promptly remit to the Remarketing
Agent) to the contrary not later than May 20, 2005 (or, if such day is not a
Business Day, the next succeeding Business Day) (the "Tender Notification
Date"). Accordingly, if a holder of HIGH TIDES does not so notify the
Remarketing Agent, the HIGH TIDES it holds will no longer be outstanding after
the Remarketing, and such holder will have no further rights thereunder except
to receive an amount equal to (i) from the proceeds of the Remarketing or, in
the event of a Failed Final Remarketing, from the Company, 101% of the aggregate
liquidation amount of such HIGH TIDES, plus (ii) from the Company, accrued and
unpaid Distributions on such HIGH TIDES to (but excluding) the Reset Date.
Notwithstanding the foregoing, the Remarketing will be deemed to have
failed if (i) despite using its best efforts the Remarketing Agent cannot
establish a Term Rate less than or equal to the Maximum Rate, (ii) the
Remarketing Agent is excused from remarketing the HIGH TIDES because of (a) the
failure by the Company to satisfy a condition in the Remarketing Agreement or
(b) the occurrence of certain market events specified in the Remarketing
Agreement or (iii) there is no Remarketing Agent on the first day of the Initial
Remarketing Period. Should the Remarketing be deemed to have failed, the HIGH
TIDES Debentures will be mandatorily redeemable on the Reset Date (and,
accordingly, the HIGH TIDES will be redeemed on such date). If no HIGH TIDES are
tendered for remarketing, the Remarketing will not take place (although the
Remarketing will not be deemed to have failed) and the Remarketing Agent will
set the Term Provisions in accordance with the instructions set forth in the
Remarketing Notice in the manner that it believes, in its sole discretion, would
result in a price per HIGH TIDE equal to 101% of the liquidation amount thereof
were a Remarketing actually to occur.
Each HIGH TIDE is initially convertible, at the option of the holder
thereof, into 1.5179 shares of Class A Common Stock, as adjusted in certain
circumstances. See "Description of HIGH TIDES -- Conversion Rights." The Company
may elect to remarket the HIGH TIDES such that after the Reset Date the HIGH
TIDES are not convertible into shares of Class A Common Stock, or such that each
HIGH TIDE is convertible into a smaller number of shares of Class A Common
Stock. See "The Remarketing."
Tax Event or Investment Company Event Redemption or Distribution
Upon the occurrence of a Tax Event (except in certain limited
circumstances) or an Investment Company Event, the Company will cause the Issuer
Trustees to liquidate the Issuer and cause HIGH TIDES Debentures to be
distributed pro rata to the holders of the HIGH TIDES. In certain limited
circumstances upon the occurrence of a Tax Event, the Company will have the
right to redeem the HIGH TIDES Debentures, in whole, but not in part, for the
principal amount thereof plus accrued and unpaid interest thereon, in lieu of a
distribution of the HIGH TIDES Debentures, in which event the HIGH TIDES will be
redeemed in whole at the liquidation preference of $50 per HIGH TIDE plus
accrued and unpaid Distributions. In the case of a Tax Event, the Company may
alternatively elect to cause the HIGH TIDES to remain outstanding and pay
Additional Amounts on the HIGH TIDES Debentures. See "Description of HIGH
TIDES -- Tax Event or Investment Company Event Redemption or Distribution" and
"Description of HIGH TIDES Debentures -- Additional Amounts."
Under current United States federal income tax law, a distribution of the
HIGH TIDES Debentures would not be a taxable event to holders of the HIGH TIDES.
However, if a Tax Event results in the Issuer being treated as an association
taxable as a corporation, the distribution would likely constitute a taxable
event to holders of the HIGH TIDES. See "United States Federal Tax
Considerations -- Receipt of HIGH TIDES Debentures or Cash Upon Liquidation of
the Trust."
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<PAGE> 16
There can be no assurance as to the market prices for HIGH TIDES or for
HIGH TIDES Debentures that may be distributed in respect of HIGH TIDES if a
liquidation of the Issuer occurs. Accordingly, the HIGH TIDES, or the HIGH TIDES
Debentures that a holder of HIGH TIDES may receive upon liquidation of the
Issuer, may trade at a discount to the price that the investor paid to purchase
the HIGH TIDES offered hereby. Because holders of HIGH TIDES may receive HIGH
TIDES Debentures upon termination of the Issuer, prospective purchasers of HIGH
TIDES are also making an investment decision with regard to the HIGH TIDES
Debentures and should carefully review all the information regarding the HIGH
TIDES Debentures contained herein. See "Description of HIGH TIDES Debentures."
Liquidation of the Trust and Distribution of HIGH TIDES Debentures
The holders of all of the outstanding Common Securities have the right at
any time (except during the period beginning on the Business Day following the
Tender Notification Date and ending on the Reset Date, other than upon the
occurrence of a Tax Event or an Investment Company Event) to dissolve the Issuer
and, after satisfaction of liabilities to creditors of the Issuer in accordance
with applicable law, to cause the HIGH TIDES Debentures to be distributed to the
holders of the HIGH TIDES and Common Securities in liquidation of the Issuer;
provided that the Issuer Trustees shall have received an opinion of tax counsel
to the effect that holders of HIGH TIDES will not recognize any income, gain or
loss on such distribution for United States federal income tax purposes. If HIGH
TIDES Debentures are distributed to the holders of Trust Securities on or prior
to the Reset Date, the remarketing arrangements described herein with respect to
the HIGH TIDES will apply mutatis mutandis to the HIGH TIDES Debentures
distributed to the holders thereof. The HIGH TIDES Debentures, if distributed,
may be subject to restrictions on transfer as described under "Transfer
Restrictions."
Rights Under the Guarantee
The Bank of New York is the Guarantee Trustee under the Guarantee Agreement
between the Company, the Issuer and the Guarantee Trustee (the "Guarantee") and
holds the Guarantee for the benefit of the holders of the HIGH TIDES. The Bank
of New York also is the Debenture Trustee for the HIGH TIDES Debentures and
Property Trustee under the Declaration. The Guarantee guarantees to the holders
of the HIGH TIDES the following payments, to the extent not paid by the Issuer:
(i) any accumulated and unpaid Distributions required to be paid on the HIGH
TIDES, to the extent that the Issuer has funds on hand available therefor at
such time; (ii) the Redemption Price with respect to any HIGH TIDES 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 termination, dissolution
or liquidation of the Issuer (unless the HIGH TIDES Debentures are distributed
to holders of the Trust Securities), the lesser of (a) the aggregate of the
liquidation amount and all accumulated and unpaid Distributions to the date of
payment, to the extent that the 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 HIGH TIDES on liquidation of the Issuer. The
Company's obligations arising or accruing under the Guarantee are general
unsecured obligations and are subordinated as described under "-- Ranking of
Obligations Under the Guarantee and the HIGH TIDES Debentures." The holders of
at least a majority in aggregate liquidation amount of the outstanding HIGH
TIDES have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust power conferred upon the
Guarantee Trustee under the Guarantee.
Any holder of the HIGH TIDES 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 HIGH TIDES Debentures, the Issuer will lack funds for
the payment of Distributions or amounts payable on redemption of the HIGH TIDES
or otherwise, and, in such event, holders of the HIGH TIDES would not be able to
rely upon the Guarantee for payment of such amounts. Instead, if a Debenture
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Company to pay any amounts payable in respect of the HIGH
TIDES Debentures on the
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<PAGE> 17
payment date on which such payment is due, then a holder of HIGH TIDES may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of any amounts payable in respect of such HIGH TIDES
Debentures having a principal amount equal to the aggregate liquidation amount
of the HIGH TIDES of such holder (a "Direct Action"). In connection with such
Direct Action, the Company will have a right of set-off under the Indenture to
the extent of any payment made by the Company to such holder of HIGH TIDES in
the Direct Action. Except as described herein, holders of HIGH TIDES will not be
able to exercise directly any other remedy available to the holders of the HIGH
TIDES Debentures or assert directly any other rights in respect of the HIGH
TIDES Debentures. See "Description of HIGH TIDES Debentures -- Debenture Events
of Default" and "-- Enforcement of Certain Rights by Holders of HIGH TIDES" and
"Description of Guarantee." The Declaration provides that each holder of HIGH
TIDES by acceptance thereof agrees to the provisions of the Guarantee and the
Indenture.
Limited Voting Rights
Holders of HIGH TIDES have limited voting rights relating generally to the
modification of the HIGH TIDES and the Guarantee and the exercise of the
Issuer's rights as holder of HIGH TIDES Debentures. Holders of HIGH TIDES are
not entitled to appoint, remove or replace the Property Trustee or the Delaware
Trustee except upon the occurrence of certain events described herein. The
Property Trustee and the holders of all of the Common Securities may, subject to
certain conditions, amend the Declaration without the consent of any holders of
HIGH TIDES to cure any ambiguity or to make other provisions not inconsistent
with existing provisions of the Declaration or to ensure that the Issuer will
not be classified for United States federal income tax purposes as an
association subject to taxation as a corporation or will be classified as a
grantor trust. See "Description of HIGH TIDES -- Voting Rights; Amendment of the
Declaration" and "-- Removal of Issuer Trustees; Appointment of Successors."
Absence of Public Market
There is no existing market for the HIGH TIDES (or the HIGH TIDES
Debentures) and there can be no assurance as to the liquidity of any markets
that may develop for the HIGH TIDES (or the HIGH TIDES Debentures), the ability
of the holders to sell their HIGH TIDES (or HIGH TIDES Debentures) or at what
price holders of the HIGH TIDES (or the HIGH TIDES Debentures) will be able to
sell such securities. Trading prices of the HIGH TIDES (and the HIGH TIDES
Debentures) depend on many factors including, among other things, prevailing
interest rates, the Company's operating results and the market for similar
securities. Credit Suisse First Boston Corporation currently makes a market for
the HIGH TIDES; however, none of the Initial Purchasers are obligated to do so
and such market making activity is subject to the limits imposed by applicable
law and may be discontinued at any time without notice.
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<PAGE> 18
THE COMPANY
THE COMPANY
The Company, through subsidiary companies and franchisees, operates the
Budget System and related transportation service businesses. The Budget System
is the third largest worldwide car and truck rental system, with over 3,200
locations and a peak fleet size during 1997 of 283,000 cars and 22,500 trucks.
The Budget System includes locations in both the airport and local (downtown and
suburban) markets in all major metropolitan areas in the United States, in many
other small and mid-size U.S. markets and in more than 120 countries worldwide.
The Budget System had approximately 509 Budget-owned locations in the United
States and 71 Budget-owned locations outside of the United States at December
31, 1997. In addition, Budget franchisees operated approximately 455
royalty-paying franchise locations in the United States and 2,171 locations
internationally at December 31, 1997.
Management's long-term strategy is to create a network of
transportation-related companies which leverage the asset base and expertise of
Budget Group. Budget Group's assets include a trade name recognized around the
world; locations for the rental, sale and maintenance of vehicles; a workforce
that is proficient in acquiring, financing, monitoring, maintaining and selling
vehicles; and advanced information systems to support these operations.
Increasing the utilization of these assets by acquiring related businesses
delivers economies of scale and increases profitability. The economies of scale
are achieved primarily in the areas of purchasing, financing, facilities
utilization and management, maintenance and advertising. In pursuit of this
strategy, the Company has substantially expanded its operations during the last
15 months, principally through its acquisitions of Budget Rent A Car
Corporation, Premier Car Rental LLC ("Premier Car Rental"), Cruise America, Inc.
("Cruise America") and Ryder TRS.
Budget-owned locations in the United States account for approximately 80%
of the Budget System's U.S. vehicle rental revenues, while Budget-owned
locations outside the United States account for approximately nine percent of
the Budget System's international vehicle rental revenues. Management believes
this high level of domestic corporate ownership is a competitive advantage in
the marketplace as it facilitates more consistent delivery of high quality
services and improved operations and communications, thereby strengthening the
Budget brand name among consumers.
The Budget System is one of only three vehicle rental systems that offer
rental vehicles throughout the world under a single brand name, with locations
in Europe, Canada, Latin America, the Middle East, Asia/ Pacific and Africa. The
Budget System currently maintains more local market rental locations throughout
the world than most of its major competitors and is unique among major car
rental systems in that it rents trucks in most major markets worldwide. The
Budget System, including the franchisees and agents acquired as a result of the
Ryder TRS Acquisition, operates the second largest consumer truck rental
business and the third largest general use car and truck rental system in the
world.
In addition, the Company owns Cruise America, one of the largest North
American companies specializing primarily in the rental and sale of recreational
vehicles; Premier Car Rental, which serves the insurance replacement market,
Budget Car Sales, Inc., one of the largest independent retailers of late model
vehicles in the United States.
The Company acquired Cruise America in January 1998. Cruise America began
rental and sales operations in Miami, Florida in 1972 with an initial strategy
to locate rental centers in metropolitan gateway cities which are destinations
for large numbers of domestic and international travelers. Since that time,
Cruise America has established rental and/or sales locations across the United
States and Canada. At December 31, 1997, Cruise America operated a total of 16
hub offices, 76 satellite offices and a rental fleet of 2,810 RVs. In addition
to rentals, Cruise America sells new and used RVs (including vehicles retired
form the rental fleet) from its hub offices. The sales effort is conducted under
the name RV DEPOT. For the year ended April 30, 1997, RV sales represented
approximately 44% of Cruise America's total revenue. Cruise America comple-
14
<PAGE> 19
ments and enhances the Company's truck rental operations by providing a source
of used trucks for the Company's truck rental fleet and access to its ten modern
truck maintenance facilities and allows the Budget System to capitalize on the
growing base of inbound European leisure travelers.
In July 1997 the Company acquired Premier Car Rental, which provides rental
cars for the insurance replacement market under its own trade name. At December
31, 1997, Premier Car Rental owned and operated approximately 8,500 vehicles
from 150 locations in 16 major U.S. markets. Management believes the acquisition
of Premier Car Rental enables the Company to compete effectively in the
insurance replacement market with an established brand name and creates
synergies with the Company's other businesses. The acquisition of Premier Car
Rental allows the Company to better manage the strategic disposition of higher
mileage vehicles that are not subject to manufacturers' repurchase programs by
transferring such vehicles form Budget Car Rental locations to Premier Car
Rental locations.
Budget Car Sales is one of the largest U.S. independent retailers of used
cars, offering late model, low mileage cars. As of December 31, 1997, there were
26 Budget Car Sales stores in 16 U.S. markets. Budget Car Sales complements the
Company's strategy of building a network of transportation-related companies
and, like Premier Car Rental, allows the Company to better manage the strategic
disposition of vehicles that are not subject to manufacturers' repurchase
programs. On June 1, 1998, Budget Car Sales acquired three new car dealerships
which had combined revenue of $165 million in 1997. The Company believes that
both its vehicle rental and vehicle sales operations will benefit from its
ownership of these new car dealerships.
Van Pool Services, the Company's commuter van pooling subsidiary, was
acquired in February 1996 and maintains offices in 28 cities located in 18
states and the District of Columbia. Founded in 1977, Van Pool Services provides
van pooling services to individuals, corporations and municipalities. At
December 31, 1997, Van Pool Services operated a fleet of approximately 3,700
passenger vans. Van Pool Services benefits from the Budget System through shared
repair and maintenance facilities and fleet purchasing programs.
THE RYDER TRS ACQUISITION
On June 19, 1998, the Company acquired Ryder TRS, the second largest
provider of truck rentals and related moving supplies and services to consumers
and light commercial users in the United States, with a fleet of approximately
29,000 trucks as of December 31, 1997. As consideration for the Ryder TRS
Acquisition, the Company issued 3,455,206 shares of Class A Common Stock, paid
$125 million in cash and issued warrants to purchase Class A Common Stock, the
value of which is capped at $19 million. In addition, the Company agreed to pay
Ryder TRS stockholders a make-whole payment, the amount of which will depend on
the performance of the Class A Common Stock following the Ryder TRS Acquisition.
The Company also assumed approximately $522 million of Ryder TRS's debt.
Ryder TRS rents trucks to both individual consumers and businesses.
Consumers rent trucks primarily to move household goods. Ryder TRS also serves a
wide range of businesses that rent light- and medium-duty trucks (i.e., trucks
with a gross vehicle weight of less than 26,000 pounds) for a variety of light
commercial applications. Commercial customers range from small local businesses,
such as florists, package delivery companies and local private moving companies,
to large national companies that rent trucks primarily for the transportation
and delivery of inventory and packages. Commercial rentals complement Ryder
TRS's consumer rentals by enabling Ryder TRS to improve utilization of its
trucks on weekdays, when consumer demand is typically lower than it is on
weekends.
The Company's management believes that business conducted by Ryder TRS will
complement and enhance Budget's truck rental business. As a result of the Ryder
TRS Acquisition, the Company, its franchisees and agents operate the second
largest consumer truck rental business and third largest general use car and
truck rental system in the world. The Ryder TRS Acquisition is expected to
result in significant cost savings, including (i) significant economies of scale
in fleet purchasing and management, vehicle maintenance and in the cost of
parts, supplies and equipment and (ii) the opportunity to consolidate fleet and
yield management systems.
* * *
The principal executive offices of the Company are located at 125 Basin
Street, Suite 210, Daytona Beach, Florida 32114 (telephone number: (904)
238-7035).
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<PAGE> 20
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges on: (i) an historical basis for each of the five years ended December
31, 1997, and for the six-month period ended June 30, 1998, including the effect
of retroactive restatement for the 1998 pooling of interests with Cruise
America; and (ii) a pro forma basis for the year ended December 31, 1997 ("the
1997 Pro Formas"), and for the six-month period ended June 30, 1998 ("the 1998
Pro Formas"). The 1997 Pro Formas are based on the historical financial
statements of the Company, after restatement for the 1998 pooling of interests
with Cruise America, and Ryder TRS for the year ended December 31, 1997, and of
Budget Rent A Car Corporation for the period from January 1, 1997 to April 29,
1997, adjusted to give effect to (a) the Ryder TRS Acquisition, (b) the
acquisition of Budget Rent A Car Corporation, and (c) various changes in the
capital structure of the combined companies that occurred concurrently with the
Ryder TRS Acquisition, including the issuance of the HIGH TIDES and application
of the net proceeds thereof (the "Recapitalization Transactions"), all as if
they had occurred on January 1, 1997. The 1998 Pro Formas are based on the
unaudited historical financial statements of the Company, after restatement for
the 1998 pooling of interests with Cruise America, and Ryder TRS for the five
month period ended May 31, 1998, adjusted to give effect to (a) the Ryder TRS
Acquisition, and (b) the Recapitalization Transactions, all as if they had
occurred on January 1, 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------- JUNE 30,
1993 1994 1995 1996 1997 1998
----- ----- ----- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
Historical........................................ (1) (1) 1.14x 1.32x 1.39x 1.01x
Pro forma......................................... -- -- -- -- 1.01x (2)
</TABLE>
- ---------------
(1) Earnings for the fiscal years ended December 31, 1993 and 1994, on an
historical basis, were inadequate to cover fixed charges. Additional
earnings of $2.4 million and $.6 million, respectively, would have been
required to bring the ratio to 1.0 in the respective periods.
(2) Earnings for the six-month period ended June 30, 1998, on a pro forma basis,
were inadequate to cover fixed charges. Additional earnings of $7.6 million
would have been required to bring the ratio to 1.0.
The ratio of earnings to fixed charges has been computed on a total
enterprise basis. Earnings represent income before taxes, plus fixed charges.
Fixed charges represent interest (including amortization of debt issuance cost),
the estimated interest portion of rental charges and the distributions on the
HIGH TIDES.
ACCOUNTING TREATMENT
For financial reporting purposes, the accounts of the Trust will be
included in the consolidated financial statements of the Company. The HIGH TIDES
will be presented as a separate line item in the consolidated balance sheet of
the Company entitled "Company-obligated mandatorily redeemable Securities of
Budget Group Capital Trust," and appropriate disclosures about the HIGH TIDES,
the Guarantee and the HIGH TIDES Debentures will be included in the notes to the
Company's consolidated financial statements. For financial reporting purposes,
the Company records distributions payable on the HIGH TIDES as a minority
interest in the Company's statement of consolidated income.
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of the
Offered Securities. Neither the Company nor the Issuer will receive any of the
proceeds from the sale of the Offered Securities.
BUDGET GROUP CAPITAL TRUST
Budget Group Capital Trust is a statutory business trust that was formed
under Delaware law on June 4, 1998. The Trust's original declaration of trust
was amended and restated in its entirety by the Company, as Depositor, and the
trustees of the Issuer (the "Issuer Trustees") (as so amended and restated, the
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<PAGE> 21
"Declaration"), in connection with the issuance of the Trust Securities. The
Company owns Common Securities in an aggregate liquidation amount equal to
approximately 3% of the total capital of the Issuer. Payment on the Common
Securities is made pro rata with the HIGH TIDES except that upon the occurrence
and during the continuance of an Event of Default under the Declaration, the
rights of the holders of the Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of the holders of the HIGH TIDES. The assets of the
Trust consist principally of the HIGH TIDES Debentures, and payments under the
HIGH TIDES Debentures are the sole revenue of the Issuer. The Issuer exists for
the exclusive purposes of (i) issuing the Trust Securities representing
undivided beneficial interests in the assets of the Trust, (ii) investing the
gross proceeds of the Trust Securities in the HIGH TIDES Debentures and (iii)
engaging in only those other activities necessary or incidental thereto.
Pursuant to the Declaration, (i) the number of Issuer Trustees is five,
(ii) three of the Issuer Trustees (the "Administrative Trustees") are officers
of Company, (iii) the fourth trustee is a financial institution that is
unaffiliated with the Company (the "Property Trustee") and (iv) the fifth
trustee is an entity which maintains its principal place of business in the
State of Delaware (the "Delaware Trustee"). The Bank of New York, a New York
banking corporation, acts as Property Trustee and its affiliate, The Bank of New
York (Delaware), a Delaware banking corporation, acts as Delaware Trustee. The
Property Trustee and the Delaware Trustee may be removed or replaced by the
holder of the Common Securities. The Bank of New York also acts as trustee under
the Guarantee (the "Guarantee Trustee") and under the Indenture (the "Debenture
Trustee"). See "Description of Guarantee" and "Description of HIGH TIDES
Debentures." In certain circumstances, the holders of a majority of the HIGH
TIDES are entitled to appoint one additional trustee (a "Special Trustee"), who
need not be an officer or employee of or otherwise affiliated with the Company
and who will have the same rights, powers and privileges as the Administrative
Trustees. See "Description of HIGH TIDES -- Voting Rights; Amendment of the
Declaration."
The Property Trustee holds title to the HIGH TIDES Debentures for the
benefit of the holders of the Trust Securities, and the Property Trustee has the
power to exercise all rights, powers and privileges under the Indenture as the
holder of the HIGH TIDES Debentures. In addition, the Property Trustee maintains
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the HIGH TIDES
Debentures for the benefit of the holders of the Trust Securities. The Guarantee
Trustee holds the Guarantee for the benefit of the holders of the HIGH TIDES.
Subject to the right of the holders of the HIGH TIDES to appoint a Special
Trustee, the Company, as the direct or indirect holder of all the Common
Securities, has the right to appoint, remove or replace any of the Issuer
Trustees and to increase or decrease the number of trustees, provided that the
number of trustees shall be at least three, a majority of which shall be
Administrative Trustees. See "Description of HIGH TIDES Debentures."
The rights of the holders of the HIGH TIDES, including economic rights,
rights to information and voting rights, are as set forth in the Declaration and
the Delaware Business Trust Act, as amended (the "Trust Act"). See "Description
of HIGH TIDES." The Declaration, the Indenture and the Guarantee also
incorporate by reference the terms of the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). At the time the Registration Statement
becomes effective, the Declaration, the Indenture and the Guarantee will be
qualified under the Trust Indenture Act.
The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of the Company.
THE REMARKETING
NOTICE OF REMARKETING; TENDER FOR SALE BY REMARKETING; RETENTION OF HIGH TIDES
At least 40 days but not more than 60 days prior to June 15, 2005, the
Issuer will send to the holders of HIGH TIDES a notice (the "Remarketing
Notice") stating whether it intends to remarket (the "Remarketing") the HIGH
TIDES as securities which will be convertible into Class A Common Stock (a
"Convertible
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<PAGE> 22
Remarketing") or which will be nonconvertible (a "Nonconvertible Remarketing").
So that no holder of HIGH TIDES, through inadvertence or otherwise, may fail to
tender any HIGH TIDES for sale in the Remarketing, each outstanding HIGH TIDE
will be deemed to have been tendered for remarketing unless the holder thereof
has given irrevocable notice to the contrary to the Tender Agent (which the
Tender Agent will promptly remit to the Remarketing Agent). Such irrevocable
notice, which may be telephonic or written, must be delivered not earlier than
30 days prior to May 20, 2005 (or, if such day is not a Business Day, the next
succeeding Business Day) (the "Tender Notification Date"), and not later than
5:00 p.m., New York City time, on the Tender Notification Date. A holder's
notice of an election to retain HIGH TIDES must state the number of HIGH TIDES
to be retained (which must be all of the HIGH TIDES represented by the
applicable certificate, unless such certificate is a Global HIGH TIDE), the
number of the certificate representing the HIGH TIDES not to be deemed to have
been so tendered and the number of HIGH TIDES represented by such certificate.
Any transferee of a HIGH TIDE for which such notice has been provided shall be
bound thereby.
The failure by a holder of HIGH TIDES to give timely notice of an election
to retain all (or, in the case of a Global HIGH TIDE, any part) of such holder's
HIGH TIDES will constitute the irrevocable tender for sale in the Remarketing of
all the HIGH TIDES it holds. On and after the Reset Date, the terms of all HIGH
TIDES, whether or not tendered for remarketing, will be modified by the Term
Provisions, as the same shall be established by the Remarketing Agent.
If the HIGH TIDES are not held by DTC or its nominee in the form of one or
more Global HIGH TIDES, certificates representing remarketed HIGH TIDES will be
issued to the purchasers thereof, irrespective of whether the certificates
formerly representing such HIGH TIDES have been delivered to the Tender Agent. A
holder of HIGH TIDES which has not duly given notice that it will retain its
HIGH TIDES will cease to have any further rights with respect to such HIGH TIDES
upon the successful remarketing thereof, except the right of such holder to
receive an amount equal to (i) from the proceeds of the Remarketing or, in the
event of a Failed Final Remarketing, from the Company, 101% of the aggregate
liquidation amount of such HIGH TIDES (the "Reset Price"), plus (ii) from the
Company, any accrued and unpaid Distributions on such HIGH TIDES to (but
excluding) the Reset Date, (upon surrender of the certificate representing such
HIGH TIDES to the Tender Agent properly endorsed for transfer, in the case of a
holder other than DTC which has taken physical delivery of a HIGH TIDES
certificate), but without additional interest thereon (and any such certificate
will cease to represent outstanding HIGH TIDES).
If no HIGH TIDES are tendered for remarketing, the Remarketing will not
take place (although the Remarketing will not be deemed to have failed), and the
Remarketing Agent will set the Term Provisions in a manner consistent with the
Remarketing Notice that it believes, in its sole discretion, would result in a
price per HIGH TIDE equal to 101% of the liquidation amount thereof were a
Remarketing actually to occur.
THE REMARKETING PROCESS
The Remarketing Agent has agreed to use its best efforts to remarket all
HIGH TIDES tendered for Remarketing in accordance with the Remarketing
Agreement. The Remarketing Agent will establish, effective beginning on the
Reset Date, (i) the rate (the "Term Rate") per annum at which Distributions will
accrue on the HIGH TIDES, (ii) the number of shares of Class A Common Stock, if
any, into which each HIGH TIDE may be converted (the "Term Conversion Ratio")
and (iii) the price, manner and time, if any, at which the HIGH TIDES may be
redeemed from the proceeds of a Common Stock Offering (the "Term Call
Protections" and together with the Term Rate and the Term Conversion Ratio, the
"Term Provisions"). The Remarketing Agent will use its best efforts to establish
the Term Provisions most favorable to the Company consistent with the successful
remarketing of all HIGH TIDES tendered therefor at a price equal to 101% of the
liquidation amount thereof. The Remarketing Agent may purchase HIGH TIDES
tendered for remarketing, but it shall not be obligated to purchase any HIGH
TIDES except to the extent expressly provided under "The Remarketing Agent."
The Remarketing will be done without charge to the holders of the HIGH
TIDES, but the Company shall be obligated to pay the Remarketing Agent fees for
its services. See "The Remarketing Agent." Neither
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<PAGE> 23
the Company nor any of its affiliates will be permitted to submit orders or
purchase tendered HIGH TIDES in the Remarketing. See "-- Purchases by the
Company and Its Affiliates."
In establishing the Term Provisions during the Remarketing, the Remarketing
Agent will take into account the following factors (the "Remarketing
Conditions"): (i) short- and long-term market interest rates and indices of such
short- and long-term interest rates; (ii) market supply and demand for short-
and long-term securities; (iii) yield curves for short- and long-term securities
comparable to the HIGH TIDES; (iv) industry and financial conditions which may
affect the HIGH TIDES; (v) the number of HIGH TIDES to be remarketed; (vi) the
number of potential purchasers; (vii) the current ratings by nationally
recognized statistical rating organizations of long-term subordinated debt of
the Company and of other outstanding capital securities of the Company's trust
subsidiaries; (viii) the number of shares of Class A Common Stock, if any, into
which the HIGH TIDES will be convertible; and (ix) the length and type of call
protections, if any. The Company currently has no intention of causing the
Applicable Conversion Price on the Reset Date to be less than 110% of the fair
market value of the Class A Common Stock on the Reset Date.
If any HIGH TIDES are tendered for remarketing, on the Business Day
following the Tender Notification Date, the Remarketing Agent will commence a
Convertible Remarketing or a Nonconvertible Remarketing, as the case may be (in
either case, an "Initial Remarketing"), in accordance with the Remarketing
Agreement and pursuant to the instructions set forth in the Remarketing Notice.
The Remarketing Agent will determine, and upon request make available to
interested persons non-binding indications of, the Term Provisions based upon
then-current Remarketing Conditions. The Remarketing Agent will solicit and
receive orders from prospective investors to purchase tendered HIGH TIDES. The
Remarketing Agent will continue using its best efforts to remarket the HIGH
TIDES as described above, adjusting the non-binding indications of the Term
Provisions as necessary to establish the Term Conditions most favorable to the
Company consistent with remarketing all HIGH TIDES tendered therefor at 101% of
the aggregate liquidation amount thereof until the Remarketing is completed or
is deemed to have failed for any of the reasons set forth under "-- Effect of a
Failed Remarketing."
If the Remarketing Agent determines that the Remarketing has not failed and
the Term Provisions have been established during the period (the "Initial
Remarketing Period") beginning on the first Business Day following the Tender
Notification Date and ending on June 1, 2005 (or, if such date is not a Business
Day, the next succeeding Business Day) the ("Initial Remarketing Termination
Date"), the Remarketing Agent will promptly communicate the Term Provisions to
the Tender Agent, who will communicate the Term Provisions to the Issuer
Trustees, the Debenture Trustee, the Issuer, the Paying Agent, the Company and
each holder (if any) which timely elected not to tender all of its HIGH TIDES
for remarketing, by written notice or by telephone promptly confirmed by
telecopy or other writing. On the Reset Date, new holders will tender the Reset
Price for the tendered HIGH TIDES as set forth below under "-- Settlement," and
the Term Provisions will become effective.
EFFECT OF FAILED REMARKETING
The Initial Remarketing will fail (an "Initial Failed Remarketing") if (i)
despite using its best efforts the Remarketing Agent is unable to establish,
prior to the Initial Remarketing Termination Date, a Term Rate which is less
than or equal to the Treasury Rate plus 6% per annum (the "Maximum Rate"), (ii)
the Remarketing Agent is excused from remarketing the HIGH TIDES because of (a)
the failure by the Company or the Trust to satisfy a condition in the
Remarketing Agreement or (b) the occurrence of certain market events specified
in the Remarketing Agreement, or (iii) there is no Remarketing Agent on the
first day of the Initial Remarketing Period.
If the Initial Remarketing fails because the Remarketing Agent was not able
to establish a Term Rate less than or equal to the Maximum Rate, the Remarketing
Agent will commence a second remarketing (the "Final Remarketing") during the
period beginning on the Business Day following the Initial Remarketing
Termination Date and ending on the date which is three Business Days (or such
shorter period as shall be agreed to by the Remarketing Agent) prior to June 15,
2005 (or, if such day is not a Business Day, the next
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succeeding Business Day) (the "Final Remarketing Period"), which will be a
Convertible Remarketing if the Initial Remarketing was a Nonconvertible
Remarketing and vice versa.
If the Remarketing Agent is able to establish a Term Rate less than or
equal to the Maximum Rate during the Final Remarketing Period, it shall promptly
communicate the Term Provisions to the Tender Agent, who will communicate the
Term Provisions to the Issuer Trustees, the Issuer, the Paying Agent, the
Company and each holder (if any) which timely elected not to tender all of its
HIGH TIDES for remarketing, by written notice or by telephone promptly confirmed
by telecopy or other writing. On the Reset Date, new holders will tender the
Reset Price for the tendered HIGH TIDES as set forth below under
"-- Settlement," and the Term Provisions will become effective.
If despite using its best efforts, the Remarketing Agent is still not able
to establish a Term Rate less than or equal to the Maximum Rate prior to the
expiration of the Final Remarketing Period, the Final Remarketing will fail (a
"Failed Final Remarketing"). In the event of a Failed Final Remarketing, the
Company will be required to redeem the outstanding HIGH TIDE Debentures on the
Reset Date at 101% of the aggregate principal amount thereof, plus any accrued
and unpaid interest thereon (the "Failed Remarketing Redemption Price"). The
failure of the Company to redeem the outstanding HIGH TIDES Debentures in whole
on the Reset Date in the event of a Failed Final Remarketing shall constitute a
Debenture Event of Default. See "Description of HIGH TIDES
Debentures -- Debenture Events of Default." Upon redemption of any HIGH TIDE
Debentures as a result of a Failed Final Remarketing, a Like Amount of HIGH
TIDES will be redeemed at the Failed Remarketing Redemption Price. See
"Description of HIGH TIDES -- Mandatory Redemption" and "Description of HIGH
TIDES Debentures -- Redemption -- Mandatory Redemption." There can be no
assurance that all of the HIGH TIDES tendered therefor will be remarketed.
"Treasury Rate" means (i) the yield, under the heading which represents the
average for the week immediately prior to the date of calculation, appearing in
the most recently published statistical release designated H.15(519) or any
successor publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Remaining Life (if no maturity is within three
months before or after the Remaining Life, yields for the two published
maturities most closely corresponding to the Remaining Life shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding to the nearest month) or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
the Reset Date. The Treasury Rate shall be calculated on the third Business Day
preceding the Reset Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Remaining
Life that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the Remaining Life. If no United States Treasury
security has a maturity which is within a period from three months before to
three months after the Reset Date, the two most closely corresponding United
States Treasury securities shall be used as the Comparable Treasury Issue, and
the rate being calculated shall be interpolated or extrapolated on a
straight-line basis, rounding to the nearest month using such securities.
"Comparable Treasury Price" means (A) the arithmetic mean of five Reference
Treasury Dealer Quotations for the Reset Date, after excluding the highest and
lowest such Reference Treasury Dealer Quotations, or (B) if the Debenture
Trustee obtains fewer than five such Reference Treasury Dealer Quotations, the
arithmetic mean of all such Reference Treasury Dealer Quotations.
"Quotation Agent" means Credit Suisse First Boston Corporation and its
successors; provided, however, that if the foregoing shall cease to be a primary
United States Government securities dealer in The City of New York (a "Primary
Treasury Dealer"), the Company shall substitute therefor another Primary
Treasury Dealer.
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"Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any
other Primary Treasury Dealer selected by the Debenture Trustee after
consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and the Reset Date, the arithmetic mean, as determined
by the Debenture Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Debenture Trustee by such Reference Treasury Dealer at
5:00 p.m., New York City time, on the third Business Day preceding the Reset
Date.
"Remaining Life" means the period beginning on the Reset Date and ending at
June 15, 2028.
SETTLEMENT
Settlement of transactions in connection with the Remarketing will take
place on June 15, 2005 (or, if such day is not a Business Day, the next
succeeding Business Day), or such earlier date as the Remarketing Agent may, in
its sole discretion, determine. Payments in respect of the tendered HIGH TIDES
in an amount equal to the Reset Price will be made by the Tender Agent (but only
to the extent in fact received by the Tender Agent) on such date in the manner
described under "Description of HIGH TIDES -- Form, Book Entry Procedures and
Transfer," but, in the case of a holder (other than DTC) which has taken
physical delivery of a certificate representing its HIGH TIDES, such payment
shall be made only upon surrender to the Tender Agent by 2:30 p.m. on such date
(or any succeeding date) of the certificate representing such HIGH TIDES,
properly endorsed for transfer. See "-- Tender Agent."
None of the Issuer, the Issuer Trustees, the Tender Agent and (except to
the extent expressly provided under "The Remarketing" and "The Remarketing
Agent") the Company and the Remarketing Agent will be obligated to provide or
advance funds to make payment to the holders of HIGH TIDES tendered in the
Remarketing.
PURCHASES BY THE COMPANY AND ITS AFFILIATES
While the Company (or an affiliate thereof) may from time to time purchase,
hold and sell HIGH TIDES, neither the Company nor any of its affiliates may
purchase any HIGH TIDES on the Reset Date or submit orders in the Remarketing,
and the Remarketing Agent has agreed that it will not knowingly remarket any
HIGH TIDES to the Company or any of its affiliates.
TENDER AGENT
Tenders of HIGH TIDES in the Remarketing will be made to the tender agent
(the "Tender Agent"), and the Tender Agent will pay to the prior holders thereof
the Reset Price (provided the Tender Agent receives such amount from the
Remarketing Agent). The Tender Agent will be the Property Trustee (or, in the
event of the distribution of HIGH TIDES Debentures to the holders of HIGH TIDES
prior to the Reset Date, the Debenture Trustee).
TERMINATION OF THE ISSUER
If the Issuer is for any reason liquidated or dissolved prior to the Reset
Date and the HIGH TIDES Debentures are distributed to the holders of Trust
Securities in connection therewith, the Remarketing will proceed as described
herein except that the HIGH TIDES Debentures rather than the HIGH TIDES will be
remarketed by the Remarketing Agent, the Debenture Trustee rather than the
Property Trustee will be the Tender Agent and the descriptions herein of the
Remarketing of the HIGH TIDES (including under "The Remarketing" and "The
Remarketing Agent") will apply mutatis mutandis to such remarketing of HIGH
TIDES Debentures. Accordingly, in such an event, without limiting the generality
of the foregoing statements, (i) the HIGH TIDES Debentures instead of the HIGH
TIDES will be deemed to have been tendered for remarketing absent timely notice
to the contrary (provided that any notice duly and timely given in respect of
the tender for remarketing of any HIGH TIDES will apply to the HIGH TIDES
Debentures distributed in respect thereof), (ii) the HIGH TIDES Debentures
instead of the HIGH TIDES will be remarketed by the
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Remarketing Agent, (iii) the Remarketing Agent will use its best efforts to
establish the Term Provisions most favorable to the Company consistent with the
successful remarketing of all HIGH TIDES Debentures tendered therefor at a Reset
Price equal to 101% of the principal amount thereof and (iv) subject to the
proviso in clause (i) above, a holder of HIGH TIDES Debentures which has not
duly given notice by the Tender Notification Date that it will retain its HIGH
TIDES Debentures will cease to have any further rights with respect to such HIGH
TIDES Debentures upon the successful remarketing thereof, except the right of
such holder to receive an amount equal to (i) from the proceeds of the
Remarketing or, in the event of a Failed Final Remarketing, from the Company,
101% of the principal amount of such HIGH TIDES Debentures, plus (ii) from the
Company, any accrued but unpaid interest on such HIGH TIDES Debentures to (but
excluding) the Reset Date (upon surrender of the certificate representing such
HIGH TIDES Debentures to the Tender Agent properly endorsed for transfer, in the
case of a holder (other than DTC) which has taken physical delivery of a HIGH
TIDES Debentures certificate), but without any additional interest thereon (any
such certificate will cease to represent outstanding HIGH TIDES Debentures).
If the HIGH TIDES Debentures are accelerated, redeemed or otherwise prepaid
on or prior to the Reset Date, the Remarketing will not take place.
THE REMARKETING AGENT
The Company will use its reasonable best efforts to assure that, at all
times prior to and including the Reset Date, an investment bank, broker, dealer
or other organization which, in the judgment of the Company, is qualified to
remarket HIGH TIDES and to establish the Term Rate is acting as Remarketing
Agent (the "Remarketing Agent"), provided that if the Company fails to appoint a
successor upon the resignation or removal of the Remarketing Agent reasonably
promptly, a successor having such qualifications may be appointed by the holders
of at least 25% in aggregate liquidation amount of the outstanding HIGH TIDES.
Credit Suisse First Boston Corporation has agreed to act as the initial
Remarketing Agent but may resign or be replaced by the Company, in accordance
with the terms of the Remarketing Agreement. The Remarketing Agent may authorize
any broker-dealer to assist in the Remarketing.
The Remarketing Agreement among the Company, the Issuer, the Administrative
Trustees and the Tender Agent (the "Remarketing Agreement") provides that the
Remarketing Agent will receive fees from the Company for the Remarketing equal
to 1% of the aggregate liquidation amount of outstanding HIGH TIDES on the Reset
Date upon settlement of the transactions contemplated by the Remarketing. In
addition to such fees, the Company will reimburse the Remarketing Agent for all
out-of-pocket expenses reasonably incurred in connection with the performance of
its duties. In the event that both the Initial Remarketing and the Final
Remarketing fail, the Company shall not be required to pay any fees to, or
reimburse any out-of-pocket expenses of, the Remarketing Agent. The Remarketing
will be done without charge to the holders of the HIGH TIDES.
The Issuer has agreed in the Remarketing Agreement to indemnify the
Remarketing Agent against certain liabilities arising out of or in connection
with its duties or to contribute to payments which the Remarketing Agent may be
required to make in respect thereof.
The Remarketing Agent may resign and be relieved from its duties under the
Remarketing Agreement under certain conditions on a date specified in a notice
in writing delivered to the Issuer and the Company, which resignation will be
effective no earlier than 30 days after delivery of such notice. The successor
Remarketing Agent must be an investment bank, broker, dealer or other
organization which, in the judgment of the Company, is qualified to remarket the
HIGH TIDES and to establish the Term Provisions and which has entered into a
remarketing agreement with the Company and the Issuer in which it has agreed to
conduct the Remarketing in accordance with the terms and conditions described
herein and provided in the Remarketing Agreement. The holders of a majority in
aggregate liquidation amount of the outstanding HIGH TIDES may remove the
Remarketing Agent for cause. The Tender Agent will send notice to the holders of
HIGH TIDES of the resignation or removal of the Remarketing Agent and the
appointment of a successor Remarketing Agent. If there is no Remarketing Agent
on the first day of the Initial Remarketing Period, the
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<PAGE> 27
Remarketing will fail and the HIGH TIDES Debentures will be mandatorily
redeemable on the Reset Date. See "The Remarketing -- Effect of Failed
Remarketing."
The Remarketing Agreement provides that the Remarketing Agent will not be
obligated to remarket HIGH TIDES if (i) there is a material misstatement or
omission in any (a) disclosure document approved by the Issuer or the Company in
connection with the Remarketing or (b) document publicly disclosed (including in
a filing pursuant to the Exchange Act) by or on behalf of the Issuer or the
Company, unless in each case the Remarketing Agent is satisfied that such
misstatement or omission has been properly corrected or (ii) either the Issuer
or the Company fails to satisfy conditions customary in an offering.
Broker-dealers, if any, which obtain purchasers for the HIGH TIDES will be
paid a commission or fee by the Remarketing Agent based upon the remarketing fee
described above and the number of HIGH TIDES sold. Broker-dealers will enter
into broker-dealer agreements with the Remarketing Agent, which will provide for
their participation in the Remarketing and will require them to follow certain
private placement procedures. The identity of the broker-dealers, if any, which
will participate in the Remarketing has not yet been determined; the Remarketing
Agent will have the right to select broker-dealers therefor at any time prior to
the Reset Date. No broker-dealer will be obligated to purchase the HIGH TIDES.
If for any reason Term Provisions are established by the Remarketing Agent
but on the Reset Date the Remarketing Agent is unable to sell one or more HIGH
TIDES tendered for remarketing, the Remarketing Agent will be obligated (except
upon the occurrence of certain market events specified in the Remarketing
Agreement) to purchase such HIGH TIDES for the Reset Price on the Reset Date.
DESCRIPTION OF HIGH TIDES
Pursuant to the terms of the Declaration, the Issuer Trustees on behalf of
the Trust have issued the HIGH TIDES and the Common Securities in fully
registered form without interest coupons. The HIGH TIDES represent preferred
undivided beneficial ownership interests in the Trust, and the holders thereof
are entitled to a preference in certain circumstances with respect to
Distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust over the Common Securities, as well as other benefits
as described in the Declaration. See "-- Subordination of Common Securities."
The Declaration will be qualified under and will be subject to and governed by
the Trust Indenture Act upon effectiveness of the Registration Statement in
respect of the HIGH TIDES. See "Registration Rights." This summary of certain
provisions of the HIGH TIDES, the Common Securities and the Declaration does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Declaration, including the definitions
therein of certain terms. Copies of the Declaration are available upon request
from the Issuer Trustees.
GENERAL
Payments on the HIGH TIDES are made pro rata with the Common Securities
except as described under "-- Subordination of Common Securities." Legal title
to the HIGH TIDES Debentures is held by the Property Trustee on behalf of the
Trust in trust for the benefit of the holders of the HIGH TIDES and Common
Securities. The Guarantee executed by the Company for the benefit of the holders
of the HIGH TIDES provides for a guarantee on a subordinated basis with respect
to the HIGH TIDES but does not guarantee payment of Distributions or amounts
payable on redemption of the HIGH TIDES or on liquidation of the Trust when the
Trust does not have funds on hand available to make such payments. See
"Description of Guarantee."
Credit Suisse First Boston Corporation will act as the initial Remarketing
Agent with respect to the HIGH TIDES and will be paid fees for its services and
may resign or be replaced by the Company under certain circumstances. See "The
Remarketing Agent."
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RATINGS
The HIGH TIDES have been rated "BB-" by Standard & Poor's Ratings Group and
"B2" by Moody's Investors Services, Inc. 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.
DISTRIBUTIONS
Distributions accrue on the HIGH TIDES from the date of their original
issuance at the Applicable Rate applied to the stated liquidation amount of $50
per HIGH TIDE, and are payable quarterly in arrears on each March 15, June 15,
September 15 and December 15 (each, a "Distribution Date"), commencing September
15, 1998, to the person in whose name each HIGH TIDE is registered, subject to
certain exceptions, at the close of business on the first of each March, June,
September and December next preceding the applicable Distribution Date. Each
registered holder of HIGH TIDES on June 1, 2005 (including any holder which has
tendered or is deemed to have tendered its HIGH TIDES for remarketing) shall be
paid a Distribution of interest and Additional Amounts, if any, accrued to (but
excluding) the Reset Date on June 15, 2005 (or, if such day is not a Business
Day, the next succeeding Business Day). Interest and Additional Amounts, if any,
accrued from and after the Reset Date to (but excluding) September 15, 2005
shall be paid on September 15, 2005 (or, if such day is not a Business Day, the
next succeeding Business Day) to the person in whose name each HIGH TIDE is
registered on the preceding September 1, subject to the right of the Company to
initiate a Deferral Period (as described below). The Applicable Rate is 6 1/4%
per annum (the "Initial Rate") from the date of original issuance of the HIGH
TIDES to (but excluding) the Reset Date, and the Term Rate from the Reset Date
and thereafter. The Term Rate is the rate established by the Remarketing Agent
to be effective on the Reset Date and communicated on such date by the
Remarketing Agent, who will communicate such rate to the Issuer Trustees, the
Issuer, the Debenture Trustee, the Paying Agent, the Company and the holders (if
any) which elected not to tender all their HIGH TIDES for remarketing, by
written notice or by telephone promptly confirmed by telecopy or other writing.
The Applicable Rate will be increased upon a Registration Default. See "The
Remarketing" and "Registration Rights." The amount of Distributions payable for
any period is computed on the number of days elapsed in a 360-day year of twelve
30-day months. In the event that any Distribution Date is not a Business Day,
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 payments in respect to any such delay) with the same force and effect
as if made on the date such payment was originally payable. Accrued
Distributions that are not paid on the applicable Distribution Date will accrue
additional Distributions on the amount thereof (to the extent permitted by law)
at the Applicable Rate, compounded quarterly from the relevant Distribution
Date. "Distribution" as used herein shall include quarterly distributions,
additional distributions on quarterly distributions not paid on the applicable
Distribution Date and Additional Amounts, as applicable. See "Description of
HIGH TIDES Debentures -- Additional Amounts" and "Registration Rights." A
"Business Day" shall mean any day other than a Saturday or a Sunday, or 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 a day on which the corporate trust
office of the Property Trustee or the Debenture Trustee is closed for business.
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
on the HIGH TIDES Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each Deferral Period, provided
that no Deferral Period may extend beyond (i) the maturity (whether at June 15,
2028 or by declaration of acceleration, call for redemption or otherwise) and
(ii) in the case of a Deferral Period that begins prior to the Reset Date, the
Reset Date. See "Description of HIGH TIDES Debentures -- Option to Extend
Interest Payment Period." As a consequence of any such election, quarterly
Distributions on the HIGH TIDES by the Trust will be deferred during any such
Deferral Period. Deferred distributions to which holders of the HIGH TIDES are
entitled will accumulate additional Distributions thereon at the Applicable
Rate, compounded quarterly from the relevant payment date for such Distributions
during any such Deferral Period, to the extent permitted by applicable law.
During any such Deferral Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any
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of the Company's capital stock (which includes common and preferred stock) other
than stock dividends paid by the Company which consist of stock of the same
class as that on which the dividend is being paid, (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the HIGH TIDES Debentures, or (iii) make any guarantee payments with respect
to any guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior in interest to the
HIGH TIDES Debentures (other than (a) dividends or distributions in Common
Stock, (b) any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, or the issuance of stock under any such plan in
the future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, (d) purchases or acquisitions of shares of
Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plan or any other contractual obligation
of the Company (other than a contractual obligation ranking pari passu with or
junior to the HIGH TIDES Debentures), (e) as a result of a reclassification of
the Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock or (f) the purchase of fractional interests in shares of the
Company's stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged). A Deferral Period
will terminate upon the payment by the Company of all amounts then accrued and
unpaid on the HIGH TIDES Debentures (together with interest thereon accrued at
the Applicable Rate compounded quarterly, to the extent permitted by applicable
law). Prior to the termination of any such Deferral Period, the Company may
further extend such Deferral Period, provided that such deferral does not cause
such Deferral Period to exceed 20 consecutive quarters or to extend beyond (i)
the maturity (whether at June 15, 2028 or by declaration of acceleration, call
for redemption or otherwise) and (ii) in the case of a Deferral Period that
begins prior to the Reset Date, the Reset Date. Upon the termination of any
Deferral Period, and subject to the foregoing limitations, the Company may elect
to begin a new Deferral Period. No interest or other amounts shall be due and
payable during a Deferral Period, except at the end thereof. The Company must
give the Property Trustee, the Administrative Trustees and the Debenture Trustee
notice of its election of any such Deferral Period and shall cause the Issuer to
give such notice (which shall include notice of the deferral of Distributions on
the HIGH TIDES) to holders of HIGH TIDES not later than ten days prior to the
related record date for Distributions on the HIGH TIDES. There is no limitation
on the number of times that the Company may elect to begin a Deferral Period.
See "Description of HIGH TIDES Debentures -- Option to Extend Interest Payment
Date" and "United States Federal Tax Considerations -- Interest Income and
Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of interest on the HIGH TIDES Debentures.
The revenue of the Trust available for distribution to holders of the HIGH
TIDES is limited to payments under the HIGH TIDES Debentures in which the Trust
invested the proceeds from the issuance and sale of the Trust Securities. See
"Description of HIGH TIDES Debentures -- General." If the Company does not make
interest payments on the HIGH TIDES Debentures, the Property Trustee will not
have funds available to pay Distributions on the HIGH TIDES. The payment of
Distributions (if and to the extent the Trust 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 herein under
"Description of Guarantee."
CONVERSION RIGHTS
General. HIGH TIDES are convertible at any time prior to 5:00 p.m., New
York City time, on or prior to the Tender Notification Date and, in the event of
a Convertible Remarketing which does not fail, from and after the Reset Date to
and including June 15, 2028 (except that HIGH TIDES called for redemption by the
Company will be convertible at any time prior to 5:00 p.m., New York City time,
on any Redemption Date), at the option of the holder thereof and in the manner
described below, into shares of Class A Common Stock. On or prior to the Tender
Notification Date, each HIGH TIDE is convertible, at the option of the holder,
into 1.5179 shares of Class A Common Stock for each High Tide (the "Initial
Conversion Ratio") (equivalent to a conversion price (the "Initial Conversion
Price") of $32.94 liquidation amount of HIGH TIDES per share
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of Class A Common Stock). On the Reset Date and thereafter, each HIGH TIDE may,
at the option of the Issuer and subject to the results of the Remarketing,
become nonconvertible or convertible into a different number of shares of Class
A Common Stock. See "The Remarketing." The conversion ratio and the equivalent
conversion price in effect at any given time are referred to as the "Applicable
Conversion Ratio" and the "Applicable Conversion Price," respectively, and will
be subject to adjustment as described under "-- Conversion Price Adjustments"
below. The Issuer will covenant in the Declaration not to convert HIGH TIDES
Debentures held by it except pursuant to a notice of conversion delivered to the
conversion agent by a holder of HIGH TIDES. A holder of a HIGH TIDE wishing to
exercise its conversion right shall deliver an irrevocable conversion notice,
together, if the HIGH TIDE is in certificated form, with such certificated
security, to the conversion agent which shall, on behalf of such holder,
exchange such HIGH TIDE for a Like Amount of HIGH TIDES Debentures and
immediately convert such HIGH TIDES Debentures into Class A Common Stock.
Holders may obtain copies of the required form of the conversion notice from the
conversion agent. For purposes of this section entitled "Conversion Rights," the
term "Common Stock" includes any class of common stock of the Company, except
that the Common Stock issuable upon conversion means the Class A Common Stock.
Holders of HIGH TIDES at the close of business on a Distribution record
date will be entitled to receive the Distribution payable on such HIGH TIDES on
the corresponding Distribution Date notwithstanding the conversion of such HIGH
TIDES following such Distribution record date but prior to such Distribution
Date. Except as provided in the immediately preceding sentence, neither the
Issuer nor the Company will make, or be required to make, any payment, allowance
or adjustment for accrued and unpaid Distributions, whether or not in arrears,
on converted HIGH TIDES. The Company will make no payment or allowance for
distributions on the shares of Class A Common Stock issued upon such conversion,
except to the extent that such shares of Class A Common Stock are held of record
on the record date for any such distributions. Each conversion will be deemed to
have been effected immediately prior to the close of business on the day on
which the related conversion notice was received by the Issuer and the
conversion agent.
No fractional shares of Class A Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid by the
Company in cash based on the Closing Price of the Class A Common Stock.
Conversion Price Adjustments -- General. The Applicable Conversion Price
will be subject to adjustment in certain events including, without duplication:
(i) the payment of dividends (and other distributions) payable in Common Stock
on the Common Stock; (ii) the issuance to all holders of Common Stock of rights
or warrants; (iii) subdivisions and combinations of Common Stock; (iv) the
payment of dividends (and other distributions) to all holders of Common Stock
consisting of evidences of indebtedness of the Company, securities or capital
stock, cash or assets (including securities, but excluding those rights,
warrants, dividends and distributions referred to in clauses (i) and (ii) and
dividends and distributions paid exclusively in cash); (v) the payment of
dividends (and other distributions) on Common Stock paid exclusively in cash,
excluding (a) cash dividends that do not exceed the per share amount of the
smallest of the immediately four preceding quarterly cash dividends (as adjusted
to reflect any of the events referred to in clauses (i) through (vi) of this
sentence) and (b) cash dividends the per share amount of which, together with
the aggregate per share amount of any other cash dividends paid within the 12
months preceding the date of payment of such cash dividends, does not exceed
12 1/2% of the current market price of Common Stock as of the trading day
immediately preceding the date of declaration of such dividend; and (vi) payment
to holders of Common Stock in respect of a tender or exchange offer (other than
an odd-lot offer) by the Company or any subsidiary of the Company for Common
Stock at a price in excess of 110% of the current market price of Common Stock
as of the trading day next succeeding the last date tenders or exchanges may be
made pursuant to such tender or exchange offer.
The Company may, at its option, make such reductions in the Applicable
Conversion Price as the Company's Board of Directors deems advisable to avoid or
diminish any income tax to holders of Common Stock resulting from any dividend
or distribution of stock (or rights to acquire stock) or from any event treated
as such for income tax purposes. See "United States Federal Tax
Considerations -- Adjustment of Conversion Price."
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No adjustment of the Applicable Conversion Price will be made upon the
issuance of any shares of Common Stock pursuant to any present or future plan
providing for the reinvestment of dividends or interest payable on securities of
the Company and the investment of additional optional amounts in shares of
Common Stock under any such plan or the issuance of any shares of Common Stock
or options or rights to purchase such shares pursuant to any present or future
employee, director or consultant benefit plan or program of the Company or
pursuant to any option, warrant, right, or exercisable, exchangeable or
convertible security outstanding as of the date the HIGH TIDES were first
issued. There shall also be no adjustment of the Applicable Conversion Price in
case of the issuance of any Common Stock (or securities convertible into or
exchangeable for Common Stock), except as specifically described above. No
adjustment in the Applicable Conversion Price will be required unless such
adjustment would require an increase or decrease of at least 1% of the
Applicable Conversion Price, but any adjustment that would otherwise be required
to be made shall be carried forward and taken into account in any subsequent
adjustment.
Conversion Price Adjustments -- Merger, Consolidation or Sale of Assets of
the Company. In the event that the Company is a party to any transaction
(including, without limitation, a merger, consolidation, sale of all or
substantially all of the assets of the Company, recapitalization or
reclassification of Common Stock or any compulsory share exchange (each of the
foregoing being referred to as a "Company Transaction")), in each case, as a
result of which shares of Common Stock shall be converted into the right to
receive other securities, cash or other property, then lawful provision shall be
made as part of the terms of such Company Transaction whereby the holder of each
HIGH TIDE then outstanding shall have the right thereafter to convert such HIGH
TIDE only into (i) in the case of any Company Transaction other than a Company
Transaction involving a Common Stock Fundamental Change, the kind and amount of
securities, cash and other property receivable upon the consummation of such the
Company Transaction by a holder of that number of shares of Common Stock into
which a HIGH TIDE was convertible immediately prior to such Transaction, or (ii)
in the case of a Company Transaction involving a Common Stock Fundamental
Change, common stock of the kind received by holders of Common Stock (but in
each case after giving effect to any adjustment discussed below relating to a
Fundamental Change if such Company Transaction constitutes a Fundamental
Change). The holders of HIGH TIDES will have no voting rights with respect to
any Company Transaction described in this section.
In the case of any Company Transaction involving a Fundamental Change, the
Applicable Conversion Price will be adjusted immediately after such Fundamental
Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the Applicable
Conversion Price of the HIGH TIDES will thereupon become the lower of (a)
the Applicable Conversion Price immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other prior adjustments,
and (b) the result obtained by multiplying the greater of the Relevant
Price or the then applicable Reference Market Price by the Optional
Redemption Ratio (such product shall hereinafter be referred to as the
"Adjusted Relevant Price" or the "Adjusted Reference Market Price", as the
case may be); and
(ii) in the case of a Common Stock Fundamental Change, the Applicable
Conversion Price of the HIGH TIDES immediately prior to such Common Stock
Fundamental Change, but after giving effect to any other prior adjustments,
will thereupon be adjusted by multiplying such Applicable Conversion Price
by a fraction of which the numerator will be the Purchaser Stock Price and
the denominator will be the Relevant Price; provided, however, that in the
event of a Common Stock Fundamental Change in which (a) 100% of the value
of the consideration received by a holder of Common Stock is common stock
of the successor, acquiror or other third party (and cash, if any, is paid
only with respect to any fractional interests in such common stock
resulting from such Common Stock Fundamental Change) and (b) all Common
Stock will have been exchanged for, converted into, or acquired for common
stock (and cash with respect to fractional interests) of the successor,
acquiror or other third party, the Applicable Conversion Price of the HIGH
TIDES immediately prior to such Common Stock Fundamental Change will
thereupon be adjusted by multiplying such conversion price by a fraction of
which the numerator will be one and the denominator will be the number of
shares of common stock of the successor, acquiror, or other third party
received by a holder of one share of Common Stock as a result of such
Common Stock Fundamental Change.
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In the absence of the adjustments to the Applicable Conversion Price after
a Fundamental Change, in the case of a Company Transaction each HIGH TIDE would
become convertible into the securities, cash, or other property receivable by a
holder of the number of shares of Common Stock into which such HIGH TIDE was
convertible immediately prior to such Company Transaction. Thus, in the absence
of the Fundamental Change provisions, a Company Transaction could substantially
lessen or eliminate the value of the conversion privilege associated with the
HIGH TIDES. For example, if the Company were acquired in a cash merger, each
HIGH TIDE would become convertible solely into cash and would no longer be
convertible into securities whose value would vary depending on the future
prospects of the Company and other factors.
In Non-Stock Fundamental Change transactions, the foregoing conversion
price adjustments are designed to increase the securities, cash or other
property into which each HIGH TIDE is convertible. In a Non-Stock Fundamental
Change transaction in which the initial value received per share of Common Stock
(measured as described in the definition of Adjusted Relevant Price) is lower
than the then Applicable Conversion Price of a HIGH TIDE but greater than or
equal to the Adjusted Reference Market Price, the Applicable Conversion Price
will be adjusted as described above with the effect that each HIGH TIDE will be
convertible into securities, cash or other property of the same type received by
the holders of Common Stock in such transaction with the Applicable Conversion
Price adjusted as though such initial value had been the Adjusted Relevant
Price. In a Non-Stock Fundamental Change transaction in which the initial value
received per share of Common Stock (measured as described in the definition of
Adjusted Relevant Price) is lower than both the Applicable Conversion Price of a
HIGH TIDE and the Adjusted Reference Market Price, the Applicable Conversion
Price will be adjusted as described above but calculated as though such initial
value had been the Adjusted Reference Market Price.
In Common Stock Fundamental Change transactions, the foregoing adjustments
are designed to provide in effect that (i) where Common Stock is converted
partly into such common stock and partly into other securities, cash or
property, each HIGH TIDE will be convertible solely into a number of shares of
such common stock determined so that the initial value of such shares (measured
as described in the definition of Purchaser Stock Price) equals the value of the
shares of Common Stock into which such HIGH TIDE was convertible immediately
before the transaction (measured as aforesaid) and (ii) where Common Stock is
converted solely into such common stock, each HIGH TIDE will be convertible into
the same number of shares of such common stock receivable by a holder of the
number of shares of Common Stock into which such HIGH TIDE was convertible
immediately before such transaction.
"Closing Price" of any security on any day means the last reported sale
price of such security on such day, or in case no sale takes place on such day,
the average of the closing bid and asked prices in each case on the principal
national securities exchange on which such securities are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, on the National Market System of the National Association of
Securities Dealers, Inc. or any successor national automated interdealer
quotation system (the "NNM") or, if such securities are not listed or admitted
to trading on any national securities exchange or quoted on the NNM, the average
of the closing bid and asked prices of such security in the over-the-counter
market as furnished by any New York Stock Exchange member firm selected by the
Company for such purpose.
"Common Stock Fundamental Change" means any Fundamental Change in which
more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Common
Stock consists of common stock that for each of the ten consecutive trading days
immediately prior to and including the Entitlement Date has been admitted for
listing or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on the NNM.
"Entitlement Date" means the record date for determination of the holders
of Common Stock entitled to receive securities, cash or other property in
connection with a Non-Stock Fundamental Change or a Common Stock Fundamental
Change or, if there is no such record date, the date upon which holders of
Common Stock shall have the right to receive such securities, cash or other
property.
"Fundamental Change" means the occurrence of any transaction or event in
connection with a plan pursuant to which all or substantially all of the Common
Stock shall be exchanged for, converted into,
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<PAGE> 33
acquired for or constitute solely the right to receive securities, cash or other
property (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided that, in the case of a plan involving more than one such
transaction or event, for purposes of adjustment of the Applicable Conversion
Price, such Fundamental Change shall be deemed to have occurred when
substantially all of the Common Stock shall be exchanged for, converted into, or
acquired for or constitute solely the right to receive securities, cash, or
other property, but the adjustment shall be based upon the highest weighted
average per share consideration that a holder of Common Stock could have
received in such transactions or events as a result of which more than 50% of
all outstanding shares of Common Stock shall have been exchanged for, converted
into, or acquired for or constitute solely the right to receive securities, cash
or other property.
"Non-Stock Fundamental Change" means any Fundamental Change other than a
Common Stock Fundamental Change.
"Optional Redemption Ratio" means a fraction of which the numerator will be
$50 and the denominator will be the then current Optional Redemption Price or,
on or prior to June 20, 2001 and at any time after the Reset Date at which the
HIGH TIDES are not redeemable at the option of the Company, an amount per HIGH
TIDE determined by the Company in its sole discretion, after consultation with
an investment banking firm, to be the equivalent of the hypothetical redemption
price that would have been applicable if the HIGH TIDES had been redeemable
during such period.
"Purchaser Stock Price" means, with respect to any Common Stock Fundamental
Change, the average of the Closing Prices for the common stock received in such
Common Stock Fundamental Change for the ten consecutive trading days prior to
and including the Entitlement Date, as adjusted in good faith by the Company to
appropriately reflect any of the events referred to in clauses (i) through (vi)
of the first paragraph under "-- Applicable Conversion Price
Adjustments -- General."
"Reference Market Price" shall initially mean on the date of original
issuance of the HIGH TIDES, $17.88 (which is an amount equal to 66 2/3% of the
last reported sale price for the Class A Common Stock on the New York Stock
Exchange Composite Tape on June 16, 1998) and, in the event of any adjustment to
the Applicable Conversion Price from such date to (but excluding) the Reset
Date, other than as a result of a Non-Stock Fundamental Change, the Reference
Market Price shall also be adjusted so that the ratio of the Reference Market
Price to the Applicable Conversion Price after giving effect to any such
adjustment shall always be the same as the ratio of $17.88 to the Initial
Conversion Price. If the HIGH TIDES are convertible into Class A Common Stock on
and after the Reset Date, the Reference Market Price on the Reset Date will be
an amount equal to 66 2/3% of the Closing Price of the Class A Common Stock on
the Reset Date and, in the event of any adjustment to the Applicable Conversion
Price from the Reset Date and thereafter, other than as a result of a Non-Stock
Fundamental Change, the Reference Market Price shall also be adjusted so that
the ratio of the Reference Market Price to the Applicable Conversion Price after
giving effect to any such adjustment shall always be the same as the ratio of
the Closing Price of the Class A Common Stock on the Reset Date to the Term
Conversion Price.
"Relevant Price" means (i) in the case of a Non-Stock Fundamental Change in
which the holder of Common Stock receives only cash, the amount of cash received
by the holder of one share of Common Stock and (ii) in the event of any other
Non-Stock Fundamental Change or any Common Stock Fundamental Change, the average
of the daily Closing Prices for Common Stock during the ten consecutive trading
days prior to and including the Entitlement Date, in each case as adjusted in
good faith by the Company to appropriately reflect any of the events referred to
in clauses (i) through (vi) of the first paragraph under "-- Applicable
Conversion Price Adjustments -- General."
MANDATORY REDEMPTION
Upon the repayment in full of the HIGH TIDES Debentures at their stated
maturity or a redemption in whole or in part of the HIGH TIDES Debentures (other
than following any distribution of the HIGH TIDES Debentures to the holders of
the Trust Securities), the proceeds from such repayment or redemption shall be
applied by the Property Trustee to redeem, on a pro rata basis, a Like Amount of
Trust Securities, on the
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<PAGE> 34
Redemption Date, in an amount per Trust Security equal to the applicable
Redemption Price, which Redemption Price will be equal to (i) the liquidation
amount of each HIGH TIDE plus any accrued and unpaid Distributions thereon in
the case of (A) the repayment of the HIGH TIDES Debentures at their stated
maturity (the "Stated Maturity Price"), or (B) the redemption of the HIGH TIDES
Debentures in certain limited circumstances upon the occurrence of a Tax Event,
(ii) in the case of an Optional Redemption after June 20, 2001, but prior to
(and excluding) the Reset Date, the Initial Redemption Price (as defined under
"Description of HIGH TIDES Debentures -- Redemption -- Optional Redemption"),
(iii) in the case of an Optional Redemption after the Reset Date, in accordance
with the Term Call Protections, if any, established in the Remarketing and (iv)
in the event of redemption of the HIGH TIDES Debentures upon a Failed Final
Remarketing, 101% of the liquidation amount of each HIGH TIDE plus any accrued
and unpaid Distributions thereon.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the HIGH TIDES Debentures such amounts as shall be
required so that the Distributions payable by the Trust in respect of the Trust
Securities shall not be reduced as a result of any such additional taxes, duties
or other governmental charges. See "Description of HIGH TIDES
Debentures -- Additional Amounts."
REDEMPTION PROCEDURES
Trust Securities shall be redeemed, if at all, at the applicable Redemption
Price with the proceeds from the contemporaneous repayment or redemption of the
HIGH TIDES Debentures. Redemptions of the Trust Securities shall be made and the
applicable Redemption Price shall be payable on each Redemption Date only to the
extent that the Trust has funds on hand available for the payment of such
Redemption Price. See also "-- Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the HIGH TIDES,
then, by 10:00 a.m., New York City time, on the date fixed for redemption (the
"Redemption Date"), to the extent funds are available, with respect to the HIGH
TIDES held in global form, the Property Trustee will deposit irrevocably with
DTC funds sufficient to pay the applicable Redemption Price and will give DTC
irrevocable instructions and authority to pay the applicable Redemption Price to
the holders of the HIGH TIDES. See "-- Form, Book-Entry Procedures and
Transfer." With respect to the HIGH TIDES held in certificated form, the
Property Trustee, to the extent funds are available, will irrevocably deposit
with the paying agent for the HIGH TIDES funds sufficient to pay the applicable
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 the HIGH TIDES. See "-- Payment and Paying
Agency." Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date shall be payable to the holders of the HIGH TIDES on the
relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then upon the
date of such deposit, all rights of the holders of the HIGH TIDES will cease,
except the right of the holders of the HIGH TIDES to receive the applicable
Redemption Price, but without interest on such Redemption Price, and the HIGH
TIDES will cease to be outstanding. In the event that any Redemption Date is not
a Business Day, then payment of the applicable Redemption Price payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
applicable Redemption Price is improperly withheld or refused and not paid
either by the Trust or by the Company pursuant to the Guarantee as described
under "Description of Guarantee," Distributions on HIGH TIDES will continue to
accrue at the then Applicable Rate, from the Redemption Date originally
established by the Trust 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.
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding HIGH TIDES by tender in the open market
or by private agreement except as provided under "The Remarketing -- Purchases
by the Company and its Affiliates."
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If the Company desires to consummate an Optional Redemption it must send a
notice to each holder of Trust Securities at its registered address in
accordance with the notice procedures set forth under "Description of HIGH TIDES
Debentures -- Redemption -- Optional Redemption." Notice of a Tax Event
Redemption will be mailed at least 30 days but not more than 60 days before the
Redemption Date to each holder of HIGH TIDES. Notice of repayment at the stated
maturity of the HIGH TIDES Debentures or of redemption in the event of a Failed
Final Remarketing is not required, except to the extent set forth under "The
Remarketing."
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION
If a Tax Event shall occur and be continuing, the Company shall cause the
Issuer Trustees to liquidate the Issuer and cause HIGH TIDES Debentures to be
distributed to the holders of the HIGH TIDES in liquidation of the Issuer within
90 days following the occurrence of such Tax Event; provided, however, that such
liquidation and distribution shall be conditioned on (i) the Issuer Trustees'
receipt of an opinion of nationally recognized independent tax counsel
(reasonably acceptable to the Issuer Trustees) experienced in such matters (a
"No Recognition Opinion"), which opinion may rely on published revenue rulings
of the Internal Revenue Service (the "IRS"), to the effect that the holders of
the HIGH TIDES will not recognize any income, gain or loss for United States
federal income tax purposes as a result of such liquidation and distribution of
HIGH TIDES Debentures, and (ii) the Company being unable to avoid such Tax Event
within such 90-day period by taking some ministerial action or pursuing some
other reasonable measure that, in the sole judgment of the Company, will have no
adverse effect on the Issuer, the Company or the holders of the HIGH TIDES and
will involve no material cost. Furthermore, if (i) the Company has received an
opinion (a "Redemption Tax Opinion") of nationally recognized independent tax
counsel (reasonably acceptable to the Issuer Trustees) experienced in such
matters that, as a result of a Tax Event, there is more than an insubstantial
risk that the Company would be precluded from deducting the interest on the HIGH
TIDES Debentures for United States federal income tax purposes, even after the
HIGH TIDES Debentures were distributed to the holders of the HIGH TIDES upon
liquidation of the Issuer as described above, or (ii) the Issuer Trustees shall
have been informed by such tax counsel that it cannot deliver a No Recognition
Opinion, the Company shall have the right, upon not less than 30 nor more than
60 days' notice and within 90 days following the occurrence and continuation of
the Tax Event, to redeem the HIGH TIDES Debentures, in whole, but not in part,
for cash, for the principal amount thereof plus accrued and unpaid interest
thereon and, following such redemption, all the HIGH TIDES will be redeemed by
the Issuer at the aggregate liquidation amount thereof plus accrued and unpaid
Distributions thereon; provided, however, that, if at the time there is
available to the Company or the Issuer the opportunity to eliminate, within such
90-day period, the Tax Event by taking some ministerial action or pursuing some
other reasonable measure that, in the sole judgment of the Company, will have no
adverse effect on the Issuer, the Company or the holders of the HIGH TIDES and
will involve no material cost, the Issuer or the Company will pursue such
measure in lieu of redemption. See "-- Mandatory Redemption." In lieu of the
foregoing options, the Company will also have the option of causing the HIGH
TIDES to remain outstanding and pay Additional Amounts on the HIGH TIDES
Debentures. See "Description of HIGH TIDES Debentures -- Additional Amounts."
"Tax Event" means the receipt by the Property Trustee of an opinion of a
nationally recognized independent tax counsel to the Company (reasonably
acceptable to the Issuer Trustees) experienced in such matters (a "Dissolution
Tax Opinion") to the effect that, as a result of (i) any amendment to or change
(including any announced prospective change (which shall not include a proposed
change), provided that a Tax Event shall not occur more than 90 days before the
effective date of any such prospective change) in the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (ii) any judicial decision or official
administrative pronouncement, ruling, regulatory procedure, notice or
announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (iii) any amendment to
or change in the administrative position or interpretation of any Administrative
Action or judicial decision that differs from the theretofore generally accepted
position, in each case, by any legislative body, court, governmental agency or
regulatory body, irrespective of the manner in which such amendment or change is
made known, which amendment or change is effective or such Administrative Action
or decision is announced, in each case, on or after the date
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of original issuance of the HIGH TIDES Debentures or the issue date of the HIGH
TIDES issued by the Trust, there is more than an insubstantial risk that (a) if
the HIGH TIDES Debentures are held by the Property Trustee, (x) the Trust is, or
will be within 90 days of the date of such opinion, subject to United States
federal income tax with respect to interest accrued or received on the HIGH
TIDES Debentures or subject to more than a de minimis amount of other taxes,
duties or other governmental charges as determined by such counsel, or (y) any
portion of interest payable by the Company to the Trust (or OID accruing) on the
HIGH TIDES Debentures is not, or within 90 days of the date of such opinion will
not be, deductible by the Company in whole or in part for United States federal
income tax purposes or (b) with respect to HIGH TIDES Debentures which are no
longer held by the Property Trustee, any portion of interest payable by the
Company (or OID accruing) on the HIGH TIDES Debentures is not, or within 90 days
of the date of such opinion will not be, deductible by the Company in whole or
in part for United States federal income tax purposes, provided, however, that
clauses (a)(y) and (b) shall not apply if the reason for the nondeductibility of
such interest (or OID) is based on the particular use (or deemed use) by the
Company or an affiliate of the proceeds of the issuance of the HIGH TIDES
Debentures.
If an Investment Company Event shall occur and be continuing, the Company
shall cause the Issuer Trustees to liquidate the Issuer and cause the HIGH TIDES
Debentures to be distributed to the holders of the HIGH TIDES in liquidation of
the Issuer within 90 days following the occurrence of such Investment Company
Event.
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that the Issuer is or will
be considered an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
1940 Act Law becomes effective on or after the date of this Prospectus.
The distribution by the Company of the HIGH TIDES Debentures will
effectively result in the cancellation of the HIGH TIDES. See "-- Liquidation of
the Trust and Distribution of HIGH TIDES Debentures."
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF HIGH TIDES DEBENTURES
The Company, as the holder of the outstanding Common Securities, has the
right at any time (including, without limitation, upon the occurrence of a Tax
Event or an Investment Company Event) to dissolve the Trust and cause a Like
Amount of the HIGH TIDES Debentures to be distributed to the holders of the
Trust Securities upon liquidation of the Trust; provided, however, that the
Company may not dissolve the Issuer during the period beginning on the Business
Day following the Tender Notification Date and ending on the Reset Date (other
than upon the occurrence of a Tax Event or an Investment Company Event as
provided herein); provided, further that, the Issuer Trustees shall have
received a No Recognition Opinion prior to the liquidation of the Trust;
provided, further that, following such distribution of the HIGH TIDES
Debentures, the Company agrees to use its best efforts to maintain any ratings
of such HIGH TIDES Debentures by any nationally recognized rating agency for so
long as any such HIGH TIDES Debentures are outstanding.
The Trust shall automatically dissolve upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the distribution of a Like Amount of the HIGH TIDES Debentures to the holders of
the Trust Securities if the Company, as Depositor, has given written direction
to the Property Trustee to terminate the Trust (which direction is optional and,
except as described above, wholly within the discretion of the Company, as
Depositor); (iii) redemption of all the Trust Securities as described under
"-- Mandatory Redemption" above; (iv) the conversion of all outstanding Trust
Securities as described under "-- Conversion Rights" above; (v) expiration of
the term of the Trust; or (vi) the entry of an order for the dissolution of the
Trust by a court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii), (v) or
(vi) above, the Trust shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, to the
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holders of such Trust Securities a Like Amount of the HIGH TIDES Debentures,
unless such distribution would not be practical, in which event such holders
will be entitled to receive out of the assets of the Trust available for
distribution to holders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to, in the case of holders
of HIGH TIDES, the aggregate liquidation amount thereof plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on the
HIGH TIDES shall be paid on a pro rata basis. The holder(s) of the Common
Securities will be entitled to receive distributions upon any such liquidation
pro rata with the holders of the HIGH TIDES, except that if a Debenture Event of
Default (or an event that, with notice or passage of time, would become such a
Debenture Event of Default) has occurred and is continuing, the HIGH TIDES shall
have a priority over the Common Securities with respect to any such
distributions. See "-- Subordination of Common Securities."
"Like Amount" means (i) with respect to a redemption of HIGH TIDES, HIGH
TIDES having an aggregate liquidation amount equal to that portion of the
principal amount of HIGH TIDES Debentures to be contemporaneously redeemed in
accordance with the Indenture, allocated to the Common Securities and to the
HIGH TIDES based upon the relative liquidation amounts of such classes and the
proceeds of which will be used to pay the applicable Redemption Price of the
HIGH TIDES and (ii) with respect to a distribution of HIGH TIDES Debentures to
holders of HIGH TIDES in connection with a dissolution or liquidation of the
Trust, HIGH TIDES Debentures having an aggregate principal amount equal to the
aggregate liquidation amount of the Trust Securities of the holder to whom such
HIGH TIDES Debentures are distributed.
If the Company does not redeem the HIGH TIDES Debentures prior to maturity
and the Trust is not liquidated and the HIGH TIDES Debentures are not
distributed to holders of the Trust Securities, the HIGH TIDES will remain
outstanding until the repayment of the HIGH TIDES Debentures at their stated
maturity and the distribution of the Liquidation Distribution to the holders of
the HIGH TIDES.
On and after the liquidation date fixed for any distribution of HIGH TIDES
Debentures to holders of the Trust Securities, (i) the HIGH TIDES will no longer
be deemed to be outstanding, (ii) DTC or its nominee, as the record holder of
the HIGH TIDES, will receive a registered global certificate or certificates
representing the HIGH TIDES Debentures to be delivered upon such distribution
with respect to HIGH TIDES held by DTC or its nominee and (iii) any certificates
representing HIGH TIDES not held by DTC or its nominee will be deemed to
represent HIGH TIDES Debentures having a principal amount equal to the
liquidation amount of such HIGH TIDES and bearing accrued and unpaid interest in
an amount equal to the accumulated and unpaid Distributions on such HIGH TIDES
until such certificates are presented to the Administrative Trustees or their
agent for cancelation, whereupon the Company will issue to such holder, and the
Debenture Trustee will authenticate, a certificate representing such HIGH TIDES
Debentures.
There can be no assurance as to the market prices for the HIGH TIDES or the
HIGH TIDES Debentures that may be distributed in exchange for the Trust
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the HIGH TIDES that an investor may purchase, or the HIGH TIDES
Debentures that the investor may receive on dissolution and liquidation of the
Trust, may trade at a discount to the price that the investor paid to purchase
the HIGH TIDES offered hereby.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the HIGH TIDES
and Common Securities, as applicable, shall be made pro rata to the holders of
HIGH TIDES and Common Securities based on the liquidation amount of the Trust
Securities, provided that, if on any Distribution Date or Redemption Date any
Debenture Event of Default (or an event that, with notice or passage of time,
would become such an Event of Default) or an Event of Default under the
Declaration shall have occurred and be continuing, no payment of any
Distribution on, or applicable Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of such Common Securities, shall be made unless payment in
full in cash of all accrued and unpaid Distributions on all of the outstanding
HIGH TIDES
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for all Distribution periods terminating on or prior thereto, or, in the case of
payment of the applicable Redemption Price, the full amount of such Redemption
Price on all of the outstanding HIGH TIDES, shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions on, or the applicable
Redemption Price of, the HIGH TIDES then due and payable.
In the case of any Event of Default under the Declaration resulting from a
Debenture Event of Default, the Company as holder of the Common Securities will
be deemed to have waived any right to act with respect to any such Event of
Default under the Declaration until the effect of all such Events of Default
have been cured, waived or otherwise eliminated. Until all such Events of
Default under the Declaration have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
such HIGH TIDES and not on behalf of the Company as holder of the Common
Securities, and only the holders of the HIGH TIDES will have the right to direct
the Property Trustee to act on their behalf.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under the
Declaration (an "Event of Default") (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 HIGH TIDES 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 (subject to the deferral of any due date in the case of a Deferral
Period); 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 Declaration
(other than a covenant or warranty, a default in the performance of which
or the breach of which is addressed 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
Trustee or Issuer Trustees by the holders of at least 25% in aggregate
liquidation amount of the outstanding HIGH TIDES, 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 Declaration; or
(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 60 days thereof.
Within ten Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the HIGH TIDES, the
Administrative Trustees and the Company, as Depositor, unless such Event of
Default shall have been cured or waived. 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 Declaration.
If a Debenture Event of Default (or an event that with notice or the
passage of time, would become such an Event of Default) or an Event of Default
under the Declaration has occurred and is continuing, the HIGH TIDES shall have
a preference over the Common Securities as described above. See "-- Liquidation
of the Trust and Distribution of HIGH TIDES Debentures" and "-- Subordination of
Common Securities."
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred
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and is continuing, the Property Trustee and the Delaware Trustee may be removed
at such time by the holders of a majority in liquidation amount of the
outstanding HIGH TIDES. In no event will the holders of the HIGH TIDES have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of the Delaware Trustee or the Property
Trustee and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor trustee in accordance with the
provisions of the Declaration.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust's property
may at the time be located, the Company, as the holder of the Common Securities,
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 such Trust's property, or to 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 Declaration. In case a Debenture Event of Default has occurred
and is continuing, the Property Trustee alone shall have power to make such
appointment.
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 Issuer Trustee shall be a party, or
any person succeeding to all or substantially all the corporate trust business
of such Issuer Trustee, shall be the successor of such Issuer Trustee under the
Declaration, provided such person shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust 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 otherwise set forth in the Declaration. The Trust may, at
the request of the Company, as Depositor, with the consent of the Administrative
Trustees but without the consent of the holders of the HIGH TIDES, the Property
Trustee or the Delaware Trustee, 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, however, that (i) such successor entity either (a) expressly
assumes all of the obligations of the Trust with respect to the HIGH TIDES or
(b) substitutes for the HIGH TIDES other securities having substantially the
same terms as the HIGH TIDES (the "Successor Securities") so long as the
Successor Securities rank the same as the HIGH TIDES rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Company expressly acknowledges the successor entity as the
holder of the HIGH TIDES Debentures, (iii) the Successor Securities are listed
or traded, or any Successor Securities will be listed or traded upon
notification of issuance, on any national securities exchange, national
automated quotation system or other organization on which the HIGH TIDES are
then listed or traded, if any, (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the HIGH TIDES
(including any Successor Securities) to be downgraded by any nationally
recognized statistical rating organization, (v) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the HIGH TIDES
(including any Successor Securities) in any material respect, (vi) such
successor entity has a purpose substantially identical and limited to that of
the Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Company has received an opinion from
independent counsel to the Trust experienced in such matters to the effect that
(a) such merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease does not adversely affect the limited liability of the holders of the
HIGH TIDES (including any Successor Securities)
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in any material respect, and (b) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor
such successor entity will be required to register as an investment company
under the 1940 Act, (viii) the Company or any permitted successor or assignee
owns all of the common securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee and (ix) such merger, consolidation,
amalgamation, replacement or lease is not a taxable event for holders of the
HIGH TIDES. Notwithstanding the foregoing, the Trust shall not, except with the
consent of holders of 100% in aggregate liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it, if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Trust or the
successor entity to be classified as an association taxable as a corporation (or
to substantially increase the likelihood that the Trust or the successor entity
would be classified as other than a grantor trust) for United States federal
income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE DECLARATION
Except as provided below and under "Description of Guarantee -- Amendments
and Assignment" and as otherwise required by law and the Declaration, the
holders of the HIGH TIDES will have no voting rights.
In addition to the rights of the holders of HIGH TIDES with respect to the
enforcement of payment to the Issuer of principal of or interest on the HIGH
TIDES Debentures as provided under "Description of HIGH TIDES
Debentures -- Debenture Events of Default," if (i) a Debenture Event of Default
occurs and is continuing or (ii) the Company defaults under the Guarantee with
respect to the HIGH TIDES (each an "Appointment Event"), then the holders of the
HIGH TIDES, acting as a single class, will be entitled by a vote of a majority
in aggregate stated liquidation amount of the outstanding HIGH TIDES to appoint
a Special Trustee. Any holder of HIGH TIDES (other than the Company or any of
its affiliates) shall be entitled to nominate any person to be appointed as
Special Trustee. Not later than 30 days after such right to appoint a Special
Trustee arises, the Issuer Trustees shall convene a meeting of the holders of
HIGH TIDES for the purpose of appointing a Special Trustee. If the Issuer
Trustees fail to convene such meeting within such 30-day period, the holders of
not less than 10% of the aggregate stated liquidation amount of the outstanding
HIGH TIDES will be entitled to convene such meeting. The provisions of the
Declaration relating to the convening and conduct of the meetings of the holders
will apply with respect to any such meeting. Any Special Trustee so appointed
shall cease to be a Special Trustee if the Appointment Event pursuant to which
the Special Trustee was appointed and all other Appointment Events cease to be
continuing. Notwithstanding the appointment of any such Special Trustee, the
Company shall retain all rights under the Indenture, including the right to
defer payments of interest by extending the interest payment period as provided
under "Description of HIGH TIDES Debentures -- Option to Extend Interest Payment
Date." If such an extension occurs, there will be no Debenture Event of Default
and, consequently, no Event of Default for failure to make any scheduled
interest payment during the Deferral Period on the date originally scheduled.
The Declaration may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provision in the Declaration that may be inconsistent with any
other provision, or to make any other provisions with respect to matters or
questions arising under the Declaration, which shall not be inconsistent with
the other provisions of the Declaration, or (ii) to modify, eliminate or add to
any provisions of the Declaration to such extent as shall be necessary to ensure
that the Trust will not be taxable as a corporation or will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities are outstanding or to ensure that the Trust will not be
required to register as an "investment company" under the 1940 Act; provided,
however, that in the case of clause (i), such action shall not adversely affect
in any material respect the interests of any holder of Trust Securities, and any
such amendments of the Declaration shall become effective when notice thereof is
given to the holders of the Trust Securities. The Declaration may be amended by
the Issuer Trustees and the Company with (i) the consent of holders representing
not less than a majority (based upon liquidation amounts) of the outstanding
HIGH
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TIDES, 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 affect the Trust's status as
a grantor trust for United States federal income tax purposes or the Trust's
exemption from status as an "investment company" under the 1940 Act. In
addition, without the consent of each holder of Trust Securities, the
Declaration may not be amended to (i) change the amount or timing of any
Distribution 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.
So long as any HIGH TIDES Debentures are held by the Trust, the Issuer
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Property Trustee with respect to the HIGH TIDES
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 HIGH TIDES Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the HIGH TIDES
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of a majority in aggregate
liquidation amount of all outstanding HIGH TIDES; provided, however, that where
a consent under the Indenture would require the consent of each holder of HIGH
TIDES Debentures affected thereby, no such consent shall be given by the
Property Trustee without the prior consent of each holder of the HIGH TIDES. The
Issuer Trustees shall not revoke any action previously authorized or approved by
a vote of the holders of the HIGH TIDES except by subsequent vote of such
holders. The Property Trustee shall notify each holder of HIGH TIDES of any
notice of default with respect to the HIGH TIDES Debentures. In addition to
obtaining the foregoing approvals of such holders of the HIGH TIDES, prior to
taking any of the foregoing actions, the Issuer Trustees shall obtain an opinion
of counsel experienced in such matters to the effect that such action will not
affect the Trust's status as a grantor trust for United States federal income
tax purposes on account of such action.
Any required approval of holders of HIGH TIDES may be given at a meeting of
such holders convened for such purpose or pursuant to written consent. The
Property Trustee will cause a notice of any meeting at which holders of HIGH
TIDES are entitled to vote to be given to each holder of record of HIGH TIDES in
the manner set forth in the Declaration.
No vote or consent of the holders of HIGH TIDES will be required for the
Trust to redeem and cancel or remarket the HIGH TIDES in accordance with the
Declaration.
Notwithstanding that holders of the HIGH TIDES are entitled to vote or
consent under any of the circumstances described above, any of the HIGH TIDES
that are owned by the Company, the Issuer Trustees or any affiliate of the
Company or any Issuer Trustees, shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
EXPENSES AND TAXES
In the Indenture, the Company, as borrower, has agreed to pay all debts and
other obligations (other than with respect to payments of Distributions, amounts
payable upon redemption and the liquidation amount of the Trust Securities) and
all costs and expenses of the Trust (including costs and expenses relating to
the organization of the Trust, the fees and expenses of the Issuer Trustees and
the costs and expenses relating to the operation of the Trust) and the offering
of the HIGH TIDES, and to pay any and all taxes and all costs and expenses with
respect to the foregoing (other than United States withholding taxes) to which
the Trust might become subject. The foregoing obligations of the Company under
the Indenture are for the benefit of, and shall be enforceable by, any person to
whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof. Any such
Creditor may enforce such obligations of the Company directly against the
Company, and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against the Trust or any other person
before proceeding against the Company. The Company has also agreed in the
Indenture to execute such additional agreement(s) as may be necessary or
desirable to give full effect to the foregoing.
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FORM, BOOK-ENTRY PROCEDURES AND TRANSFER
The HIGH TIDES were offered and sold initially only to QIBs in reliance on
Rule 144A. The HIGH TIDES were issued in the form of one or more fully
registered global HIGH TIDES certificates (collectively, the "Global HIGH
TIDES"), except as described below. The Global HIGH TIDES were deposited upon
issuance with the Property Trustee as custodian for DTC, in New York, New York,
and registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global HIGH TIDES may be transferred, in
whole but not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global HIGH TIDES may not be
exchanged for HIGH TIDES in certificated form except in the limited
circumstances described below. See "-- Certificated HIGH TIDES." In addition, a
transfer of beneficial interests in the Global HIGH TIDES will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants
which may change from time to time.
Depositary Procedures
DTC has advised the Trust and the Company as follows: DTC is a limited
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
to accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers
(including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Indirect access to DTC's system is
also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global HIGH TIDES, DTC will credit
the accounts of Participants designated by the Initial Purchaser with portions
of the principal amount of the Global HIGH TIDES and (ii) ownership of such
interests in the Global HIGH TIDES will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC (with
respect to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial interests in the Global
HIGH TIDES).
Investors in the Global HIGH TIDES may hold their interests therein
directly through DTC, if they are Participants in DTC, or indirectly through
organizations which are Participants in such system. All interests in a Global
HIGH TIDE will be subject to the procedures and requirements of DTC. The laws of
some states require that certain persons take physical delivery in certificated
form of certain securities, such as the HIGH TIDES, that they own. Consequently,
the ability to transfer beneficial interests in a Global HIGH TIDE to such
persons will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global HIGH TIDE
to pledge such interests to persons or entities that do not participate in the
DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests. For
certain other restrictions on the transferability of the HIGH TIDES, see
"-- Certificated HIGH TIDES."
EXCEPT AS DESCRIBED BELOW, OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
HIGH TIDES ARE NOT ENTITLED TO HAVE HIGH TIDES REGISTERED IN THEIR NAMES, AND
WILL NOT RECEIVE OR BE ENTITLED TO RECEIVE PHYSICAL DELIVERY OF HIGH TIDES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS
THEREOF UNDER THE DECLARATION FOR ANY PURPOSE.
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Payments in respect of the Global HIGH TIDES registered in the name of DTC
or its nominee will be payable by the Property Trustee to DTC or its nominee as
the registered holder under the Declaration by wire transfer in immediately
available funds on each Distribution Date. Under the terms of the Declaration,
the Property Trustee will treat the persons in whose names the HIGH TIDES,
including the Global HIGH TIDES, are registered as the owners thereof for the
purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Property Trustee nor any agent thereof has
or will have any responsibility or liability for (i) any aspect of DTC's records
or any Participant's or Indirect Participant's records relating to, or payments
made on account of, beneficial ownership interests in the Global HIGH TIDES, or
for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global HIGH TIDES, or (ii) any other matter relating
to the actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised the Trust and the Company that its current
practice, upon receipt of any payment in respect of securities such as the HIGH
TIDES, is to credit the accounts of the relevant Participants with the payment
on the payment date, in amounts proportionate to their respective holdings in
liquidation amount of beneficial interests in the Global HIGH TIDES, as shown on
the records of DTC, unless DTC has reason to believe it will not receive payment
on such payment date. Payments by the Participants and the Indirect Participants
to the beneficial owners of HIGH TIDES represented by Global HIGH TIDES held
through such Participants will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Property
Trustee or the Trust. Neither the Trust nor the Property Trustee will be liable
for any delay by DTC or any of its Participants in identifying the beneficial
owners of the HIGH TIDES, and the Trust and the Property Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Interests in the Global HIGH TIDES will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its Participants. Transfers between Participants
in DTC will be effected in accordance with DTC's procedures, and will be settled
in same-day funds.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of HIGH TIDES (including, without limitation,
the presentation of HIGH TIDES for exchange as described below) only at the
direction of one or more Participants to whose account with DTC interests in the
Global HIGH TIDES are credited and only in respect of such portion of the
aggregate liquidation amount of the HIGH TIDES represented by the Global HIGH
TIDES as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the Declaration, DTC
reserves the right to exchange the Global HIGH TIDES for legended HIGH TIDES in
certificated form and to distribute such HIGH TIDES to its Participants.
So long as DTC or its nominee is the registered owner of the Global HIGH
TIDES, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the HIGH TIDES represented by the Global HIGH TIDES for all
purposes under the Declaration.
Neither DTC nor its nominee will consent or vote with respect to the HIGH
TIDES. Under its usual procedures, DTC would mail an omnibus proxy to the Trust
as soon as possible after the record date. The omnibus proxy assigns the
consenting or voting rights of DTC or its nominee to those Participants to whose
accounts the HIGH TIDES are credited on the record date (identified in a listing
attached to the omnibus proxy).
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global HIGH TIDES among Participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Trust nor the Property
Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants of their respective obligations under the
rules and procedures governing their operations.
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Certificated HIGH TIDES
The HIGH TIDES represented by the Global HIGH TIDES are exchangeable for
certificated HIGH TIDES in definitive form of like tenor as such HIGH TIDES
("Certificated HIGH TIDES") in denominations of U.S. $50.00 and integral
multiples thereof if (i) DTC notifies the Company or the Issuer that it is
unwilling or unable to continue as depositary for the Global HIGH TIDES or if at
any time DTC ceases to be a clearing agency registered under the Exchange Act,
(ii) the Company or the Issuer in its discretion at any time determines not to
have all of the HIGH TIDES evidenced by Global HIGH TIDES or (iii) a default
entitling the holders of the HIGH TIDES to accelerate the maturity thereof has
occurred and is continuing. Any of the HIGH TIDES that is exchangeable pursuant
to the preceding sentence is exchangeable for Certificated HIGH TIDES issuable
in authorized denominations and registered in such names as DTC shall direct.
Subject to the foregoing, the Global HIGH TIDES are not exchangeable, except for
Global HIGH TIDES of the same aggregate denomination to be registered in the
name of DTC or its nominee.
PAYMENT AND PAYING AGENCY
Payments in respect of the HIGH TIDES held in global form shall be made to
DTC, which shall credit the relevant accounts at DTC on the applicable
Distribution Dates, or, in respect of the HIGH TIDES that are not held by DTC,
such payments shall be made by check mailed to the address of the holder
entitled thereto as such address shall appear on the register. The paying agent
(the "Paying Agent") shall initially be the Property Trustee and any co-paying
agent chosen by the Property Trustee and acceptable to the Administrative
Trustees and the Company. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Property Trustee, the
Administrative Trustees and the Company. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees shall appoint a
successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Company) to act as Paying Agent.
The Property Trustee has informed the Trust that so long as it serves as
paying agent for the HIGH TIDES, it anticipates that information regarding
Distributions on the HIGH TIDES, including payment date, record date and
redemption information, will be made available through The Bank of New York at
101 Barclay Street, New York, New York 10286, Attention: Corporate Trust
Department.
REGISTRAR, CONVERSION AGENT AND TRANSFER AGENT
The Property Trustee acts as registrar, conversion agent and transfer agent
for the HIGH TIDES.
Registration of transfers of HIGH TIDES, will be effected without charge by
or on behalf of the Trust, but only upon payment in respect of any tax or other
government charges that may be imposed in connection with any transfer or
exchange. The Trust will not be required to register or cause to be registered
the transfer or exchange of the HIGH TIDES after they have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Declaration and, during the existence of an 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 Declaration at the request of any holder of Trust
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no Event of Default has
occurred and is continuing and the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
Declaration or is unsure of the application of any provision of the Declaration,
and the matter is not one on which holders of the HIGH TIDES or the Common
Securities are entitled under the Declaration to vote, then the Property Trustee
shall take such action as is directed by the Company and, if not so directed,
shall take such action as it deems advisable and in the best interests of the
holders of the Trust Securities and will have no liability except for its own
bad faith, negligence or willful misconduct.
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MISCELLANEOUS
The Administrative Trustees are authorized and directed to: (i) conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the 1940
Act, (ii) take any action to cause the Trust to be classified for United States
federal income tax purposes as a grantor trust, and (iii) take any action to
ensure that the HIGH TIDES Debentures will be treated as indebtedness of the
Company for United States federal income tax purposes. In this connection, the
Company and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of the Trust or the
Declaration, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt or mortgage or pledge any of
its assets.
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<PAGE> 46
DESCRIPTION OF HIGH TIDES DEBENTURES
The HIGH TIDES Debentures were issued under a HIGH TIDES Debentures
Indenture (the "Indenture"), between the Company and The Bank of New York, as
the Debenture Trustee. The Indenture will be qualified under and will be subject
to and governed by the Trust Indenture Act upon effectiveness of the
Registration Statement in respect of the HIGH TIDES. See "Registration Rights."
This summary of certain terms and provisions of the HIGH TIDES Debentures and
the Indenture does not purport to be complete, and where reference is made to
particular provisions of the Indenture, such provisions, including the
definitions of certain terms, some of which are not otherwise defined herein,
are qualified in their entirety by reference to all of the provisions of the
Indenture and those terms made a part of the Indenture by the Trust Indenture
Act.
GENERAL
Concurrently with the issuance of the Trust Securities, the Trust invested
the proceeds thereof in HIGH TIDES Debentures issued by the Company. Interest
accrues on the HIGH TIDES Debentures from the date of their original issuance,
at the Applicable Rate applied to the principal amount thereof, and is payable
quarterly in arrears on March 15, June 15, September 15 and December 15 (each,
an "Interest Payment Date"), commencing September 15, 1998, to the person in
whose name each HIGH TIDES Debenture is registered, subject to certain
exceptions, at the close of business on the first of each March, June, September
and December next preceding the applicable Interest Payment Date. Each
registered holder of HIGH TIDES on June 1, 2005 (including any holder which has
tendered or is deemed to have tendered its HIGH TIDES for remarketing) shall be
paid interest and Additional Amounts, if any, accrued to (but excluding) the
Reset Date on June 15, 2005 (or, if such day is not a Business Day, the next
succeeding Business Day). Interest and Additional Amounts, if any, accrued from
and after the Reset Date to (but excluding) September 15, 2005 shall be paid on
September 15, 2005 (or, if such day is not a Business Day, the next succeeding
Business Day) to the person in whose name each HIGH TIDES Debenture is
registered on the preceding September 1, subject to the right of the Company to
initiate a Deferral Period. See "-- Option to Extend Interest Payment Date." The
Applicable Rate will be 6 1/4% per annum from the date of original issuance of
the HIGH TIDES to (but excluding) the Reset Date, and the Term Rate from the
Reset Date and thereafter. The Applicable Rate will be increased upon a
Registration Default. See "The Remarketing" and "Registration Rights." It is
anticipated that, until the liquidation of the Trust, each HIGH TIDES Debenture
will be registered in the name of the Trust and held by the Property Trustee for
the benefit of the holders of the Trust Securities. The amount of interest
payable for any period will be computed on the basis of the number of days
elapsed in a 360-day year of twelve 30-day months. In the event that any
Interest Payment Date 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),
with the same force and effect as if made on the applicable Interest Payment
Date. 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 Applicable Rate, compounded quarterly from the relevant Interest
Payment Date. The term "interest" as used herein shall include quarterly
payments, interest on quarterly interest payments not paid on the applicable
Interest Payment Date and Additional Amounts, as applicable. See "-- Additional
Amounts" and "Registration Rights."
If the HIGH TIDES Debentures are distributed to the holders of the HIGH
TIDES, the descriptions herein of the Remarketing of the HIGH TIDES and the
conversion rights of holders of HIGH TIDES will apply mutatis mutandis to such
remarketing or conversion of HIGH TIDES Debentures. See "The Remarketing," "The
Remarketing Agent" and "Description of HIGH TIDES -- Conversion Rights."
Unless previously redeemed or repurchased in accordance with the Indenture,
the HIGH TIDES Debentures will mature on June 15, 2028; provided, however, that
if the Final Remarketing shall fail as described under "The
Remarketing -- Effect of a Failed Remarketing," the Company will be required to
redeem any outstanding HIGH TIDES Debentures on the Reset Date. See
"-- Redemption."
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<PAGE> 47
The HIGH TIDES Debentures are unsecured and rank junior and subordinate in
right of payment to all Senior Debt. Because the Company is a holding company,
the right of the Company to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the HIGH TIDES to benefit indirectly from
such distribution), is subject to the prior claims of creditors of such
subsidiary, except to the extent that the Company may itself be recognized as a
creditor of such subsidiary. Accordingly, the HIGH TIDES Debentures are
subordinated to all Senior Debt and effectively subordinated to all existing and
future liabilities of the Company's subsidiaries, and holders of HIGH TIDES
Debentures should look only to the assets of the Company for payments on the
HIGH TIDES Debentures. 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 or any existing or other indenture that the Company
may enter into in the future or otherwise. See "Investment
Considerations -- Ranking of Obligations Under the Guarantee and the HIGH TIDES
Debentures" and "-- Subordination."
OPTION TO EXTEND INTEREST PAYMENT DATE
As long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
on the HIGH TIDES Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each Deferral Period,
provided, that no Deferral Period may extend beyond (i) the maturity (whether at
June 15, 2028 or by declaration of acceleration, call for redemption or
otherwise) and (ii) in the case of a Deferral Period that begins prior to the
Reset Date, the Reset Date. At the end of a Deferral Period, the Company must
pay all interest then accrued and unpaid on the HIGH TIDES Debentures (together
with interest thereon accrued at an annual rate equal the Applicable Rate
compounded quarterly from the relevant Interest Payment Date, to the extent
permitted by applicable law). During a Deferral Period and for so long as the
HIGH TIDES Debentures remain outstanding, interest will continue to accrue and
holders of HIGH TIDES Debentures (and holders of the HIGH TIDES while HIGH TIDES
are outstanding) will be required to accrue interest income (in the form of OID)
for United States federal income tax purposes. Moreover, because the Reset Price
exceeds the principal amount of the HIGH TIDES Debentures during the period
through the Reset Date, holders will accrue OID for federal income tax purposes
at a rate slightly in excess of the Initial Rate. See "United States Federal Tax
Considerations -- Interest Income and Original Issue Discount."
During any Deferral Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) other than stock dividends paid by the
Company which consist of stock of the same class as that on which the dividend
is being paid, (ii) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the HIGH TIDES Debentures or (iii) make
any guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the HIGH TIDES Debentures (other than (a)
dividends or distributions in Common Stock, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) purchases or acquisitions of shares of the Company's Common Stock
in connection with the satisfaction by the Company of its obligations under any
employee benefit plan or any other contractual obligation of the Company (other
than a contractual obligation ranking pari passu with or junior to the HIGH
TIDES Debentures), (e) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock or (f) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged). A Deferral Period will
terminate upon the payment by the Company of all interest then accrued and
unpaid on the HIGH TIDES Debentures (together with interest thereon accrued at
an annual rate equal to the Applicable Rate, compounded quarterly, to the extent
permitted by applicable law). Prior to the termination of any Deferral Period,
the Company may further extend such Deferral Period, provided, however, that
such deferral does not cause such Deferral Period to exceed 20 consecutive
quarters or to extend beyond (i) the maturity (whether
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<PAGE> 48
at June 15, 2028 or by declaration of acceleration, call for redemption or
otherwise) and (ii) in the case of a Deferral Period that begins prior to the
Reset Date, the Reset Date. Upon the termination of any Deferral Period, and
subject to the foregoing limitations, the Company may elect to begin a new
Deferral Period. No interest shall be due and payable during a Deferral Period,
except at the end thereof. The Company must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election of any
Deferral Period at least ten days prior to the record date for the Distributions
on the HIGH TIDES that would have been payable except for the election to begin
or extend such Deferral Period. The Debenture Trustee shall give notice of the
Company's election to begin or extend a new Deferral Period to the holders of
the HIGH TIDES Debentures. There is no limitation on the number of times that
the Company may elect to begin a Deferral Period.
REDEMPTION
Repayment at Maturity; Redemption of HIGH TIDES Debentures
The HIGH TIDES Debentures must be repaid at their stated maturity on June
15, 2028, unless earlier redeemed. The Company has covenanted in the Indenture
that it will fund such repayment with the proceeds of an offering of
nonconvertible preferred securities or nonconvertible trust-preferred securities
of the Company. The circumstances in which the Company may, or is required to,
redeem the HIGH TIDES Debentures prior to their stated maturity are described
below. Upon the repayment in full at maturity or redemption, in whole or in
part, of the HIGH TIDES Debentures (other than following the distribution of the
HIGH TIDES Debentures to the holders of the Trust Securities), the proceeds from
such repayment or redemption shall concurrently be applied to redeem, at the
applicable Redemption Price, a Like Amount of Trust Securities, upon the terms
and conditions described herein. See "Description of HIGH TIDES -- Mandatory
Redemption."
Mandatory Redemption
In the event of a Failed Final Remarketing, the Company must redeem the
HIGH TIDES Debentures on the Reset Date, in whole, but not in part, at 101% of
the principal amount thereof plus accrued and unpaid interest thereon to the
date of redemption (the "Failed Remarketing Redemption Price"). If the Company
fails to so redeem all outstanding HIGH TIDES Debentures, a Debenture Event of
Default will occur. See "The Remarketing" and "-- Debenture Events of Default."
Optional Redemption
The Company may redeem the HIGH TIDES Debentures solely from the proceeds
of a Common Stock Offering (an "Optional Redemption"), (i) in whole or in part,
at any time after June 20, 2001 until (but excluding) the Tender Notification
Date, at a redemption price (the "Initial Redemption Price") equal to the
following prices per $50 principal amount of HIGH TIDES Debentures, plus accrued
and unpaid interest thereon, if redeemed during the 12-month period ending June
15:
<TABLE>
<CAPTION>
PRICE PER
YEAR $50 PRINCIPAL AMOUNT
- ---- --------------------
<S> <C>
2002................................................... $51.5625
2003................................................... $51.0417
2004................................................... $50.5208
2005................................................... $50.0000
</TABLE>
and (ii) after the Reset Date, in accordance with the Term Call Protections, if
any, established in the Remarketing (any Redemption Price so established in the
Remarketing, the "Term Redemption Price" and together with the Initial
Redemption Price an "Optional Redemption Price"). The Remarketing Agent will
establish Term Call Protections, if any, in the Remarketing that when taken
together with the Term Rate and the Term Conversion Ratio, if any, result in a
price per HIGH TIDE equal to 101% of the liquidation amount thereof; provided,
that the Company may not, at any time, redeem the HIGH TIDES Debentures for a
price less than the aggregate principal amount thereof plus any accrued and
unpaid interest thereon.
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"Common Stock Offering" means any sale or sales of Common Stock by the
Company, in any manner, the closing or closings of which occur not more than 90
days prior to an Optional Redemption Notification Date.
If the Company desires to consummate an Optional Redemption, it must cause
a notice of such intent (an "Optional Redemption Notice") to be sent, within 90
days following the closing of the applicable Common Stock Offering (the
"Optional Redemption Notification Date"), to each holder of HIGH TIDES
Debentures (and each holder of the corresponding HIGH TIDES) to be redeemed;
provided that if the Company elects to complete an Optional Redemption on an
accelerated basis (an "Accelerated Redemption"), the Optional Redemption Notice
must be received by such holders not later than the Business Day immediately
following the Optional Redemption Notification Date. Holders of HIGH TIDES (or,
if the HIGH TIDES Debentures have been distributed to the holders of the HIGH
TIDES, the HIGH TIDES Debentures) may convert their HIGH TIDES (or HIGH TIDES
Debentures, if applicable) called for redemption into Class A Common Stock at
the Applicable Conversion Ratio prior to 5:00 p.m., New York City time, on or
prior to the Optional Redemption Date.
"Optional Redemption Date" means the date which is (i) 20 to 40 days
following the Optional Redemption Notification Date, as specified in the
Optional Redemption Notice (or if such date is not a Business Day, the next
succeeding Business Day) or (ii) in the event that the Company decides to make
an Accelerated Redemption, five Business Days following the Optional Redemption
Notification Date.
The Company may make an "Accelerated Redemption" whenever, on an Optional
Redemption Notification Date, the Closing Price for the Class A Common Stock for
each of the five consecutive trading days prior to such Optional Redemption
Notification Date was equal to or greater than 125% of the Applicable Conversion
Price.
Tax Event Redemption
The Company may also, under certain limited circumstances within 90 days of
the occurrence and continuation of a Tax Event, redeem (a "Tax Event
Redemption") the HIGH TIDES Debentures in whole, but not in part, at the
aggregate principal amount thereof plus accrued and unpaid interest thereon to
the date of redemption (the "Tax Event Redemption Price"). See "Description of
HIGH TIDES -- Tax Event or Investment Company Event Redemption or Distribution."
If the Company is permitted to consummate a Tax Event Redemption and it
desires to do so, it must cause a notice to be mailed to each holder of HIGH
TIDES and each holder of HIGH TIDES Debentures at least 30 days but not more
than 60 days before the Redemption Date. In the event of a Tax Event Redemption,
holders of HIGH TIDES (or, if the HIGH TIDES Debentures have been distributed to
the holders of the HIGH TIDES, HIGH TIDES Debentures) may convert their HIGH
TIDES (or HIGH TIDES Debentures, if applicable) called for redemption into Class
A Common Stock at the Applicable Conversion Ratio prior to 5:00 p.m., New York
City time, on the applicable Redemption Date.
ADDITIONAL AMOUNTS
If (i) the Property Trustee is the sole holder of all the HIGH TIDES
Debentures and (ii) the Trust is required to pay any additional taxes, duties,
assessments or other governmental charges as a result of a Tax Event
("Additional Sums"), the Company will pay as additional amounts ("Additional
Amounts") on the HIGH TIDES Debentures such amounts as shall be required so that
the Distributions payable by the Trust in respect of the Trust Securities shall
not be reduced as a result of any such Additional Sums.
RESTRICTIONS ON CERTAIN PAYMENTS
If (i) there shall have occurred a Debenture Event of Default, (ii) 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 of a
Deferral Period as provided in the Indenture and shall not have rescinded such
notice, or such Deferral Period shall be continuing, the Company will covenant
that it will not (a) declare or pay any
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<PAGE> 50
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) other than stock dividends paid by the
Company which consist of stock of the same class as that on which the dividend
is being paid, (b) make any payment of principal, interest or premium, if any,
on or repay or repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the HIGH TIDES Debentures or (c) make
any guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the HIGH TIDES Debentures (in each case other than
(A) dividends or distributions in Common Stock of the Company, (B) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (C)
payments under the Guarantee, (D) purchases or acquisitions of shares of Common
Stock in connection with the satisfaction by the Company of its obligations
under any employee benefit plan or any other contractual obligation of the
Company (other than a contractual obligation ranking pari passu with or junior
in interest to the HIGH TIDES Debentures), (E) as a result of a reclassification
of the Company's capital stock or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock or (F) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged).
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of HIGH TIDES Debentures, amend, waive or supplement the
Indenture for specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies (provided that any such action does not
materially adversely affect the interest of the holders of HIGH TIDES Debentures
or the holders of the HIGH TIDES so long as they remain outstanding) and
qualifying, or maintaining the qualification of, the Indenture under the Trust
Indenture Act. The Indenture contains provisions permitting the Company and the
Debenture Trustee, with the consent of the holders of not less than a majority
in principal amount of HIGH TIDES Debentures, to modify the Indenture in a
manner affecting the rights of the holders of HIGH TIDES Debentures; provided,
however, that no such modification may, without the consent of the holder of
each outstanding HIGH TIDES Debenture so affected, change the Reset Date or any
date specified in the Indenture on which interest on, or the principal, together
with any accrued and unpaid interest, of the HIGH TIDES Debentures is due and
payable ("Stated Maturity") or reduce the principal amount of the HIGH TIDES
Debentures, or reduce the rate or extend the time of payment of interest thereon
or reduce the percentage of principal amount of HIGH TIDES Debentures the
consent of whose holders is required to amend, waive or supplement the
Indenture, or have certain other effects as set forth in the Indenture.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the HIGH TIDES Debentures that has occurred and is
continuing constitutes a "Debenture Event of Default":
(i) failure for 30 days to pay any interest on the HIGH TIDES
Debentures when due (subject to the deferral of any due date in the case of
a Deferral Period); or
(ii) failure to pay any principal or premium, if any, on the HIGH
TIDES Debentures when due, whether at maturity, upon redemption, by
declaration of acceleration or otherwise; or
(iii) failure to observe or perform certain other covenants contained
in the Indenture for 90 days after written notice to the Company from the
Debenture Trustee or the holders of at least 25% in aggregate outstanding
principal amount of the HIGH TIDES Debentures; or
(iv) failure by the Company to issue and deliver shares of Class A
Common Stock upon an election by a holder of HIGH TIDES to convert such
HIGH TIDES; or
(v) certain events in bankruptcy, insolvency or reorganization of the
Company; or
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<PAGE> 51
(vi) the failure of the Company to redeem the outstanding HIGH TIDES
Debentures in whole on the Reset Date in the event of a Failed Final
Remarketing; or
(vii) the failure of the Company to repay all of the outstanding HIGH
TIDES Debentures on June 15, 2028 with the proceeds of the sale of
nonconvertible preferred or nonconvertible trust preferred securities of
the Company; or
(viii) the voluntary or involuntary dissolution, winding-up or
termination of the Trust, except in connection with the distribution of the
HIGH TIDES Debentures to the holders of Trust Securities in liquidation of
the Trust, the redemption of all of the Trust Securities of the Trust, or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration.
The holders of a majority in aggregate outstanding principal amount of the
HIGH TIDES Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee. The
Debenture Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of the HIGH TIDES Debentures may declare the principal due and
payable immediately upon a Debenture Event of Default and, should the Debenture
Trustee or such holders of HIGH TIDES Debentures fail to make such declaration,
the holders of at least 25% in aggregate liquidation amount of the HIGH TIDES
shall have such right; provided that any such declaration will not be effective
until the earlier to occur of (i) ten business days after receipt by the Company
and the administrative agent under the Senior Credit Agreement of written notice
of such declaration and (ii) acceleration of obligations under the Senior Credit
Agreement. The holders of a majority in aggregate outstanding principal amount
of the HIGH TIDES Debentures may annul such declaration and waive the default if
the default (other than the non-payment of the principal of the HIGH TIDES
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
Should the holders of HIGH TIDES Debentures fail to annul such declaration and
waive such default, the holders of a majority in aggregate liquidation amount of
the HIGH TIDES shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
HIGH TIDES Debentures affected thereby may, on behalf of the holders of all the
HIGH TIDES Debentures, waive any past default, except a default in the payment
of principal of (or premium, if any) 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 respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding HIGH TIDES Debenture. Should the holders of such HIGH
TIDES Debentures fail to annul such declaration and waive such default, the
holders of a majority in aggregate liquidation amount of the HIGH TIDES shall
have such right. 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
the conditions and covenants applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing, the
Property Trustee will have the right to declare the principal of and the
interest on the HIGH TIDES Debentures, and any other amounts payable under the
Indenture, to be forthwith due and payable and to enforce its other rights as a
creditor with respect to the HIGH TIDES Debentures; provided that any such
declaration will not be effective until the earlier to occur of (i) ten business
days after receipt by the Company and the administrative agent under the Senior
Credit Agreement of written notice of such declaration and (ii) acceleration of
obligations under the Senior Credit Agreement.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF HIGH TIDES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or principal
on the HIGH TIDES Debentures on the date such interest or principal is otherwise
payable, a holder of HIGH TIDES may institute a Direct Action. The Company may
not amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the HIGH TIDES. If
the right to bring a Direct Action is removed following
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<PAGE> 52
the effectiveness of a Shelf Registration Statement in respect of the HIGH TIDES
Debentures, the Trust may become subject to the reporting obligations under the
Exchange Act. Notwithstanding any payments made to a holder of HIGH TIDES by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of and interest on the HIGH TIDES Debentures, and the
Company shall be subrogated to the rights of the holder of such HIGH TIDES with
respect to payments on the HIGH TIDES to the extent of any payments made by the
Company to such holder in any Direct Action.
The holders of the HIGH TIDES will not be able to exercise directly any
remedies, other than those set forth in the preceding paragraph, available to
the holders of the HIGH TIDES Debentures unless there shall have been an Event
of Default under the Declaration. See "Description of HIGH TIDES -- Events of
Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
with or into any other person or convey, transfer or lease its properties and
assets substantially as an entirety to any person, and no person shall
consolidate with or merge with or 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 with or into another person
or conveys, transfers or leases 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 of the United States or the District of Columbia, and
such successor person expressly assumes the Company's obligations on the HIGH
TIDES Debentures issued under the Indenture and shall have provided for
conversion rights in accordance with Article XIII of 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; (iii) if at the time
any HIGH TIDES are outstanding, such transaction is permitted under the
Declaration and the Guarantee and does not give rise to any breach or violation
of the Declaration or the Guarantee; and (iv) certain other conditions as
prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the HIGH
TIDES Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the HIGH
TIDES Debentures.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any HIGH TIDES
Debentures issued thereunder shall be subordinate and junior in right of payment
to all Senior Debt to the extent provided in the Indenture. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding-
up, reorganization, assignment for the benefit of creditors, marshaling of
assets or any bankruptcy, insolvency, debt restructuring or similar proceedings
in connection with any insolvency or bankruptcy proceeding of the Company, the
holders of Senior Debt will first be entitled to receive payment in full in cash
of principal of (and premium, if any), interest, and all other obligations with
respect to such Senior Debt before the holders of HIGH TIDES Debentures, or the
Property Trustee (or any other person or entity) on behalf of the holders, will
be entitled to receive or retain any payment or distribution in respect thereof.
In the event of the acceleration of the maturity of the HIGH TIDES
Debentures, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full in cash of all
amounts due thereon (including any amounts due upon acceleration) before the
holders of the HIGH TIDES Debentures will be entitled to receive or retain any
payment or distribution in respect of the HIGH TIDES Debentures.
In the event that the Company shall default in the payment of any principal
of, premium (if any), interest on, or any other amount with respect to, any
Senior Debt when the same becomes due and payable (a "payment default"), whether
at maturity or at a date fixed for prepayment or by declaration of acceleration
or otherwise, and in the case of Senior Debt other than Designated Senior Debt
such default continues beyond the period of grace, if any, specified in the
instrument evidencing such Senior Debt, then, unless and until such
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default shall have been cured or waived or shall have ceased to exist or all
Senior Debt shall have been paid in full in cash, no direct or indirect payment
or distribution (in cash, property, securities, by set-off or otherwise) shall
be made or agreed to be made for or in respect of the HIGH TIDES Debentures, or
in respect of any redemption, repayment, retirement, purchase or other
acquisition of any of the HIGH TIDES Debentures. In the event the Company shall
suffer a default (other than a payment default) under any Designated Senior Debt
and such default continues beyond the period of grace, if any, specified in the
instrument evidencing such Designated Senior Debt, then, commencing upon the
receipt by the Debenture Trustee (with a copy to the Company) of written notice
of such default from the representative of the holders of such Designated Senior
Debt and until such default shall have been cured or waived or shall have ceased
to exist or all such Designated Senior Debt shall have been paid in full in
cash, no direct or indirect payment or distribution (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made for or
in respect of the HIGH TIDES Debentures, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of any of the HIGH TIDES
Debentures.
"Designated Senior Debt" means (i) any obligation under the Senior Credit
Agreement and (ii) following termination of the Senior Credit Agreement, any
other Senior Debt the principal amount of which is $50.0 million or more and
that has been designated by the Company as "Designated Senior Debt."
"Senior Credit Agreement" means that certain Amended and Restated Credit
Agreement, dated June 19, 1998, by and among the Company, the lenders parties
thereto, Credit Suisse First Boston, as a co-arranger, a co-syndication agent
and the administrative agent, and NationsBanc Montgomery Securities LLC, as a
co-arranger, a co-syndication agent and the documentation agent, including,
without limitation, any related notes, letters of credit, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and, in
each case, as amended, amended and restated, modified, renewed, refunded,
replaced or refinanced from time to time, including any agreement (i) extending
or shortening the maturity of any obligation incurred thereunder or contemplated
thereby, (ii) adding or deleting borrowers or guarantors thereunder and (iii)
increasing the amount of credit extended, or available to be extended,
thereunder.
"Senior Debt" means (i) all obligations of the Company under the Senior
Credit Agreement, including, without limitation, principal (including, without
limitation, reimbursement obligations in respect of letters of credit (whether
or not drawn) and obligations to cash collateralize letters of credit), premium
(if any), interest (including, without limitation, interest accruing subsequent
to the filing of, or which would have accrued but for the filing of, a petition
for bankruptcy, whether or not such interest is an allowable claim in such
bankruptcy proceeding), fees, indemnifications, expenses and other amounts
payable pursuant thereto, (ii) the principal of, and premium and interest, if
any, on all indebtedness of the Company for money borrowed, whether outstanding
on the date of execution of the Indenture or thereafter created, assumed or
incurred, (iii) all obligations to make payment pursuant to the terms of
financial instruments, such as (a) securities contracts and foreign currency
exchange contracts, (b) derivative instruments, such as swap agreements
(including interest rate and foreign exchange rate swap agreements), cap
agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange agreements, options, commodity futures contracts and commodity
options contracts, and (c) similar financial instruments; except, in the case of
both (ii) and (iii) above, such indebtedness and obligations that are expressly
stated to rank junior in right of payment to, or pari passu in right of payment
with, the HIGH TIDES Debentures, (iv) indebtedness or obligations of others of
the kind described in (i), (ii) and (iii) above for the payment of which the
Company is responsible or liable as guarantor or otherwise and (v) any
deferrals, renewals or extensions of any such Senior Debt; provided, however,
that Senior Debt shall not be deemed to include (a) any Debt of the Company
which, when incurred and without respect to any election under Section 1111(b)
of the United States Bankruptcy Code of 1978, was without recourse to the
Company, (b) trade accounts payable in the ordinary course of business, (c) any
Debt of the Company to any of its subsidiaries, (d) Debt to any employee of the
Company and (e) Debt which by its terms is subordinated to trade accounts
payable or accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of such debt by the holders of the HIGH
TIDES Debentures as a result of the subordination provisions of the Indenture
would be greater than such payments otherwise would have been as a result of any
obligation of such holders of such Debt to pay amounts over to the obligees on
such trade accounts payable or accrued
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liabilities arising in the ordinary course of business as a result of
subordination provisions to which such Debt is subject.
"Debt" means (i) the principal of, and premium and interest, if any, on
indebtedness for money borrowed, (ii) purchase money and similar obligations,
(iii) obligations under capital leases, (iv) guarantees, assumptions or purchase
commitments relating to, or other transactions as a result of which the Company
is responsible for the payment of such indebtedness of others, (v) renewals,
extensions and refunding of any such indebtedness, (vi) interest or obligations
in respect of any such indebtedness accruing after the commencement of any
insolvency or bankruptcy proceedings and (vii) obligations associated with
derivative products such as interest rate and currency exchange contracts,
foreign exchange contracts, commodity contracts and similar arrangements.
The Indenture places no limitation on the amount of Senior Debt that may be
incurred by the Company. The Company expects from time to time to incur
additional indebtedness constituting Senior Debt. At March 31, 1998, the
aggregate outstanding Senior Debt of the Company was approximately $125 million
($45 million on a pro forma basis giving effect to the Ryder TRS Acquisition and
the Series A Note Conversion). The Indenture also places no limitation on the
Debt of the Company's subsidiaries, which rank senior in right of payment to the
HIGH TIDES Debentures. As of March 31, 1998, the Company's subsidiaries had Debt
and other liabilities of approximately $3.0 billion ($3.4 billion on a pro forma
basis giving effect to the Ryder TRS Acquisition).
REGISTRATION AND TRANSFER
The HIGH TIDES Debentures will be represented by one or more global
certificates registered in the name of Cede & Co. as the nominee of DTC if, and
only if, distributed to the holders of the Trust Securities. Until such time,
the HIGH TIDES Debentures will remain registered in the name of and held by the
Property Trustee. Should the HIGH TIDES Debentures be distributed to holders of
the Trust Securities, beneficial interests in the HIGH TIDES Debentures will be
shown on, and transfers thereof will be effected only through, records
maintained by Participants in DTC. Except as described below, HIGH TIDES
Debentures in certificated form will not be issued in exchange for the global
certificates.
A global security shall be exchangeable for HIGH TIDES Debentures in
certificated form registered in the names of persons other than Cede & Co. only
if (i) DTC notifies the Company that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have been
appointed, or it at any time DTC ceases to be a "clearing agency" registered
under the Exchange Act, at a time when DTC is required to be so registered to
act as such depositary, (ii) the Company in its sole discretion determines that
such global security shall be so exchangeable or (iii) there shall have occurred
and be continuing a Debenture Event of Default. Any global security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
certificates registered in such names as DTC shall direct. It is expected that
such instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such global
security.
Payments on HIGH TIDES Debentures held in global form will be made to DTC,
as the depositary for the HIGH TIDES Debentures. In the case of HIGH TIDES
Debentures issued in certificated form, principal and interest will be payable,
the transfer of the HIGH TIDES Debentures will be registrable, and HIGH TIDES
Debentures will be exchangeable for HIGH TIDES Debentures of other denominations
of a like aggregate principal amount, at the corporate office of the Debenture
Trustee in New York, New York, or at the offices of any paying agent or transfer
agent appointed by the Company, provided that payment of interest may be made at
the option of the Company by check mailed to the address of the persons entitled
thereto or by wire transfer.
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Description of HIGH TIDES -- Form, Book-Entry Procedures
and Transfer." If the HIGH TIDES Debentures are distributed to the holders of
the Trust Securities upon the termination of the Trust, the form, book-entry and
transfer procedures with respect
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to the HIGH TIDES as described under "Description of HIGH TIDES -- Form,
Book-Entry Procedures and Transfer," shall apply to the HIGH TIDES Debentures
mutatis mutandis.
PAYMENT AND PAYING AGENTS
Payment of the principal of and interest on the HIGH TIDES Debentures will
be made at the office or agency of the Company maintained for that purpose in
New York, New York, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that, at the option of the Company, payment of interest may
be made (except in the case of HIGH TIDES Debentures that are held in global
form) by check mailed to each registered holder or by wire transfer. Payment of
any interest on any HIGH TIDES Debenture will be made to the person in whose
name such HIGH TIDES Debenture is registered at the close of business on the
record date for such interest, except in the case of defaulted interest.
GOVERNING LAW
The Indenture and the HIGH TIDES Debentures are governed by and will be
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee has and is subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of HIGH TIDES 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.
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DESCRIPTION OF THE GUARANTEE
The Guarantee was executed and delivered by the Company concurrently with
the issuance by the Trust of the HIGH TIDES for the benefit of the holders from
time to time of such HIGH TIDES. The Bank of New York acts as trustee (the
"Guarantee Trustee") under the Guarantee. The Guarantee is not qualified under
the Trust Indenture Act. This summary of certain provisions of the Guarantee
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all of the provisions of the Guarantee, including the
definitions therein of certain terms, and the Trust Indenture Act. The Guarantee
Trustee holds the Guarantee for the benefit of the holders of the HIGH TIDES.
GENERAL
Pursuant to the Guarantee, the Company irrevocably agreed to pay in full on
a subordinated basis, to the extent set forth herein, the Guarantee Payments to
the holders of the HIGH TIDES, as and when due, regardless of any defense, right
of set-off or counterclaim that the Trust may have or assert other than the
defense of payment. The following payments with respect to the HIGH TIDES, to
the extent not paid by or on behalf of the Trust (the "Guarantee Payments"), are
subject to the Guarantee: (i) any accrued and unpaid Distributions required to
be paid on the HIGH TIDES, to the extent that the Trust has funds on hand
available therefor at such time, (ii) the applicable Redemption Price with
respect to HIGH TIDES called for redemption, to the extent that the Trust has
funds on hand available therefor at such time and (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of the Trust (other than in
connection with the distribution of HIGH TIDES Debentures to the holders of the
HIGH TIDES or the redemption of all of the HIGH TIDES) the lesser of (a) the
Liquidation Distribution, to the extent the Trust has funds available therefor
and (b) the amount of assets of the Trust remaining available for distribution
to holders of the HIGH TIDES upon liquidation of the Trust after satisfaction of
liabilities to creditors of the Trust as required by applicable law. The
Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of the HIGH TIDES
or by causing the Trust to pay such amounts to such holders.
The Guarantee is an irrevocable guarantee on a subordinated basis of the
Trust's obligations under the HIGH TIDES, although it applies only to the extent
that the Trust has funds sufficient to make such payments, and is not a
guarantee of collection. If the Company does not make interest payments on the
HIGH TIDES Debentures held by the Trust, the Trust will not be able to pay
Distributions on the HIGH TIDES and will not have funds legally available
therefor.
The Guarantee ranks subordinate and junior in right of payment to all
Senior Debt. See "-- Status of the Guarantee." Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of any subsidiary, upon such subsidiary's liquidation or reorganization or
otherwise (and thus the ability of the holders of HIGH TIDES to benefit
indirectly from any such distribution), is subject to the prior claims of
creditors of such subsidiary, except to the extent the Company may itself be
recognized as a creditor of that subsidiary. Accordingly, the Company's
obligations under the Guarantee are effectively subordinated to all existing and
future liabilities of the Company's subsidiaries, including deposits, and
claimants should look only to the assets of the Company for payments thereunder.
The Guarantee does not limit the incurrence or issuance of other secured or
unsecured debt of the Company, including Senior Debt, whether under any
indenture that the Company may enter into in the future or otherwise.
Taken together, the Company's obligations under the Guarantee, the
Declaration, the HIGH TIDES Debentures and the Indenture, including the
Company's obligation to pay the costs, expenses and other liabilities of the
Trust (other than the Trust's obligations to the holders of the Trust Securities
under the Trust Securities), provide, in the aggregate, a full, irrevocable and
unconditional guarantee of all of the Trust's obligations under the HIGH TIDES.
No single document standing alone or operating in conjunction with fewer than
all the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
HIGH TIDES. See "Relationship Among the HIGH TIDES, the HIGH TIDES Debentures
and the Guarantee."
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STATUS OF THE GUARANTEE
The Guarantee constitutes an unsecured obligation of the Company and ranks
subordinate and junior in right of payment to all Senior Debt in the same manner
as HIGH TIDES Debentures.
The Guarantee constitutes 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 is held
for the benefit of the holders of the HIGH TIDES. The Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent not
paid by the Trust or upon distribution to the holders of the HIGH TIDES or the
HIGH TIDES Debentures. The Guarantee does not place a 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 that do not materially adversely affect
the rights of holders of the HIGH TIDES (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority of the aggregate liquidation amount of such
outstanding HIGH TIDES. The manner of obtaining any such approval will be as set
forth under "Description of HIGH TIDES -- Voting Rights; Amendment of the
Declaration." 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 HIGH TIDES then
outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder; provided,
however, that except with respect to a default in payment of any Guarantee
Payment, the Company shall have received notice of default and shall not have
cured such default within 60 days after receipt of such notice. The holders of
not less than a majority in aggregate liquidation amount of the HIGH TIDES have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust or power conferred upon the Guarantee Trustee
under the Guarantee.
Any holder of the HIGH TIDES may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity.
The Company, as guarantor, 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.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, 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 the HIGH TIDES unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the HIGH TIDES, upon full payment of the
amounts payable upon liquidation of the Trust or upon distribution of HIGH TIDES
Debentures to the holders of the HIGH TIDES. The Guarantee will continue
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to be effective or will be reinstated, as the case may be, if at any time any
holder of the HIGH TIDES must restore payment of any sums paid under the HIGH
TIDES or the Guarantee.
GOVERNING LAW
The Guarantee is governed by and will be construed in accordance with the
laws of the State of New York.
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RELATIONSHIP AMONG THE HIGH TIDES,
THE HIGH TIDES DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the HIGH TIDES (to the
extent the Trust has funds available for the payment of such Distributions) are
irrevocably guaranteed by the Company as and to the extent set forth under
"Description of Guarantee." Taken together, the Company's obligations under the
HIGH TIDES Debentures, the Indenture, the Declaration and the Guarantee provide,
in the aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the HIGH TIDES. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and unconditional
guarantee of the Trust's obligations under the Trust Securities. If and to the
extent that the Company does not make payments on the HIGH TIDES Debentures, the
Trust will not pay Distributions or other amounts due on the HIGH TIDES. The
Guarantee does not cover payment of Distributions when the Trust does not have
sufficient funds to pay such Distributions. In such event, the remedy of a
holder of HIGH TIDES is to institute a Direct Action. The obligations of the
Company under the Guarantee are subordinate and junior in right of payment to
all Senior Debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
HIGH TIDES Debentures, such payments will be sufficient to cover Distributions
and other payments due on the HIGH TIDES, primarily because (i) the aggregate
principal amount or applicable Redemption Price of the HIGH TIDES Debentures
will be equal to the sum of the aggregate liquidation amount or applicable
Redemption Price, as applicable, of the Trust Securities; (ii) the Applicable
Rate and interest and other payment dates on the HIGH TIDES Debentures will
match the Distribution rate and Distributions and other payment dates for the
HIGH TIDES; (iii) the Company shall pay for all costs, expenses and liabilities
of the Trust except the Trust's obligations to holders of Trust Securities under
such Trust Securities; and (iv) the Declaration further provides that the Trust
will not engage in any activity that is not consistent with the limited purposes
thereof.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, any payment under the Guarantee used to satisfy
the related payment of indebtedness under the Indenture.
ENFORCEMENT RIGHTS OF HOLDERS OF HIGH TIDES
A holder of any HIGH TIDES may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Senior Debt would not constitute a
default or Event of Default under the Declaration. However, in the event of
payment and certain other defaults under, or acceleration of, Senior Debt, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the HIGH TIDES Debentures until such Senior Debt has been paid in
full or such payment or other default thereunder has been cured or waived.
Failure to make required payments on HIGH TIDES Debentures would constitute an
Event of Default under the Declaration.
LIMITED PURPOSE OF THE TRUST
The HIGH TIDES evidence an undivided beneficial interest in the Trust, and
the Trust exists for the sole purpose of issuing the HIGH TIDES and Common
Securities and investing the proceeds of the Trust Securities in HIGH TIDES
Debentures.
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RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the Trust involving the liquidation of the HIGH TIDES Debentures, after
satisfaction of the liabilities of creditors of the Trust as required by
applicable law, the holders of the Trust Securities will be entitled to receive,
out of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of HIGH TIDES -- Liquidation of the Trust and Distribution of HIGH
TIDES Debentures." Upon any voluntary or involuntary liquidation or bankruptcy
of the Company, the Property Trustee, as holder of the HIGH TIDES Debentures,
would be a subordinated 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 and has agreed to pay for all costs, expenses and
liabilities of the Trust (other than the Trust's obligations to the holders of
its Trust Securities), the positions of a holder of HIGH TIDES and a holder of
HIGH TIDES 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.
REGISTRATION RIGHTS
The Company and the Trust are subject to a registration agreement with the
Initial Purchasers (the "Registration Agreement") for the benefit of the holders
of the HIGH TIDES wherein the Company and the Trust agreed, at the Company's
sole expense, to use their best efforts to keep the Registration Statement
effective and usable for two years or such other period as shall be required
under Rule 144(k) of the Securities Act or any successor rule thereto or, if
earlier, such time as all of the applicable HIGH TIDES, the Guarantee, the HIGH
TIDES Debentures and the related Class A Common Stock issuable upon conversion
of the HIGH TIDES (the "Registerable Securities") have been sold thereunder
(except that the Company will be permitted to suspend the use of the
Registration Statement during certain periods under certain circumstances). The
Company will provide to each holder for whom the Registration Statement was
filed copies of this Prospectus, notify each such holder when the Registration
Statement for the Registerable Securities has become effective and take certain
other actions as are required to permit unrestricted resales of the Registerable
Securities. A holder that sells Registerable Securities pursuant to the
Registration Statement is required to be named as a Selling Holder in the
Prospectus and to deliver a Prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the Registration Agreement
that are applicable to such a holder (including certain indemnification rights
and obligations).
In the event that the Company or the Trust fails to keep the Registration
Statement continuously effective and usable (subject to certain exceptions) for
the period required by the Registration Agreement (each such event referred to
above a "Registration Default"), then the Applicable Rate at which interest will
accrue on the HIGH TIDES Debentures, (including in respect of amounts accruing
during any Deferral Period), and corresponding distributions will accrue on the
Trust Securities, in each case from and including the day following such
Registration Default to but excluding the day on which such Registration Default
has been cured or has been deemed to have been cured will be increased 0.50% per
annum of the principal amount or liquidation amount (the "Registration Default
Rate"), as applicable, subject to certain exceptions. Following the cure of a
Registration Default, the Applicable Rate will become the rate in effect
immediately prior to such Registration Default.
The Registration Agreement is governed by, and will be construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration Agreement does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Registration Agreement, a form of which is available upon
request to the Company. See "Available Information."
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UNITED STATES FEDERAL TAX CONSIDERATIONS
GENERAL
Except as otherwise indicated in an amendment or supplement to this
Prospectus, the following summary describes the material United States federal
income tax consequences of the purchase, ownership, disposition, and conversion
of HIGH TIDES and Class A Common Stock, and, in the opinion of King & Spalding,
special tax counsel to the Company and the Trust ("Tax Counsel"), is accurate in
all material respects with respect to the matters discussed therein. Unless
otherwise stated, this summary deals only with HIGH TIDES and Class A Common
Stock held as capital assets by U.S. Holders (as defined below). It does not
deal with special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, or tax-exempt investors. This summary also does not
address the tax consequences to persons that have a functional currency other
than the U.S. Dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of HIGH TIDES or Class A Common Stock. Further, it
does not include any description of any alternative minimum tax consequences or
the tax laws of any state or local government or of any foreign government that
may be applicable to the HIGH TIDES or Class A Common Stock. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations thereunder (the "Treasury Regulations") and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
As used herein, the term "U.S. Holder" means any beneficial owner of HIGH
TIDES or Class A Common Stock that is, for United States federal income tax
purposes, (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States, any
state thereof or the District of Columbia (other than a partnership that is not
treated as a United States person under any applicable Treasury Regulations),
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust if (A) a court within the
United States is able to exercise primary supervision over the administration of
the trust and (B) one or more United States persons have the authority to
control all substantial decisions of the trust. Notwithstanding the preceding
sentence, to the extent provided in Treasury Regulations, certain trusts in
existence on August 20, 1996 and treated as United States persons prior to such
date that elect to continue to be treated as United States persons also will be
U.S. Holders. As used herein, the term "Non-U.S. Holder" means a beneficial
owner of HIGH TIDES or Class A Common Stock that is not a U.S. Holder.
In part because of the uncertainties concerning the proper tax treatment of
HIGH TIDES as discussed below, it is particularly important that each holder
consult with its own tax advisor regarding the tax treatment of the potential
acquisition, ownership and disposition of its HIGH TIDES. HOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS TO DETERMINE THE FEDERAL, STATE AND LOCAL INCOME,
FRANCHISE, PERSONAL PROPERTY, AND ANY OTHER TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE HIGH TIDES.
CLASSIFICATION OF THE TRUST AS A GRANTOR TRUST
In the opinion of Tax Counsel, under current law, the Trust will be
classified for United States federal income tax purposes as a grantor trust and
not as a partnership, an association taxable as a corporation, or a publicly
traded partnership. Accordingly, for United States federal income tax purposes,
each holder of HIGH TIDES generally will be considered the owner of an undivided
interest in the HIGH TIDES Debentures, and each holder will be required to
include in its gross income all income or gain with respect to its allocable
share of those HIGH TIDES Debentures.
CLASSIFICATION OF THE HIGH TIDES DEBENTURES AS INDEBTEDNESS
In the opinion of Tax Counsel, under current law, the HIGH TIDES Debentures
will be classified for United States federal income tax purposes as indebtedness
of the Company. This opinion is not binding on the Internal Revenue Service
("IRS") and, accordingly, no complete assurance can be given that the IRS will
not
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challenge the classification of the HIGH TIDES Debentures as debt, or if the
classification were challenged, that such a challenge would not be successful.
The remainder of this discussion assumes that the HIGH TIDES Debentures will be
classified as indebtedness of the Company for United States federal income tax
purposes.
TAX TREATMENT OF HIGH TIDES DEBENTURES AS RESET BONDS
Because no debt instrument closely comparable to the HIGH TIDES Debentures
has been the subject of any Treasury Regulation, revenue ruling or judicial
decision, the federal income tax treatment of debt obligations such as the HIGH
TIDES Debentures is not certain. The Company intends to treat the HIGH TIDES
Debentures for federal income tax purposes as being "reset bonds" under Treasury
Regulations relating to variable rate debt instruments ("VRDI") (Treasury
Regulation Section 1.1275-5(f)). Assuming the HIGH TIDES Debentures are reset
bonds, they will be treated, solely for purposes of the OID rules of the Code,
as maturing on the date immediately preceding the Reset Date for the Reset Price
and, if the Remarketing Agent remarkets the HIGH TIDES, as being reissued on the
Reset Date at the Reset Price.
There can be no assurance that the IRS will agree with, or that a court
would uphold, the treatment of the HIGH TIDES Debentures as reset bonds. In
particular, the IRS could instead attempt to treat the HIGH TIDES Debentures as
maturing at their stated maturity on June 15, 2028. If the HIGH TIDES Debentures
were treated as maturing on such date, the HIGH TIDES Debentures would be
treated as having contingent interest under the Treasury Regulations governing
debt instruments that provide for contingent payments (the "Contingent Payment
Regulations"). In that event, the Company would be required to construct a
projected payment schedule for the HIGH TIDES Debentures, based on the Company's
current borrowing costs for comparable noncontingent debt instruments of the
Company, from which an estimated yield on the HIGH TIDES Debentures would be
calculated. A U.S. Holder would be required to include in income OID in an
amount equal to the product of the "adjusted issue price" of the HIGH TIDES
Debentures at the beginning of each interest accrual period and the estimated
yield of the HIGH TIDES Debentures and to make certain adjustments to such
income accruals for differences between actual payments and projected payments.
In general, the "adjusted issue price" of a HIGH TIDES Debenture would be equal
to its "issue price" (the first price at which a substantial amount of the HIGH
TIDES are sold to the public, ignoring sales to bond houses, brokers and similar
persons acting as underwriters, placement agents or wholesalers), increased by
the OID previously accrued on the HIGH TIDES Debenture, and reduced by all
payments made on the HIGH TIDES Debenture. Under the Contingent Payment
Regulations, during the period prior to the Reset Date, OID would accrue at a
rate that is greater than the Initial Rate, and U.S. Holders would have more
taxable income than the cash payable on the HIGH TIDES.
In addition, under the Contingent Payment Regulations, U.S. Holders who
sold or redeemed their HIGH TIDES would recognize ordinary loss or reduced gain
at that time to reflect any excess of prior OID accruals over actual interest
payments received. U.S. Holders who retain their HIGH TIDES following the Reset
Date would reduce their OID accruals after that date to reflect any such excess
prior to the Reset Date. Furthermore, under the Contingent Payment Regulations,
any gain realized with respect to the HIGH TIDES would generally be treated as
ordinary income; any loss realized would generally be treated as ordinary loss
to the extent of the U.S. Holder's prior ordinary income inclusions with respect
to the HIGH TIDES, and any additional loss would be capital loss.
The following discussion assumes the HIGH TIDES Debentures are properly
treated as reset bonds rather than as contingent payment debt instruments.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the HIGH TIDES
Debentures, to defer payments of interest by extending interest payment periods
for up to 20 consecutive quarters, the Company will treat the HIGH TIDES
Debentures as having been issued with OID. As a result, U.S. Holders of HIGH
TIDES will be required to include in income their allocable share of the OID
accrued by the Trust with respect to the HIGH TIDES Debentures on an economic
accrual basis over the period of time that the HIGH
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TIDES (and underlying allocable share of the HIGH TIDES Debentures) are held,
regardless of their regular methods of tax accounting and regardless of whether
interest has been paid on the HIGH TIDES Debentures or distributions are made on
the HIGH TIDES. Assuming that the HIGH TIDES Debentures are treated as reset
bonds (as discussed above), the total OID that will accrue during the period up
to the day before the Reset Date will be equal to the excess of (i) the sum of
(A) the Reset Price, plus (B) the total stated interest payments called for
under the HIGH TIDES Debentures prior to the Reset Date, over (ii) the issue
price of the HIGH TIDES Debentures. Because the Reset Price exceeds the
principal amount of the HIGH TIDES Debentures, during the period through the
Reset Date U.S. Holders will accrue OID at a rate slightly in excess of the
Initial Rate.
Actual distributions of stated interest will not be separately reported as
taxable income. Any OID included in income will increase the U.S. Holder's tax
basis in the HIGH TIDES and the U.S. Holder's actual receipt of interest
payments will reduce such basis. If the Company were to exercise its option to
defer payments of stated interest on the HIGH TIDES Debentures, U.S. Holders of
HIGH TIDES would continue to accrue OID income even though the Company would not
be making any actual cash payments during the Deferral Period.
Because the income underlying the HIGH TIDES will not be characterized as
dividends for federal income tax purposes, corporate holders of the HIGH TIDES
will not be entitled to a dividends received deduction for any income recognized
with respect to the HIGH TIDES.
ACQUISITION PREMIUM; PREMIUM
A U.S. Holder that purchases a HIGH TIDE will be considered to have
purchased the underlying HIGH TIDE Debenture at an "acquisition premium" if such
U.S. Holder's adjusted basis in the HIGH TIDE immediately after the purchase is
(i) greater than the adjusted issue price of the underlying HIGH TIDE Debenture
as of the purchase date and (ii) less than or equal to the sum of all amounts
payable on the underlying HIGH TIDE Debenture after the purchase date. Under the
acquisition premium rules, the amount of OID which such U.S. Holder must include
in its gross income for any taxable year (or portion thereof in which the U.S.
Holder holds the HIGH TIDES) will be reduced (but not below zero) by the portion
of the acquisition premium properly allocable to the period.
A U.S. Holder who purchases a HIGH TIDE will be considered to have
purchased the underlying HIGH TIDE Debenture at a "premium" if such U.S.
Holder's adjusted basis in the HIGH TIDE immediately after the purchase is
greater than the sum of all amounts payable on the underlying HIGH TIDE
Debenture after the purchase date. A U.S. Holder that purchases a HIGH TIDE at a
"premium" will not include any OID in gross income.
MARKET DISCOUNT
A U.S. Holder who purchases a HIGH TIDE will be considered to have
purchased the underlying HIGH TIDE Debenture at a "market discount" if such U.S.
Holder's adjusted basis in the HIGH TIDE immediately after the purchase is less
than the adjusted issue price of the underlying HIGH TIDE Debenture as of the
purchase date, unless such market discount is less than a specified de minimis
amount (generally 1/4 of 1 percent of the adjusted issue price of the HIGH TIDE
Debenture as of the purchase date multiplied by its weighted average maturity as
of such date).
Under the market discount rules, a U.S. Holder will be required to treat
any gain realized on the sale, exchange, retirement or other disposition of the
HIGH TIDES as ordinary income to the extent of the lesser of (i) the amount of
such realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on the underlying HIGH TIDES
Debentures at the time of such disposition. Market discount will be considered
to accrue ratably, unless the U.S. Holder elects to accrue market discount on a
constant yield basis. Once made, such an election is irrevocable.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry HIGH TIDES with market discount until the
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maturity of the HIGH TIDES Debentures or certain earlier dispositions. A current
deduction is only allowed to the extent the interest expense exceeds the portion
of market discount allocable to the days during the taxable year in which the
HIGH TIDES were held by the taxpayer. A U.S. Holder may elect to include market
discount in income currently as it accrues (on either a ratable or constant
yield basis), in which case the rules described above regarding the treatment as
ordinary income of gain upon the disposition of the HIGH TIDES and the deferral
of interest deductions will not apply. Generally, such currently included market
discount is treated as ordinary interest for federal income tax purposes. Such
an election will apply to all debt instruments with market discount acquired by
the holder on or after the first day of the taxable year to which such election
applies and may be revoked only with the consent of the IRS.
RECEIPT OF HIGH TIDES DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
HIGH TIDES -- Tax Event or Investment Company Event Redemption or Distribution,"
HIGH TIDES Debentures may be distributed to holders in exchange for the HIGH
TIDES and in liquidation of the Trust. Under current law, such a distribution to
holders, for United States federal income tax purposes, would be treated as a
nontaxable event to each U.S. Holder, and each U.S. Holder would receive an
aggregate tax basis in the HIGH TIDES Debentures equal to such U.S. Holder's
aggregate tax basis in its HIGH TIDES. A U.S. Holder's holding period in the
HIGH TIDES Debentures so received in liquidation of the Trust would include the
period during which the HIGH TIDES were held by such U.S. Holder. If, however,
the exchange is caused by a Tax Event which results in the Trust being treated
as an association taxable as a corporation, the distribution would likely
constitute a taxable event to U.S. Holders of the HIGH TIDES.
Under certain circumstances described herein (see "Description of HIGH
TIDES"), the HIGH TIDES Debentures may be redeemed for cash and the proceeds of
such redemption distributed to holders in redemption of their HIGH TIDES. Under
current law, such a redemption would, for United States federal income tax
purposes, constitute a taxable disposition of the redeemed HIGH TIDES as to U.S.
Holders, and a U.S. Holder would recognize gain or loss as if it sold such
redeemed HIGH TIDES for cash. See "-- Sale of HIGH TIDES."
SALE OF HIGH TIDES
A U.S. Holder that sells HIGH TIDES will recognize capital gain or loss
equal to the difference between the amount realized on the sale of the HIGH
TIDES and the holder's adjusted tax basis in such HIGH TIDES. A U.S. Holder's
adjusted tax basis in the HIGH TIDES generally will be its initial purchase
price, increased by any OID included in income (and accrued market discount, if
any, if the U.S. Holder has included such market discount in income), and
decreased by payments received on the HIGH TIDES. In the case of a U.S. Holder
other than a corporation, the maximum marginal federal income tax rate
applicable to such gain will be lower than the maximum marginal federal income
tax rate applicable to ordinary income if such holder's holding period for such
HIGH TIDES exceeds one year.
A U.S. Holder who disposes of its HIGH TIDES between record dates for
payments of distributions thereon will be required to include OID on the HIGH
TIDES Debentures through the date of disposition in income as ordinary income,
and to add such amount to its adjusted tax basis in the HIGH TIDES. To the
extent the selling price is less than the U.S. Holder's adjusted tax basis
(which basis will include OID previously included in income, less interest
payments actually received), a U.S. Holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
CONVERSION OF HIGH TIDES INTO CLASS A COMMON STOCK
A U.S. Holder of HIGH TIDES will not recognize income, gain or loss upon
the conversion, through the conversion agent, of HIGH TIDES Debentures into
Class A Common Stock (although the holder will be required to continue to accrue
any OID through the date of conversion). The U.S. Holder will recognize gain
upon the receipt of cash in lieu of a fractional share of Class A Common Stock
equal to the amount of cash
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received less the holder's tax basis in such fractional share. A U.S. Holder's
tax basis in the Class A Common Stock received upon conversion would generally
be equal to the U.S. Holder's tax basis in the HIGH TIDES delivered to the
conversion agent for exchange less the basis allocated to any fractional share
for which cash is received, and a U.S. Holder's holding period in the Class A
Common Stock received upon conversion would generally include the period during
which the HIGH TIDES were held by such U.S. Holder.
DIVIDENDS
The amount of any distribution by the Company in respect of Class A Common
Stock will be equal to the amount of cash and the fair market value, on the date
of distribution, of any property distributed. Generally, distributions will be
treated as a dividend, subject to tax as ordinary income, to the extent of the
Company's current or accumulated earnings and profits, then as a tax-free return
of capital to the extent of a U.S. Holder's tax basis in the Class A Common
Stock and thereafter as gain from the sale or exchange of such stock (as
described below).
In general, a dividend distribution to a corporate U.S. Holder will qualify
for the 70% dividends received deduction if the U.S. Holder owns less than 20%
of the voting power and value of the Company's stock (other than any non-voting,
non-convertible, non-participating preferred stock). A corporate U.S. Holder
that owns 20% or more of the voting power and value of the Company's stock
(other than any non-voting, non-convertible, non-participating preferred stock)
generally will qualify for an 80% dividends received deduction. The dividends
received deduction is subject to certain holding period, taxable income and
other limitations.
SALE OF CLASS A COMMON STOCK
Upon the sale or exchange of Class A Common Stock, a U.S. Holder generally
will recognize capital gain or loss equal to the difference between (i) the
amount of cash and the fair market value of any property received upon the sale
or exchange and (ii) such U.S. Holder's adjusted tax basis in the Class A Common
Stock. In the case of a U.S. Holder other than a corporation, the maximum
marginal federal income tax rate applicable to such gain will be lower than the
maximum marginal federal income tax rate applicable to ordinary income if such
holder's holding period for such Class A Common Stock exceeds one year. A U.S.
Holder's basis and holding period in Class A Common Stock received upon
conversion of HIGH TIDES are determined as discussed above under "-- Conversion
of HIGH TIDES into Class A Common Stock."
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of HIGH TIDES as having received a constructive distribution from the
Company in the event the Applicable Conversion Ratio of the HIGH TIDES
Debentures were adjusted if (i) as a result of such adjustment, the
proportionate interest (measured by the amount of Class A Common Stock into
which the HIGH TIDES Debentures are convertible) of the holders of the HIGH
TIDES in the assets or earnings and profits of Company were increased, and (ii)
the adjustment was not made pursuant to a bona fide, reasonable antidilution
formula. An adjustment in the Applicable Conversion Ratio would not be
considered made pursuant to such a formula if the adjustment was made to
compensate for certain taxable distributions with respect to the Class A Common
Stock. Thus, under certain circumstances, a reduction in the conversion price
for the holders may result in deemed dividend income to holders to the extent of
the current or accumulated earnings and profits of the Company. Holders of the
HIGH TIDES would be required to include their allocable share of such deemed
dividend income in gross income but will not receive any cash related thereto.
In addition, the Company will take the position that the adjustment to the
Initial Conversion Ratio in connection with the Remarketing will constitute an
"isolated" recapitalization for federal income tax purposes and, therefore, not
be deemed a constructive dividend under Section 305. However, the IRS might
contend that any increase in such Initial Conversion Ratio on the Reset Date is
a constructive dividend to holders of the HIGH TIDES who hold the HIGH TIDES
immediately before the Reset Date and that any decrease in such Initial
Conversion Ratio on the Reset Date (or elimination of the conversion feature on
the Reset Date) is a constructive dividend to all holders of Class A Common
Stock at that time. In each case, the amount of
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the constructive dividend would be the fair market value on the Reset Date of
the number of shares of Class A Common Stock which, if actually distributed to
holders of HIGH TIDES (in the case of an increase in the Initial Conversion
Ratio) or to holders of the Class A Common Stock (in the case of a decrease in
the Initial Conversion Ratio or elimination of convertibility of HIGH TIDES),
would produce the same increase in the proportionate interests of such holders
in the assets or earnings and profits of the Company as that produced by the
adjustment. The aggregate deemed dividend is limited to the current or
accumulated earnings and profits of the Company. Holders of the HIGH TIDES would
be required to include any such constructive dividend to them in gross income
but would not receive any cash related thereto.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a HIGH TIDE, payments of dividends
on Class A Common Stock, payments of the proceeds of the sale of a HIGH TIDE and
payments of the proceeds of the sale of Class A Common Stock, and a 31% backup
withholding tax may apply to such payments if the U.S. Holder (i) fails to
furnish or certify his correct taxpayer identification number to the payor in
the manner required, (ii) is notified by the IRS that he has failed to report
payments of interest and dividends properly, or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that he
is subject to backup withholding for failure to report interest and dividend
payments. Any amounts withheld under the backup withholding rules from a payment
to a U.S. Holder will be allowed as a credit against such U.S. Holder's United
States federal income tax and may entitle the holder to a refund, provided that
the required information is furnished to the IRS.
NON-U.S. HOLDERS
The rules governing United States federal income taxation of a beneficial
owner of HIGH TIDES or Class A Common Stock that, for United States federal
income tax purposes, is a Non-U.S. Holder are complex and no attempt will be
made herein to provide more than a summary of such rules. NON-U.S. HOLDERS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT OF FEDERAL,
STATE, LOCAL AND FOREIGN INCOME TAX LAWS, AS WELL AS TREATIES, WITH REGARD TO AN
INVESTMENT IN THE HIGH TIDES AND CLASS A COMMON STOCK, INCLUDING ANY REPORTING
REQUIREMENTS.
Interest Income and Original Issue Discount
Generally, interest income (or OID) of a Non-U.S. Holder that is not
effectively connected with a United States trade or business will be subject to
a withholding tax at a 30% rate (or, if applicable, a lower tax rate specified
by a treaty). However, interest income (or OID) earned on the HIGH TIDES
Debentures by a Non-U.S. Holder will qualify for the "portfolio interest"
exemption and therefore will not be subject to United States federal income tax
or withholding tax, provided that such interest income is not effectively
connected with a United States trade or business of the Non-U.S. Holder and
provided that (i) the Non-U.S. Holder does not actually or constructively
(including by virtue of its interest in the underlying HIGH TIDES Debentures)
own 10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote (ii) the Non-U.S. Holder is not a controlled
foreign corporation that is related to the Company through stock ownership,
(iii) the Non-U.S. Holder is not a bank which acquired the HIGH TIDES in
consideration for an extension of credit made pursuant to a loan agreement
entered into in the ordinary course of business and (iv) either (A) the Non-U.S.
Holder certifies to the Trust or its agent, under penalties of perjury, that it
is not a U.S. Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds customer'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds HIGH TIDES in such capacity, certifies to the Trust or
its agent, under penalties of perjury, that such statement has been received
from the beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes the Trust or its agent with a copy thereof.
Recently finalized Treasury Regulations would modify the certification
requirements on payments of interest made after December 31, 1998. In Notice
98-16, the IRS announced that the Treasury Department
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and the IRS intend to amend these regulations by delaying the effective date, so
that the regulations will apply to payments made after December 31, 1999,
subject to certain transition rules. Prospective investors should consult their
own tax advisors as to the effect, if any, of the final regulations and Notice
98-16 on their purchase, ownership and disposition of the HIGH TIDES and Class A
Common Stock.
Except to the extent that an applicable treaty otherwise provides, a
Non-U.S. Holder generally will be taxed in the same manner as a U.S. Holder with
respect to interest (or OID) if the interest (or OID) income is effectively
connected with a United States trade or business of the Non-U.S. Holder.
Effectively connected interest (or OID) received or accrued by a corporate
Non-U.S. Holder may also, under certain circumstances, be subject to an
additional "branch profits" tax at a 30% rate (or, if applicable, a lower tax
rate specified by a treaty). Even though such effectively connected interest (or
OID) is subject to income tax, and may be subject to the branch profits tax, it
is not subject to withholding tax if the holder delivers a properly executed IRS
Form 4224 (or successor form) to the payor.
Sale, Exchange or Redemption of HIGH TIDES
A Non-U.S. Holder of HIGH TIDES generally will not be subject to United
States federal income tax or withholding tax on any gain realized on the sale,
exchange or redemption of the HIGH TIDES (including the receipt of cash in lieu
of fractional shares upon conversion of HIGH TIDES into Class A Common Stock)
unless (i) the gain is effectively connected with a United States trade or
business of the Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder who is an
individual, such holder is present in the United States for a period or periods
aggregating 183 days or more during the taxable year of the disposition, and
either such holder has a "tax home" in the United States or the disposition is
attributable to an office or other fixed place of business maintained by such
holder in the United States, or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of the Code applicable to certain United States
expatriates.
Conversion of HIGH TIDES
In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of HIGH TIDES into Class A Common Stock by a
Non-U.S. Holder (except with respect to the Non-U.S. Holder's receipt of cash in
lieu of fractional shares) where one of the conditions described above under
"-- Non-U.S. Holders -- Sale, Exchange or Redemption of HIGH TIDES" is
satisfied.
Sale or Exchange of Class A Common Stock
A Non-U.S. Holder generally will not be subject to United States federal
income tax or withholding tax on the sale or exchange of Class A Common Stock
unless one of the conditions described above under "-- Non-U.S. Holders -- Sale,
Exchange or Redemption of HIGH TIDES" is satisfied.
Dividends
Distributions by the Company with respect to the Class A Common Stock that
are treated as dividends paid (or deemed paid), as described above under
"-- Dividends" to a Non-U.S. Holder (excluding dividends that are effectively
connected with the conduct of a United States trade or business by such holder
and are taxable as described below), will be subject to United States federal
withholding tax at a 30% rate (or a lower rate provided under any applicable
income tax treaty). Except to the extent that an applicable tax treaty otherwise
provides, a Non-U.S. Holder will be taxed in the same manner as a U.S. Holder on
dividends paid (or deemed paid) that are effectively connected with the conduct
of a United States trade or business by the Non-U.S. Holder. If such Non-U.S.
Holder is a foreign corporation, it may also be subject to a United States
branch profits tax on such effectively connected income at a 30% rate (or such
lower rate as may be specified by an applicable tax treaty). Even though such
effectively connected dividends are subject to income tax, and may be subject to
the branch profits tax, they will not be subject to U.S. withholding tax if the
holder delivers a properly executed IRS Form 4224 (or successor form) to the
payor.
Under current Treasury Regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for purposes of the 30%
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withholding discussed above and for purposes of determining the applicability of
a tax treaty rate. Under recently issued Treasury Regulations, however, Non-U.S.
Holders of Class A Common Stock who wish to claim the benefit of an applicable
treaty rate would be required to satisfy certain certification requirements.
Based on IRS Notice 98-16, the new regulations generally will be effective for
payments made after December 31, 1999, subject to certain transition rules.
Prospective investors should consult their own tax advisors as to the effect, if
any, of the final regulations and Notice 98-16 on their purchase, ownership and
disposition of the HIGH TIDES and Class A Common Stock.
Certain United States Federal Estate Tax Considerations Applicable to a
Non-U.S. Holder
HIGH TIDES held by an individual who is a Non-U.S. Holder at the time of
death will not be includable in the decedent's gross estate for United States
federal estate tax purposes, provided that such holder or beneficial owner did
not at the time of death actually or constructively (including by virtue of its
interest in the underlying HIGH TIDES Debentures) own 10% or more of the
combined voting power of all classes of stock of the Company entitled to vote,
and provided that at the time of death, payments with respect to such HIGH TIDES
would not have been effectively connected with the conduct by such Non-U.S.
Holder of a trade or business within the United States.
Class A Common Stock actually or beneficially held (other than through a
foreign corporation) by a Non-U.S. Holder at the time of his or her death (or
previously transferred subject to certain retained rights or powers) will be
subject to United States federal estate tax unless otherwise provided by an
applicable estate tax treaty.
Information Reporting and Backup Withholding Tax
United States information reporting requirements and backup withholding tax
will not apply to payments on HIGH TIDES to a Non-U.S. Holder if the statement
described in "-- Non-U.S. Holders -- Interest Income and Original Issue
Discount" is duly provided by such holder, provided that the payor does not have
actual knowledge that the holder is a U.S. Holder.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of HIGH TIDES, or any payment
of the proceeds of the sale of Class A Common Stock effected outside the United
States by a foreign office of a "broker" (as defined in applicable Treasury
Regulations), unless such broker (i) is a United States person, (ii) is a
foreign person that derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States or (iii) is a
controlled foreign corporation for United States federal income tax purposes.
Payment of the proceeds of any such sale effected outside the United States by a
foreign office of any broker that is described in (i), (ii) or (iii) of the
preceding sentence will not be subject to backup withholding tax, but will be
subject to information reporting requirements, unless such broker has
documentary evidence in its records that the beneficial owner is a Non-U.S.
Holder and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment of the proceeds of any such sale to or through
the United States office of a broker is subject to information reporting and
backup withholding requirements unless the beneficial owner of the HIGH TIDES
provides the statement described in "-- Non-U.S. Holders -- Interest Income and
Original Issue Discount" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on Class A
Common Stock held by a Non-U.S. Holder generally will not be subject to the
information reporting and backup withholding requirements described in this
section. However, under recently issued Treasury Regulations, dividend payments
will be subject to information reporting and backup withholding unless certain
certification requirements are satisfied. Based on IRS Notice 98-16, the new
regulations generally will be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors should consult
their own tax advisors as to the effect, if any, of the final regulations and
Notice 98-16 on their purchase, ownership and disposition of the HIGH TIDES and
Class A Common Stock.
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Foreign Investment in Real Property Tax Act
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"), any
person who acquires a "United States real property interest" (as described
below) from a foreign person must deduct and withhold a tax equal to 10% of the
amount realized by the foreign transferor. In addition, a foreign person who
disposes of a United States real property interest generally is required to
recognize gain or loss that is subject to United States federal income tax. A
"United States real property interest" generally includes any interest (other
than an interest solely as a creditor) in a United States corporation unless it
is established under specific procedures that the corporation is not (and was
not for the prior five-year period) a "United States real property holding
corporation." The Company does not believe that it is or has been a United
States real property holding corporation as of the date hereof, and does not
expect to become a United States real property holding corporation in the future
(although there can be no assurance that this future expectation will be
accurate). Moreover, even if the Company becomes a United States real property
holding corporation, so long as the Company's stock is regularly traded on an
established securities market, an exemption should apply to the HIGH TIDES and
the Class A Common Stock except with respect to a Non-U.S. Holder whose
beneficial ownership of HIGH TIDES or Class A Common Stock exceeds 5% of the
total fair market value of the Class A Common Stock.
Any investor that may approach or exceed the 5% ownership threshold
discussed above, either alone or in conjunction with related persons, should
consult its own tax advisor concerning the United States tax consequences that
may result. A Non-U.S. Holder who sells or otherwise disposes of HIGH TIDES or
Class A Common Stock may be required to inform its transferee whether such HIGH
TIDES or Class A Common Stock constitute a United States real property interest.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
HIGH TIDES AND CLASS A COMMON STOCK, INCLUDING THE TAX CONSEQUENCES UNDER STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS.
CERTAIN ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans and certain
other retirement plans and arrangements, including individual retirement
accounts and annuities, that are subject to ERISA and the Code (all of which are
hereinafter referred to as "ERISA Plans") and on persons who are fiduciaries
with respect to such ERISA Plans. In accordance with ERISA's general fiduciary
standards, before investing in HIGH TIDES, an ERISA Plan fiduciary should
determine whether such an investment is permitted under the governing ERISA Plan
instruments and is appropriate for the ERISA Plan in view of its overall
investment policy and the composition and diversification of its portfolio.
Other provisions of ERISA and the Code prohibit certain transactions involving
the assets of an ERISA Plan and persons who have certain specified relationships
to the ERISA Plan ("parties in interest" within the meaning of ERISA or
"disqualified persons" within the meaning of the Code). Accordingly, any ERISA
Plan with respect to which the Company or any of its affiliates would be
considered a party in interest or a disqualified person should not purchase HIGH
TIDES.
In addition, under United States Department of Labor Regulation Section
2510.3-101 (the "Regulation"), if immediately after any acquisition of HIGH
TIDES, 25% or more of the value of the HIGH TIDES is held by ERISA Plans,
employee benefit plans not subject to ERISA (for example, governmental plans)
and entities whose underlying assets include plan assets by reason of a plan's
investment in the entity, then the assets of the Issuer (including the HIGH
TIDES Debentures) would be treated as assets of ERISA Plans holding HIGH TIDES,
unless another exemption or exception applied. In such event, the persons
providing services with respect to the assets of the Trust may be subject to the
fiduciary responsibility provisions of
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<PAGE> 70
Title I of ERISA and the prohibited transaction provisions of ERISA and Section
4975 of the Code with respect to transactions involving such assets. In order to
avoid certain prohibited transactions that might otherwise arise in connection
with the Trust assets, each investing ERISA Plan, by its purchase of HIGH TIDES,
will be deemed to have directed the Trustee to purchase HIGH TIDES Debentures
and to have approved all of the documents relating to the Trust assets.
Moreover, the holders of HIGH TIDES will have the right to direct the Property
Trustee as to the exercise of remedies in connection with any Event of Default.
ANY ERISA PLAN PROPOSING TO PURCHASE HIGH TIDES SHOULD CONSULT WITH ITS
COUNSEL REGARDING THE APPLICATION OF ERISA, THE CODE AND THE REGULATION WITH
RESPECT TO INVESTMENT IN HIGH TIDES.
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<PAGE> 71
DESCRIPTION OF COMPANY CAPITAL STOCK
The authorized capital stock of the Company consists of 70,000,000 shares
of the Class A Common Stock, 2,500,000 shares of the Class B Common Stock, and
250,000 shares of the preferred stock, $.01 par value per share (the "Preferred
Stock"). As of September 2, 1998, there were outstanding 34,020,309 shares of
the Class A Common Stock, 1,936,600 shares of the Class B Common Stock and no
shares of the Preferred Stock. All the outstanding shares of Class B Common
Stock are held by the principal executive officers of the Company.
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Voting Rights
Each share of the Class A Common Stock is entitled to one vote and each
share of the Class B Common Stock is entitled to ten votes on all matters
submitted to a vote of the stockholders. The Class A Common Stock and the Class
B Common Stock vote together as a single class on all matters presented for a
vote of the stockholders, except as noted below and as provided under the
Delaware General Corporation Law. The holders of the Class B Common Stock have,
together with the Class A Common Stock owned by such individuals greater than
40% of the combined voting power of the outstanding Class A and Class B Common
Stock. As a result, these holders are able to exert substantial influence over
the election of the Company's Board of Directors, thereby ensuring that members
elected by them will continue to direct the business, policies and management of
the Company.
The Company's Amended and Restated Certificate of Incorporation requires a
vote of 60% of the number of shares of the Class B Common Stock outstanding,
voting separately as a class, and a majority of the shares of the Class A Common
Stock, voting separately as a class, to approve any modification to the rights
and privileges of the Class A Common Stock or the Class B Common Stock or any
reclassification or recapitalization of the Company's outstanding capital stock.
Dividends
Each share of the Class A Common Stock is entitled to receive dividends if,
as and when declared by the Board of Directors of the Company out of funds
legally available therefor. Identical dividends, if any, must be paid on both
the Class A Common Stock and the Class B Common Stock at any time that dividends
are paid on either, except that stock dividends payable on shares of the Class B
Common Stock are payable only in shares of the Class B Common Stock and stock
dividends payable on shares of the Class A Common Stock are payable only in
shares of the Class A Common Stock. If a dividend or distribution payable in the
Class A Common Stock is made on the Class A Common Stock, the Company must also
make a pro rata and simultaneous dividend or distribution of shares of Class B
Common Stock on the Class B Common Stock. If a dividend or distribution payable
in Class B Common Stock is made on the Class B Common Stock, the Company must
also make a pro rata and simultaneous dividend or distribution of shares of
Class A Common Stock on the Class A Common Stock.
Convertibility
Each share of the Class B Common Stock is convertible at any time at the
option of the holder into the Class A Common Stock on a share-for-share basis.
Shares of the Class B Common Stock will be automatically converted into shares
of the Class A Common Stock on a share-for-share basis in the event that the
record or beneficial ownership of such shares of the Class B Common Stock is
transferred (including, without limitation, by way of gift, settlement, will or
intestacy) to any person or entity that was not a holder of Class B Common Stock
at the time of transfer. Therefore, the shares of Class B Common Stock will only
exist so long as they are held by one or more of the principal executive
officers of the Company. Shares of the Class A Common Stock are not convertible.
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Liquidation Rights
In the event of the dissolution of the Company, after satisfaction of
amounts payable to creditors and distribution to the holders of outstanding
Preferred Stock, if any, of amounts to which they may be preferentially
entitled, holders of the Class A Common Stock and the Class B Common Stock are
entitled to share ratably in the assets available for distribution to the
stockholders.
Other Provisions
There are no preemptive rights to subscribe for any additional securities
which the Company may issue and there are no redemption provisions or sinking
fund provisions applicable to the Class A Common Stock or the Class B Common
Stock, nor is either class subject to calls or assessments by the Company. All
outstanding shares of Common Stock are, and all shares of Class A Common Stock
to be outstanding upon conversion of the HIGH TIDES will be, legally issued,
fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors of the Company has the authority, without further
action by the stockholders, to cause the Company to issue up to 250,000 shares
of Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions granted to or imposed upon any unissued shares of
Preferred Stock and to fix the number of shares comprising any series and the
designations of such series. The issuance of Preferred Stock, while providing
flexibility in connection with possible financings, acquisitions and other
corporate transactions, could, among other things, adversely affect the voting
power of the holders of Common Stock and, under certain circumstances, make it
more difficult for a third party to gain control of the Company, deny
stockholders the receipt of a premium on their Common Stock and have an adverse
effect on market price of the Common Stock.
CONVERTIBLE NOTES
In April 1997, the Company issued $45.0 million aggregate principal amount
of Series B Convertible Notes. The Series B Convertible Notes are convertible,
at the option of the holders, into Class A Common Stock at a conversion price of
$27.96 per share. The outstanding Series B Convertible Notes are convertible
into an aggregate of 1,609,436 shares of Class A Common Stock.
BYLAW PROVISIONS
The Company's Bylaws provide that special meetings of the stockholders may
be called only by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, the President or the Secretary of the Company, or by one or
more stockholders holding shares entitled to cast not less than a majority of
the aggregate votes entitled to be cast at such meeting. The Bylaws also provide
that any action which may be taken at any meeting of stockholders may be taken
without a meeting and without prior notice if written consents approving the
action are signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to take such action at a meeting
of stockholders. Further, directors may only be removed for cause by vote of the
record holders of a majority of the combined voting power of the Common Stock.
These provisions will make it more difficult for a third party to gain control
of the Company.
INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, the Company's Amended
and Restated Certificate of Incorporation provides that directors of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, relating to prohibited dividends,
distributions and repurchases or redemptions of stock, or (iv) for any
transaction from which the director derives an improper
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<PAGE> 73
personal benefit. The Company's Bylaws provide that the Company shall indemnify
its directors, officers, employees and other agents, to the fullest extent
provided by Delaware law. The Company has also entered into indemnification
agreements with certain of its executive officers and directors. The
indemnification agreements require the Company, among other things, to indemnify
such directors and officers against certain liabilities that may arise by reason
of their status or service as directors or officers (other than liabilities
arising from willful misconduct of a culpable nature), and to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified. The Company maintains directors' and officers' insurance
against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the arrangements described above, the Company has been advised that,
in the opinion of the Commission, such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
At present, there is no pending material litigation or proceeding involving
any director, officer, employee or agent of the Company where indemnification
will be required or permitted.
SECTION 203
The Company is subject to Section 203 of the Delaware General Corporation
Law, which prohibits a publicly held Delaware corporation from consummating a
"business combination", except under certain circumstances, with an "interested
stockholder" for a period of three years after the date such person became an
"interested stockholder" unless (i) before such person became an interested
stockholder, the board of directors of the corporation approved the transaction
in which the interested stockholder became an interested stockholder or approved
the business combination; (ii) upon consummation of the transaction that
resulted in the interested stockholder's becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares held by
directors who are also officers of the corporation and certain shares held by
employee stock plans); or (iii) following the transaction in which such person
became an interested stockholder, the business combination is approved by the
board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
stockholder. An "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns (or, within the prior three years,
owned) 15% or more of a corporation's outstanding voting stock. A "business
combination" includes mergers, asset sales and certain other transactions
resulting in a financial benefit to an interested stockholder.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services.
SELLING HOLDERS
The HIGH TIDES were originally issued by the Trust and sold by Credit
Suisse First Boston Corporation, Goldman, Sachs & Co., J.P. Morgan Securities
Inc., ABN AMRO Incorporated, BT Alex. Brown Incorporated, McDonald & Company
Securities, Inc. and NationsBanc Montgomery Securities LLC (the "Initial
Purchasers") in a transaction exempt from the registration requirements of the
Securities Act, to persons reasonably believed by such Initial Purchasers to be
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act). The Selling Holders may from time to time offer and sell pursuant to this
Prospectus any or all of the HIGH TIDES, the HIGH TIDES Debentures, Class A
Common Stock issued upon conversion of the HIGH TIDES and the associated
Guarantee. The term "Selling Holder" includes the holders listed below and the
beneficial owners of the HIGH TIDES and their transferees, pledgees, donees and
other successors. The Offered Securities have been registered pursuant to the
Registration Agreement. See "Registration Rights."
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<PAGE> 74
The Offered Securities have been registered pursuant to the Registration
Agreement which provides that the Company use its best efforts to keep the
Registration Statement effective and useable for two years or such earlier date
as of which all the Offered Securities have been sold pursuant to the Prospectus
which forms part of the Registration Statement.
The following table sets forth information with respect to the Selling
Holders of the HIGH TIDES and the respective number of HIGH TIDES beneficially
owned by each Selling Holder that may be offered pursuant to this Prospectus.
Such information has been obtained from the Selling Holders. Except as otherwise
indicated, to the knowledge of the Company, all persons listed below have sole
voting and investment power with respect to their securities.
<TABLE>
<CAPTION>
NUMBER OF
SELLING HOLDER HIGH TIDES
- -------------- ----------
<S> <C>
ABN -- AMRO Incorporated.................................... 30,800
Allstate Insurance Company.................................. 46,700
American Travelers Life Insurance Company -- Convertible.... 6,500
Baron Asset Fund............................................ 400,000
Bond Fund Series -- Oppenheimer Convertible Securities
Fund...................................................... 104,000
BT Alex. Brown Inc. ........................................ 20,000
Cede & Co. ................................................. 135,000
Century National Insurance Company.......................... 11,200
Chartwell Dividend & Income Fund............................ 25,000
Chrysler Insurance Company -- Total Return.................. 800
Chrysler Corporation Master Retirement Trust................ 52,700
Combined Insurance Company of America....................... 17,200
Conseco Health Insurance Co. -- Convertible................. 6,500
Continental Casualty Company................................ 30,000
Credit Suisse First Boston Corporation...................... 627,135
Delta Air Lines Master Trust................................ 22,700
Fundamental Investors, Inc.................................. 300,000
GPZ Trading LLC............................................. 77,500
Great American Reserve Insurance Co. -- Convertible......... 7,000
IBM Retirement Fund......................................... 130,000
The Income Fund of America, Inc. ........................... 600,000
John Hancock Mutual Life Insurance Company.................. 340,000
John Hancock Variable Life Insurance Company................ 60,000
Lincoln National Convertible Securities Fund................ 27,135
Lipper Convertibles, L.P. .................................. 582,206
Louisiana's Sheriffs Pension & Relief Fund.................. 50,000
MCI Pension Fund -- Glickenhaus............................. 30,000
McMahan Securities Company, L.P. ........................... 4,000
MFS Series Trust V -- MFS Total Return Fund................. 40,000
Morgan Stanley Dean Witter Convertible Securities Trust..... 40,000
NationsBanc Montgomery Securities, LLC...................... 46,800
New York Life Insurance & Annuity Corporation............... 50,000
New York Life Insurance Company............................. 350,000
The Northwestern Mutual Life Insurance Company.............. 90,000
OCM Convertible Trust....................................... 64,000
Offense Group Associates, L.P. ............................. 45,000
Oppenheimer Millennium Funds p/c for the Oppenheimer
Millennium Income and Growth Fund......................... 1,000
Oppenheimer Multiple Strategies Fund........................ 40,000
Oppenheimer Variable Account Funds for the Oppenheimer
Multiple Strategies Fund.................................. 20,000
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF
SELLING HOLDER HIGH TIDES
- -------------- ----------
<S> <C>
Paloma Securities L.L.C. ................................... 250,000
Raytheon Company Master Pension Trust....................... 26,900
Rio Hondo Memorial Foundation............................... 8,000
Scudder Kemper Investments.................................. 5,000
Sequa Corp M/T Glickenhaus & Co. ........................... 10,000
Smith Barney Convertible Fund............................... 30,000
State Employees' Retirement Fund of the State of Delaware... 19,000
State of Connecticut Combined Investment Funds.............. 65,500
Teachers Insurance and Annuity Association of America....... 80,000
Third Avenue High Yield Fund................................ 6,000
The Travelers Indemnity Company............................. 57,161
The Travelers Insurance Company............................. 36,547
The Travelers Insurance Company, separate Account TLAC...... 4,292
Travelers Series Trust Convertible Bond Portfolio........... 2,000
Vanguard Convertible Securities Fund, Inc................... 47,900
Walker Art Center........................................... 3,530
Any Other Holder of High Tides or Future Transferee from any
such Holder............................................... 817,294
---------
TOTAL............................................. 6,000,000
=========
</TABLE>
None of the Selling Holders has, or within the past three years has had,
any position, office or other material relationship with the Trust or the
Company or any of their predecessors or affiliates. Because the Selling Holders
may, pursuant to this Prospectus, offer all or some portion of the applicable
HIGH TIDES, the HIGH TIDES Debenture or the applicable Class A Common Stock
issuable upon conversion of the HIGH TIDES no estimate can be given as to the
amount of the HIGH TIDES, the HIGH TIDES Debenture or the Class A Common Stock
issuable upon conversion of HIGH TIDES that will be held by the Selling Holders
upon termination of any such sales. In addition, the Selling Holders identified
above may have sold, transferred or otherwise disposed of all or a portion of
their HIGH TIDES since the date on which they provided the information regarding
their HIGH TIDES included herein in transactions exempt from the registration
requirements of the Securities Act. See "Plan of Distribution."
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to time
offer the Offered Securities to or through underwriters, broker/dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders, and any
underwriters, broker/dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or in the over-the-counter market or (iv)
through the writing and exercise of options. At the time a particular offering
of the Offered Securities is made, a Prospectus Supplement, if required, will be
distributed, which will set forth the aggregate amount and type of Offered
Securities being offered and the terms of the offering, including the name or
names of any underwriters, broker/dealers or agents, any discounts, commissions
and other terms constituting compensation from the Selling Holders and any
discounts, commissions or concessions allowed or reallowed to paid
broker/dealers.
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<PAGE> 76
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they have
been registered or qualified for sale in such jurisdictions or any exemption
from registration or qualification is available and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and rules and regulations thereunder, which provisions may limit
the timing of purchases and sales of any of the Offered Securities by the
Selling Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Agreement, the Company shall bear all fees and
expenses incurred in connection with the registration of the Offered Securities;
provided, however, that the Selling Holders will pay all broker's commissions
and underwriting discounts and commissions, if any. The Selling Holders will be
indemnified by the Company and the Trust, jointly and severally against certain
civil liabilities, including certain liabilities under the Securities Act or the
Exchange Act or otherwise, or will be entitled to contribution in connection
therewith. The Company and the Trust will be indemnified by the Selling Holders
severally against certain civil liabilities, including certain liabilities under
the Securities Act or otherwise, or will be entitled to contribution in
connection therewith.
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<PAGE> 77
LEGAL MATTERS
The validity of the HIGH TIDES Debentures, the Guarantee and any Common
Stock issuable upon conversion of such HIGH TIDES has been passed upon for the
Company and the Issuer by King & Spalding, Atlanta, Georgia, and certain matters
of Delaware law relating to the Issuer and the validity of the HIGH TIDES has
been passed upon for the Issuer and the Company by Richards, Layton & Finger,
P.A., Wilmington, Delaware, special Delaware counsel to the Issuer and the
Company. Certain matters relating to United States federal income tax
considerations have been passed upon for the Company by King & Spalding,
Atlanta, Georgia, as special tax counsel to the Company and the Issuer.
EXPERTS
The consolidated balance sheets of the Company and its subsidiaries as of
December 31, 1997 and 1996 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997, after restatement for the 1998 pooling of
interests with Cruise America, Inc., included in the Company's Current Report on
Form 8-K dated July 2, 1998 and incorporated by reference in this Prospectus,
have been audited by Arthur Andersen LLP, independent certified public
accountants, as indicated in their report with respect thereto and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements for the year ended December 31, 1995
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, and incorporated by reference in this Prospectus, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference and have been incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of Budget Rent A Car Corporation as
of December 31, 1995 and 1996 and for each of the years in the three-year period
ended December 31, 1996 included in the Company's Current Report on Form 8-K
dated May 13, 1997 and incorporated by reference in this Prospectus, have been
incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, given upon the authority of said firm
as experts in accounting and auditing.
The consolidated balance sheets of Ryder TRS, Inc. and Subsidiaries as of
December 31, 1996 and 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for the period from September 5,
1996 (date of inception) to December 31, 1996 and the year ended December 31,
1997, included in the Company's Registration Statement on Form S-4 (File No.
333-49679) and incorporated by reference in this Prospectus, have been
incorporated herein in reliance upon the report of PricewaterhouseCoopers LLP,
independent accountants, given upon the authority of that firm as experts in
accounting and auditing.
The combined balance sheet of Ryder Consumer Truck Rental (a division of
Ryder Truck Rental, Inc., a wholly-owned subsidiary of Ryder System, Inc.) as of
October 16, 1996, and the related combined statements of earnings and changes in
Ryder investment and cash flows for the period from January 1, 1996 to October
16, 1996, included in the Company's Registration Statement on Form S-4 (File No.
333-49679) have been incorporated by reference in this Prospectus, in reliance
on the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
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<PAGE> 78
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE ISSUER OR ANY INITIAL PURCHASER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. i
Incorporation of Certain Documents by
Reference........................... i
Cautionary Information................ ii
Offering Summary...................... 1
Investment Considerations............. 8
The Company........................... 14
Ratio of Earnings to Fixed Charges.... 16
Accounting Treatment.................. 16
Use of Proceeds....................... 16
Budget Group Capital Trust............ 16
The Remarketing....................... 17
The Remarketing Agent................. 22
Description of HIGH TIDES............. 23
Description of HIGH TIDES
Debentures.......................... 42
Description of the Guarantee.......... 52
Relationship Among the HIGH TIDES, the
HIGH TIDES Debentures and the
Guarantee........................... 55
Registration Rights................... 56
United States Federal Tax
Considerations...................... 57
Certain ERISA Considerations.......... 65
Description of Company Capital
Stock............................... 67
Selling Holders....................... 69
Plan of Distribution.................. 71
Legal Matters......................... 73
Experts............................... 73
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
BUDGET GROUP
CAPITAL TRUST
REMARKETABLE TERM INCOME
DEFERRABLE EQUITY SECURITIES
(HIGH TIDES)(SM)
6 1/4% CONVERTIBLE PREFERRED SECURITIES
6,000,000 HIGH TIDES(SM)
guaranteed to the extent set forth herein by, and convertible into Class A
Common Stock of,
BUDGET GROUP LOGO
Budget Group, Inc.
Prospectus
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 79
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder, all of
which are being paid by the Company. Except for the SEC registration fee, all
amounts are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 88,500
Transfer agents' fees....................................... 5,000
Printing and engraving expenses............................. 70,000
Legal fees and expenses..................................... 30,000
Accounting fees and expenses................................ 15,000
Miscellaneous............................................... 5,000
--------
Total............................................. $213,500
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following summary is qualified in its entirety by reference to the
complete statute, Restated Certificate of Incorporation, Bylaws and agreements
referred to below.
Section 145 of the General Corporation Law of the State of Delaware
("DGCL") provides that a corporation has the power to indemnify any director or
officer, or former director or officer, who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) against the expenses (including
attorneys' fees), judgments, fines or amounts paid in settlement actually and
reasonably incurred by them in connection with the defense of any action by
reason of being or having been directors or officers, if such person shall have
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, provided that such person had no reasonable cause to
believe his conduct was unlawful, except that, if such action shall be in the
right of the corporation, no such indemnification shall be provided as to any
claim, issue or matter as to which such person shall have been judged to have
been liable to the corporation unless and to the extent that the Court of
Chancery of the State of Delaware, or any court in which such suit or action was
brought, shall determine upon application that, in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as such court shall deem proper.
As permitted by Section 102(b)(7) of the DGCL, the Amended and Restated
Certificate of Incorporation of the Registrant (the "Restated Certificate of
Incorporation") provides that no director shall be liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a director
other than (i) for breaches of the director's duty of loyalty to the Registrant
and its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for the
unlawful payment of dividends or unlawful stock purchases or redemptions under
Section 174 of the DGCL, and (iv) for any transaction from which the director
derived an improper personal benefit.
The Registrant's Bylaws provide indemnification of the Registrant's
directors and officers, both past and present, to the fullest extent permitted
by the DGCL, and allow the Registrant to advance or reimburse litigation
expenses upon submission by the director or officer of an undertaking to repay
such advances or reimbursements if it is ultimately determined that
indemnification is not available to such director or officer pursuant to the
Bylaws. The Registrant's Bylaws will also authorize the Registrant to purchase
and maintain insurance on behalf of an officer or director, past or present,
against any liability asserted against him in any such capacity whether or not
the Registrant would have the power to indemnify him against such liability
II-1
<PAGE> 80
under the provisions of the Restated Certificate of Incorporation or Section 145
of the DGCL. The Registrant has entered into indemnification agreements with
each of its directors and certain of its executive officers. The indemnification
agreements require the Registrant, among other things, to indemnify such
directors and officers against certain liabilities that may arise by reason of
their status or service as directors or officers (other than liabilities arising
from willful misconduct of a culpable nature), and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.
II-2
<PAGE> 81
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The Registrant agrees to furnish a copy of all agreements relating to the
Offered Securities upon request of the Commission. A list of exhibits included
as part of this Registration Statement is set forth below.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
3.1 -- Amended and Restated Certificate of Incorporation.
3.2 -- Amended and Restated Bylaws.
4.1* -- Certificate of Trust of Budget Group Capital Trust.
4.2* -- Declaration of Trust of Budget Group Capital Trust dated as
of June 4, 1998, between Budget Group, Inc., The Bank of New
York and the Administrative Trustees name therein.
4.3* -- Amended and Restated Declaration of Trust dated as of June
19, 1998 between Budget Group, Inc., The Bank of New York
(Delaware), the Bank of New York and the Administrative
Trustees named therein.
4.4* -- Indenture for the HIGH TIDES Debentures Due 2028 dated as of
June 19, 1998 between Budget Group, Inc. and The Bank of New
York.
4.5* -- Form of Budget Group, Inc. Class A Common Stock Certificate
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-1, File No. 333-34799,
dated September 26, 1997).
4.6* -- Form of HIGH TIDES (included in Exhibit 4.5).
4.7* -- Form of HIGH TIDES Debentures Due 2028 (included in Exhibit
4.6).
4.8* -- Guarantee Agreement dated as of June 19, 1998 by Budget
Group, Inc., as Guarantor.
5.1 -- Opinion of King & Spalding as to the legality of the HIGH
TIDES, the HIGH TIDES Debentures Due 2028, the Guarantee and
any Class A Common Stock issuable upon conversion of the
HIGH TIDES.
5.2 -- Opinion of Richards, Layton & Finger, P.A. as to the
legality of the HIGH TIDES.
8.1* -- Opinion of King & Spalding as to certain tax matters
(included in the Prospectus under the caption "United States
Federal Tax Considerations").
10.1* -- Registration Rights Agreement dated as of June 19, 1998
between Budget Group Capital Trust, Budget Group, Inc. and
the several Purchasers named herein.
10.2* -- Remarketing Agreement dated as June 19, 1998 between Budget
Group, Inc., Budget Group Capital Trust, The Bank of New
York, the Administrative Trustees named therein and the
Remarketing Agent named therein.
12.1 -- Computation of Ratios of Earnings to Fixed Charges.
23.1 -- Consent of King & Spalding (included in the opinions filed
as Exhibits 5.1 and 8.1).
23.2 -- Consent of Richards, Layton & Finger, P.A. (included in the
opinion filed as Exhibit 5.2).
23.3 -- Consent of Arthur Andersen LLP.
23.4 -- Consent of Deloitte & Touche LLP.
23.5 -- Consent of KPMG Peat Marwick LLP.
23.6 -- Consent of PricewaterhouseCoopers LLP.
23.7 -- Consent of KPMG Peat Marwick LLP.
24.1* -- Power of Attorney (included on page II-5).
25.1* -- Statement of Eligibility of Indenture Trustee under the
Indenture.
25.2* -- Statement of Eligibility of Property Trustee under the
Amended and Restated Declaration.
25.3* -- Statement of Eligibility of Guarantee Trustee under the
Guarantee.
99.1* -- Private Securities Litigation Reform Act of 1995 Safe Harbor
Compliance Statement for Forward-Looking Statements
(incorporated by reference to Exhibit 99.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, Commission File No. 0-23962).
</TABLE>
- ---------------
* Previously filed.
II-3
<PAGE> 82
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
above do not apply if the registration statement is on Form S-3, Form
S-8 or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in the
periodic reports filed with or furnished to the commission by the
registrant pursuant to Section 13 or Section 15(d) of the securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Securities
Act of 1993, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions in Item 15 above, or
II-4
<PAGE> 83
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Lisle, State of Illinois on September
16, 1998.
BUDGET GROUP, INC.
By: /s/ MICHAEL B. CLAUER
------------------------------------
Michael B. Clauer
Chief Financial Officer
II-5
<PAGE> 84
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated as of the 16th day of September, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer (Principal Executive Officer) and
Sanford Miller Director
* Vice Chairman and Director
- -----------------------------------------------------
John P. Kennedy
* Vice Chairman and Director
- -----------------------------------------------------
Jeffrey D. Congdon
* Chief Financial Officer (Principal Financial
- ----------------------------------------------------- Officer)
Michael B. Clauer
* Vice President -- Controller (Principal
- ----------------------------------------------------- Accounting Officer)
Thomas L. Kram
* Director
- -----------------------------------------------------
Ronald D. Agronin
* Director
- -----------------------------------------------------
Stephen L. Weber
* Director
- -----------------------------------------------------
F. Perkins Hixon
* Director
- -----------------------------------------------------
James F. Calvano
* Director
- -----------------------------------------------------
Martin P. Gregor
By: /s/ MICHAEL B. CLAUER
- ----------------------------------------------------
Michael B. Clauer
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 85
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Budget Group Capital Trust certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this Amendment No. 1 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Lisle, State of
Illinois, on September 16, 1998.
BUDGET GROUP CAPITAL TRUST
By: /s/ MICHAEL B. CLAUER
------------------------------------
Michael B. Clauer
Trustee
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ MICHAEL B. CLAUER Administrative Trustee September 16, 1998
- -----------------------------------------------------
Michael B. Clauer
/s/ ROBERT L. APRATI Administrative Trustee September 16, 1998
- -----------------------------------------------------
Robert L. Aprati
/s/ SCOTT R. WHITE Administrative Trustee September 16, 1998
- -----------------------------------------------------
Scott R. White
</TABLE>
II-7
<PAGE> 1
EXHIBIT 3.1
AMENDED AND
RESTATED
CERTIFICATE OF INCORPORATION
OF
BUDGET GROUP, INC.
FIRST: Name. The name of the corporation is Budget Group,
Inc. (the "Corporation").
SECOND: Registered Office and Agent. The address of the
registered office of the Corporation in the State of Delaware is 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801. The name of the
registered agent at such address is The Corporation Trust Company.
THIRD: Purposes. The purposes for which the Corporation is
formed are to engage in any lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law and to possess and exercise
all of the powers and privileges granted by such law and any other law of
Delaware.
FOURTH: A. Authorized Capital
The Corporation is authorized to issue 72,750,000 shares of
capital stock, consisting of 72,500,000 shares of common stock, par value $.01
per share (the "Common Stock"), and 250,000 shares of preferred stock, par value
$.01 per share (the "Preferred Stock"). Of the shares of Common Stock,
70,000,000
<PAGE> 2
shares shall be designated "Class A Common Stock" and 2,500,000 shares shall be
designated "Class B Common Stock." The rights, preferences, privileges and
restrictions granted and imposed upon the Preferred Stock, Class A Common Stock
and Class B Common Stock are set out hereinbelow.
B. Preferred Stock
The Preferred Stock may be issued from time to time in one or
more series with such designations, preferences, and relative participating,
optional or other special rights and qualifications, limitations or restrictions
adopted by the Board of Directors providing for the issuance of such Preferred
Stock or series thereof; and the Board of Directors is hereby expressly granted
the authority to fix by resolution or resolutions such designations and powers,
preferences and rights and such qualifications, limitations or restrictions
which are permitted by Section 151 of the General Corporation Law of Delaware,
as amended from time to time, in respect of any class or classes of stock or any
series of any class of stock of the Corporation that may be desired, including,
but not by way of limitation, the number, distinctive name and serial
designation of such class or series; any dividends payable and the rate, time
for and priority of payment thereof; whether such dividends shall be cumulative
or not; any participating or other special rights with respect to the payment of
dividends; any conversion, exchange, purchase or other privilege to acquire
shares of any other class or series of the Preferred Stock or Common Stock of
the Corporation; any
- 2 -
<PAGE> 3
voting power; and any redemption and liquidation price or preference.
C. Class A Common Stock.
The shares of Class A Common Stock and shares of Class B Common
Stock shall be identical in all respects and shall have equal rights and
privileges except as expressly set forth in this paragraph C and in paragraph D
of this Article FOURTH. Upon dissolution of the Corporation, shares of Class A
Common Stock and Class B Common Stock are entitled to share ratably in the
assets thereof that may be available for distribution after satisfaction of
creditors and the payment of any liquidation preference of any outstanding
shares of Preferred Stock.
1. Dividends.
(a) Subject to the rights of the holders of the Preferred Stock,
if any, such dividends or distributions as may be determined by the Board of
Directors of the Corporation from time to time may be declared and paid or made
upon shares of Class A Common Stock out of any source at the time lawfully
available for the payment of dividends; provided that (subject to subparagraphs
(b) and (c) below of this paragraph C.1.) identical dividends or distributions
are declared and paid concurrently on shares of Class B Common Stock. If
dividends or distributions are declared and paid upon shares of Class B Common
Stock (subject to subparagraphs (b) and (c) below of this paragraph C.1.),
identical dividends or distributions shall be declared and paid concurrently on
shares of Class A Common Stock.
- 3 -
<PAGE> 4
(b) No dividend may be declared and paid in shares of Class A
Common Stock unless (i) the dividend is payable only to holders of shares of
Class A Common Stock and (ii) a dividend payable to holders of Class B Common
Stock is declared and paid concurrently in the same number of shares of Class B
Common Stock per outstanding share of Class B Common Stock as the number of
shares of Class A Common Stock declared and paid per outstanding share of Class
A Common Stock.
(c) No dividend may be declared and paid in Class B Common Stock
unless (i) the dividend is payable only to holders of Class B Common Stock and
(ii) a dividend payable to holders of shares of Class A Common Stock is
declared and paid concurrently in the same number of shares of Class A Common
Stock per outstanding share of Class A Common Stock as the number of shares of
Class B Common Stock declared and paid per outstanding share of Class B Common
Stock.
2. Stock Combinations and Subdivisions. Shares of Class A Common
Stock shall not be combined or subdivided unless at the same time there is a
proportionate combination or subdivision of shares of Class B Common Stock. If
shares of Class B Common Stock are combined or subdivided, a proportionate
combination or subdivision of shares of Class A Common Stock shall be made at
the same time.
3. Voting. Except as may otherwise be required by law, the holders
of shares of Class A Common Stock shall vote together with the holders of Class
B Common Stock as a
- 4 -
<PAGE> 5
single class, provided that the holders of Class A Common Stock will have one
(1) vote per share and the holders of Class B Common Stock shall have ten (10)
votes per share.
D. Class B Common Stock.
1. Dividends and Distributions. Subject to the provisions of
paragraph C.1. of this Article FOURTH, dividends and distributions may be
declared and paid or made upon shares of Class B Common Stock as may be
permitted by applicable law.
2. Stock Combinations and Subdivisions. Subject to the provisions of
paragraph C.2. of this Article FOURTH, shares of Class B Common Stock may be
combined or subdivided in such manner as may be permitted by applicable law.
3. Voting. Subject to the provisions of paragraph C.3. of this
Article FOURTH, shares of Class B Common Stock shall have ten (10) votes per
share on all matters that may be submitted to a vote or consent of the
shareholders.
4. Conversion.
(a) Each holder of record of shares of Class B Common Stock may,
in such holder's sole discretion and at such holder's option, convert any whole
number or all of such holder's shares of Class B Common Stock into fully paid
and nonassessable shares of Class A Common Stock at the rate of one (1) share
of Class A Common Stock for each share of Class B Common Stock surrendered for
conversion. Any such conversion may be effected by any holder of Class B Common
Stock by surrendering such holder's certificate or certificates for the shares
of Class B
- 5 -
<PAGE> 6
Common Stock to be converted, duly endorsed, at the office of the Corporation
or any transfer agent for Class B Common Stock, together with a written notice
to the Corporation at such office that such holder elects to convert all or a
specified number of shares of Class B Common Stock and stating the name or
names in which such holder desires the certificate or certificates for such
shares of Class A Common Stock to be issued. Promptly thereafter, unless
otherwise prohibited by law, the Corporation shall issue and deliver to such
holder or such holder's nominee or nominees, a certificate or certificates for
the number of shares of Class A Common Stock to which such holder shall be
entitled as aforesaid. Such conversion shall be deemed to have been made at
the close of business on the day of such surrender and the person or persons
entitled to receive shares of Class A Common Stock issuable on such conversion
shall be treated for all purposes as the record holder or holders of such
shares of Class A Common Stock on that date.
(b) Each share of Class B Common Stock shall automatically be
converted into one share of Class A Common Stock in the event that the
beneficial or record ownership of such share of Class B Common Stock shall be
transferred (including, without limitation, by way of gift, settlement, will or
intestacy) to any person or entity that is not then a record or beneficial
holder of shares of Class B Common Stock. A pledge of shares of Class B Common
Stock as security for an obligation of a holder of such shares of Class B
Common Stock shall not be
- 6 -
<PAGE> 7
considered a transfer for purposes of this paragraph D.4(b), unless and until
beneficial ownership of such shares is transferred to the pledgeholder. The
conversion into Class A Common Stock shall be deemed to have occurred (whether
or not certificates representing such shares are surrendered) as of the close of
business on the date of transfer, and the person or persons entitled to receive
shares of Class A Common Stock issuable on such conversion shall be treated for
all purposes as the record holder or holders of such shares of Class A Common
Stock on that date.
(c) Before any shares of Class A Common Stock shall be delivered
upon conversion, the holder of shares of Class B Common Stock whose shares have
been converted into shares of Class A Common Stock shall deliver the
certificate(s) representing such shares to the Corporation or its duly
authorized agent (or if such certificates have been lost stolen or destroyed,
such holder shall execute an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
conversion), specifying the place where the Common Stock issued in conversion
thereof shall be sent. The endorsement of the share certificate shall be in
form satisfactory to the Corporation or such agent, as the case may be.
(d) The number of shares of Class A Common Stock into which the
shares of Class B Common Stock may be converted shall be subject to adjustment
from time to time in the event of
- 7 -
<PAGE> 8
any capital reorganization, reclassification of stock of the Corporation,
consolidation or merger of the Corporation with or into another corporation, or
sale or conveyance of all or substantially all of the assets of the Corporation
to another corporation or other entity or person. Each share of Class B Common
Stock shall thereafter be convertible into such kind and amount of securities
or other assets, or both, as are issuable or distributable in respect of each
share of Class A Common Stock. In any such case, appropriate adjustments shall
be made by the Board of Directors of the Corporation in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of the holders of Class B Common Stock to the end that the provisions set forth
herein shall thereafter be applicable, as nearly as reasonably may be, in
relation to any securities or other assets thereafter deliverable on conversion
of shares of Class B Common Stock.
(e) The Corporation shall, at all times, reserve and keep available out
of the authorized and unissued shares of Class A Common Stock, solely for the
purpose of effecting the conversion of the outstanding shares of Class B Common
Stock, such number of shares of Class A Common Stock as shall from time to time
be sufficient to effect conversion of all outstanding shares of Class B Common
Stock and if, at any time, the number of authorized and unissued shares of Class
A Common Stock shall not be sufficient to effect conversion of the then
outstanding shares of Class B Common Stock, the Corporation shall take such
- 8 -
<PAGE> 9
corporate action as may be necessary to increase the number of authorized
and unissued shares of Class A Common Stock to such number as shall be
sufficient for such purposes.
(f) The Corporation shall pay any and all issue and other taxes that
may be payable in respect of any issue or delivery of shares of Class A Common
Stock on conversion of shares of Class B Common Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of the issue of any shares of Class A Common Stock in a name other
than that in which the shares of Class B Common Stock so converted was
registered, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Corporation the amount of any such
tax, or has established, to the satisfaction of the Corporation, that such tax
has been paid.
(g) If any shares of capital stock to be reserved for the purpose of
conversion of shares of Class B Common Stock require registration or listing
with, or approval of, or inclusion in any governmental authority, stock exchange
or other regulatory body, or any automated quotation system of a national
securities association, under any federal or state law or regulation or
otherwise, before such shares may be validly issued or delivered upon
conversion, the Corporation will in good faith and as expeditiously as possible
endeavor to secure such registration, listing, approval or inclusion, as the
case may be.
- 9 -
<PAGE> 10
(h) All shares of Class A Common Stock which may be issued upon
conversion of shares of Class B Common Stock will upon issuance by the
Corporation be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof.
(i) All certificates representing shares of Class B Common
Stock surrendered for conversion shall be appropriately canceled on the books
of the Corporation, and the number of authorized shares of Class B Common
Stock shall be reduced by the number of shares so converted.
(j) In case the Corporation shall take a record of the holders
of its shares of Class A Common Stock for the purpose of:
(1) entitling them to receive a dividend, or any other
distribution, payable otherwise than in cash; or
(2) entitling them to receive rights to acquire any
security issued by the Corporation; or
(3) any proposed reclassification, reorganization,
consolidation, merger, conveyance or voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, and in any such case, the Corporation shall cause to be mailed to the
holders of record of the outstanding shares of Class B Common Stock at least
ten (10) days prior to the date hereinafter specified, a notice stating the
date on which (x) a
- 10 -
<PAGE> 11
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up is to take place and the
day, if any is to be fixed, as of which record holders of shares of Class A
Common Stock shall be entitled to exchange their shares of Class A Common Stock
for securities or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(k) So long as any shares of Class B Common Stock are
outstanding, the Corporation shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of (i)
at least a majority of the total number of shares of Class A Common Stock
outstanding, voting separately as a class, and (ii) at least sixty percent
(60%) of the total number of shares of Class B Common Stock outstanding, voting
separately as a class, (A) alter or change the rights or privileges of shares
of the Common Stock; (B) amend any provision of Section C or this Section D of
this Article FOURTH; or (C) effect any reclassification or recapitalization of
the Corporation's outstanding Common Stock.
FIFTH: Additional Powers of Board of Directors. The Board of
Directors shall have power, without shareholder action, to make by-laws for the
Corporation and to amend, alter or repeal any by-laws.
- 11 -
<PAGE> 12
SIXTH: Voting by Ballot. Elections of Directors need not be by
ballot unless the by-laws of the Corporation provide otherwise.
SEVENTH: Limited Liability of Directors. The directors of the
Corporation shall be entitled to the full benefits of all limitations on the
liability of directors generally that are now or hereafter become available
under the Delaware General Corporation Law. Without limiting the generality of
the foregoing, no director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability: (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for any acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv)
for any transaction from which the director derived an improper personal
benefit. Any repeal or modification of this Article SEVENTH shall be prospective
only, and shall not affect, to the detriment of any director, any limitation on
the personal liability of a director of the Corporation existing at the time of
such repeal or modification.
EIGHTH: Classified Board of Directors. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
Class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The term of the
initial Class I Directors shall terminate on the date of the 2001 Annual Meeting
of Stockholders; the term of the initial Class II Directors shall terminate on
the date of the 2000 Annual Meeting of Stockholders; and the term of the initial
Class III Directors shall terminate on the date of the 1999 Annual Meeting of
Stockholders. At each Annual Meeting of Stockholders beginning in 1999,
successors to the Class of directors whose term expires at that Annual Meeting
of Stockholders shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease in directorship shall be
apportioned among the Classes so as to maintain the number of directors in each
Class as nearly equal as possible, and any additional directors of any Class
elected to fill a vacancy resulting from an increase in such class shall hold
office only until the next election of directors of that Class by the
stockholders of the Corporation, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. Directors shall hold
office until the Annual Meeting of Stockholders for the year in which their
terms expire and until their successors shall be duly elected and qualified,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of Preferred Stock issued by the corporation shall have the right,
voting separately by class or series, to elect directors at an Annual or
Special Meeting of Stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation, or the resolution or resolutions
adopted by the board of directors creating such class or series, as the case
may be, applicable thereto, and such directors so elected shall not be divided
into classes pursuant to this Article EIGHTH unless expressly provided by such
terms.
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<PAGE> 1
EXHIBIT 3.2
=======================================
AMENDED AND RESTATED BY-LAWS
OF
BUDGET GROUP, INC.
=======================================
<PAGE> 2
AMENDED AND RESTATED BY-LAWS
OF
BUDGET GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I
OFFICES
1.01. Registered Office ............................................... 1
1.02. Other Offices ................................................... 1
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.01 Annual Meetings ................................................ 1
2.02 Special Meetings ............................................... 1
2.03 Notice of Meetings ............................................. 2
2.04 Waiver of Notice ............................................... 2
2.05 Adjournments ................................................... 2
2.06 Quorum ......................................................... 3
2.07 Voting ......................................................... 3
2.08 Proxies ........................................................ 3
2.09 Stockholders' Consent in Lieu of Meeting ....................... 3
ARTICLE III
BOARD OF DIRECTORS
3.01 General Powers ................................................. 4
3.02 Number and Term of Directors ................................... 4
3.03 Resignation .................................................... 4
3.04 Removal ........................................................ 4
3.05 Vacancies ...................................................... 5
3.06 Meetings ....................................................... 5
3.07 Committees of the Board ........................................ 6
3.08 Directors' Consent in Lieu of Meeting .......................... 7
3.09 Action by Means of Telephone or Similar
Communications Equipment ..................................... 7
3.10 Compensation ................................................... 8
</TABLE>
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<PAGE> 3
<TABLE>
ARTICLE IV
OFFICERS
<S> <C> <C>
4.01. Officers............................................ 8
4.02. Authority and Duties................................ 8
4.03. Term of Office, Resignation and Removal............. 8
4.04. Vacancies........................................... 9
4.05. The Chairman........................................ 9
4.06. The Chief Executive Officer......................... 9
4.07. The President....................................... 9
4.08. The Chief Operating Officer......................... 9
4.09. Vice Presidents..................................... 10
4.10. The Secretary....................................... 10
4.11. Assistant Secretaries............................... 10
4.12. The Chief Financial Officer......................... 10
4.13. Other Officers...................................... 11
ARTICLE V
CHECKS, DRAFTS, NOTES AND PROXIES
5.01. Checks, Drafts and Notes............................ 11
5.02. Execution of Proxies................................ 11
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
6.01. Certificates Evidencing Shares...................... 12
6.02. Stock Ledger........................................ 12
6.03. Transfers of Shares................................. 12
6.04. Addresses of Stockholders........................... 12
6.05. Lost, Destroyed and Mutilated Certificates.......... 13
6.06. Regulations; Transfer Agent and Registrar........... 13
6.07. Fixing Date for Determination of
Stockholders of Record............................ 13
ARTICLE VII
SEAL
7.01. Seal................................................ 13
</TABLE>
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<PAGE> 4
<TABLE>
ARTICLE VIII
FISCAL YEAR
<S> <C> <C>
8.01. Fiscal Year......................................... 14
ARTICLE IX
INDEMNIFICATION AND INSURANCE
9.01. Indemnification..................................... 14
9.02. Insurance for Indemnification....................... 16
ARTICLE X
AMENDMENTS
10.01. Amendments.......................................... 17
</TABLE>
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<PAGE> 5
AMENDED AND RESTATED
BY-LAWS
OF
BUDGET GROUP, INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office. The registered office of Budget Group,
Inc. (the "Corporation") in the State of Delaware shall be at the principal
office of The Corporation Trust Company in the City of Wilmington, County of New
Castle, and the registered agent in charge thereof shall be The Corporation
Trust Company.
SECTION 1.02. Other Offices. The Corporation may also have an office or
offices at any other place or places within or without the State of Delaware as
the Board of Directors of the Corporation (the "Board") may from time to time
determine or the business of the Corporation may from time to time require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. Annual Meetings. The annual meeting of stockholders of the
Corporation for the election of directors of the Corporation ("Directors"), and
for the transaction of such other business as may properly come before such
meeting, shall be held at such place, date and time as shall be fixed by the
Board and designated in the notice or waiver of notice of such annual meeting;
provided, however, that no annual meeting of stockholders need be held if all
actions, including the election of Directors, required by the General
Corporation Law of the State of Delaware (the "General Corporation Law") to be
taken at such annual meeting are taken by written consent in lieu of meeting
pursuant to Section 2.09 hereof.
SECTION 2.02. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called by the Board or the Chairman of the Board,
the Chief Executive Officer, the President or the Secretary of the Corporation
or by the recordholders of at least a majority of the combined voting power of
the shares of capital stock of the Corporation issued and
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<PAGE> 6
outstanding and entitled to vote thereat ("Shares"), to be held at such place,
date and time as shall be designated in the notice or waiver of notice thereof.
SECTION 2.03. Notice of Meetings. (a) Except as otherwise provided by
law, written notice of each annual or special meeting of stockholders stating
the place, date and time of such meeting and, in the case of a special meeting,
the purpose or purposes for which such meeting is to be held, shall be given
personally or by first-class mail (airmail in the case of international
communications) to each recordholder of Shares (a "Stockholder") entitled to
vote thereat, not less than 10 nor more than 60 days before the date of such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the Stockholder at such
Stockholder's address as it appears on the records of the Corporation. If,
prior to the time of mailing, the Secretary of the Corporation (the "Secretary")
shall have received from any Stockholder a written request that notices intended
for such Stockholder are to be mailed to some address other than the address
that appears on the records of the Corporation, notices intended for such
Stockholder shall be mailed to the address designated in such request.
(b) Notice of a special meeting of Stockholders may be given by the person
or persons calling the meeting, or, upon the written request of such person or
persons, such notice shall be given by the Secretary on behalf of such person or
persons. If the person or persons calling a special meeting of Stockholders
give notice thereof, such person or persons shall deliver a copy of such notice
to the Secretary. Each request to the Secretary for the giving of notice of a
special meeting of Stockholders shall state the purpose or purposes of such
meeting.
SECTION 2.04. Waiver of Notice. Notice of any annual or special meeting of
Stockholders need not be given to any Stockholder who files a written waiver of
notice with the Secretary, signed by the person entitled to notice, whether
before or after such meeting. Neither the business to be transacted at, nor the
purpose of, any meeting of Stockholders need be specified in any written waiver
of notice thereof. Attendance of a Stockholder at a meeting, in person or by
proxy, shall constitute a waiver of notice of such meeting, except when such
Stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds that
the notice of such meeting was inadequate or improperly given.
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<PAGE> 7
SECTION 2.05. Adjournments. Whenever a meeting of Stockholders, annual
or special, is adjourned to another date, time or place, notice need not be
given of the adjourned meeting if the date, time and place thereof are
announced at the meeting at which the adjournment is taken. If the adjournment
is for more than 30 days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Stockholder entitled to vote thereat. At the adjourned meeting,
any business may be transacted which might have been transacted at the original
meeting.
SECTION 2.06. Quorum. Except as otherwise provided by law or the
Certificate of Incorporation of the Corporation, including any amendment or
restatement thereof (the "Certificate of Incorporation"), the presence in
person or by proxy of the recordholders of a majority of the combined voting
power of the Shares entitled to vote at a meeting of Stockholders shall
constitute a quorum for the transaction of business at such meeting. If,
however, such quorum shall not be present in person or by proxy at any meeting
of Stockholders, the Stockholders entitled to vote thereat may adjourn the
meeting from time to time in accordance with Section 2.05 hereof until a quorum
shall be present in person or by proxy.
SECTION 2.07. Voting. Each Stockholder shall be entitled to one vote
for every Share of Class A Common Stock held of record by such Stockholder and
each Stockholder shall be entitled to ten votes for every Share of Class B
Common Stock held of record by such Stockholder. The number of votes to which
Shares of other classes of capital stock that may from time to time be
authorized and issued by the Corporation shall be as set forth in the
Certificate of Incorporation. Except as otherwise provided by law or the
Certificate of Incorporation, the vote of a majority of the combined voting
power of the Shares represented in person or by proxy at any meeting at which a
quorum is present shall decide any question brought before such meeting.
SECTION 2.08. Proxies. Each Stockholder entitled to vote at a meeting
of Stockholders or to express, in writing, consent to or dissent from any
action of Stockholders without a meeting may authorize another person or
persons to act for such Stockholder by proxy. Such proxy shall be filed with
the Secretary before such meeting of Stockholders or such action of
Stockholders without a meeting, at such time as the Board may require. No proxy
shall be voted or acted upon more than three years from its date, unless the
proxy provides for a longer period.
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<PAGE> 8
SECTION 2.09. Stockholders' Consent in Lieu of Meeting. Any action
required by the General Corporation Law to be taken at any annual or special
meeting of Stockholders, and any action which may be taken at any annual or
special meeting of Stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the recordholders of Shares having not less than the
minimum number of votes necessary to authorize or take such action at a meeting
at which the recordholders of all Shares entitled to vote thereon were present
and voted.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. General Powers. The business and affairs of the
Corporation shall be managed by the Board, which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by law,
the Certificate of Incorporation or these By-laws directed or required to be
exercised or done by Stockholders.
SECTION 3.02. Number and Term of Directors. Subject to the rights of
the holders of any series of Preferred Stock to elect additional directors, the
number of Directors shall be three or such other number as shall be fixed from
time to time by the Board. Directors need not be Stockholders. The Directors
shall be and are divided into three classes, designated Class I, Class II and
Class III. Each Class shall consist, as nearly as may be possible, of one-third
of the total number of Directors constituting the entire Board. The term of the
initial Class I Directors shall terminate on the date of the 2001 Annual
Meeting of Stockholders; the term of the initial Class II Directors shall
terminate on the date of the 2000 Annual Meeting of Stockholders; and the term
of the initial Class III Directors shall terminate on the date of the 1999
Annual Meeting of Stockholders. At each annual meeting of Stockholders
beginning in 1999, successors to the Class of Directors whose term expires at
that annual meeting of Stockholders shall be elected for a three-year term. If
the number of Directors is changed, any increase or decrease in Directorship
shall be apportioned among the Classes so as to maintain the number of
Directors in each Class as nearly equal as possible, and any additional
Directors of any Class elected to fill a vacancy resulting from an increase in
such class shall hold office only until the next election of Directors of that
Class by the stockholders of the corporation, but in no case will a decrease in
the number of Directors shorten the term of any incumbent Director. Directors
shall hold office until the annual meeting of Stockholders for the year in
which their terms expire and until their successors shall be duly elected and
qualified, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Notwithstanding the foregoing,
whenever the holders of any one or more classes or series of Preferred Stock
issued by the Corporation shall have the right, voting separately by class or
series, to elect Directors at an annual or special meeting of Stockholders, the
election, term of office, filling of vacancies and other features of such
Directorships shall be governed by the terms of the Corporation's Certificate
of Incorporation.
SECTION 3.03. Resignation. Any Director may resign at any time by
giving written notice to the Board, the Chairman of the Board of the
Corporation (the "Chairman") or the Secretary. Such resignation shall take
effect at the time specified in such notice or, if the time be not specified,
upon receipt thereof by the Board, the Chairman or the Secretary, as the case
may be. Unless otherwise specified therein, acceptance of such resignation
shall not be necessary to make it effective.
SECTION 3.04. Removal. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, any or all of the Directors may be
removed from office at any time for cause by vote of the recordholders of a
majority of the combined voting power of the Shares then entitled to vote at an
election of Directors, or by
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<PAGE> 9
written consent of the recordholders of Shares pursuant to Section 2.09 hereof.
SECTION 3.05. Vacancies. Subject to the rights of the holders of any
series of Preferred Stock then outstanding to fill Director vacancies, vacancies
occurring on the Board for any reason, including, without limitation, vacancies
occurring as a result of the creation of new directorships that increase the
number of Directors, may be filled by such vote or written consent or by vote
of the Board or by written consent of the Directors pursuant to Section 3.08
hereof. If the number of Directors then in office is less than a quorum, such
other vacancies may be filled by vote of a majority of the Directors then in
office or by written consent of all such Directors pursuant to Section 3.08
hereof. Unless earlier removed pursuant to Section 3.04 hereof, each Director
chosen in accordance with this Section 3.05 shall hold office until the next
annual election of Directors by the Stockholders and until his successor shall
be elected and qualified.
SECTION 3.06. Meetings. (a) Annual Meetings. As soon as practicable
after each annual election of Directors by the Stockholders, the Board shall
meet for the purpose of organization and the transaction of other business,
unless it shall have transacted all such business by written consent pursuant
to Section 3.08 hereof.
(b) Other Meetings. Other meetings of the Board shall be held at such
times as the Chairman, the President of the Corporation (the "President"), the
Secretary or a majority of the Board shall from time to time determine.
(c) Notice of Meetings. The Secretary shall give written notice to each
Director of each meeting of the Board, which notice shall state the place, date,
time and purpose of such meeting. Notice of each such meeting shall be given to
each Director, if by mail, addressed to him at his residence or usual place of
business, at least two days before the day on which such meeting is to be held,
or shall be sent to him at such place by telecopy, telegraph, cable, or other
form of recorded communication, or be delivered personally or by telephone not
later than the day before the day on which such meeting is to be held. A
written waiver of notice, signed by the Director entitled to notice, whether
before of after the time of the meeting referred to in such waiver, shall be
deemed equivalent to notice. Neither
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<PAGE> 10
the business to be transacted at, nor the purpose of any meeting of the Board
need be specified in any written waiver of notice thereof. Attendance of a
Director at a meeting of the Board shall constitute a waiver of notice of such
meeting, except as provided by law.
(d) Place of Meetings. The Board may hold its meetings at such place or
places within or without the State of Delaware as the Board or the Chairman may
from time to time determine, or as shall be designated in the respective
notices or waivers of notice of such meetings.
(e) Quorum and Manner of Acting. One-third of the total number of
Directors then in office (but in no event less than two if the total number of
directorships, including vacancies, is greater than one and in no event a
number less than one-third of the total number of directorships, including
vacancies) shall be present at any meeting of the Board in order to constitute
a quorum for the transaction of business at such meeting, and the vote of a
majority of those Directors present at any such meeting at which a quorum is
present shall be necessary for the passage of any resolution or act of the
Board, except as otherwise expressly required by law, the Certificate of
Incorporation or these By-laws. In the absence of a quorum for any such
meeting, a majority of the Directors present thereat may adjourn such meeting
from time to time until a quorum shall be present.
(f) Organization. At each meeting of the Board, one of the following
shall act as chairman of the meeting and preside, in the following order of
precedence:
(i) the Chairman;
(ii) Chief Executive Officer;
(iii) the President; or
(iv) any Director chosen by a majority of the Directors present.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary is present) whom the chairman of
the meeting shall appoint shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 3.07. Committees of the Board. The Board may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more
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Directors. The Board may designate one or more Directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of such committee. In the absence or disqualfication of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another Director to act at the meeting in the place of any
such absent or disqualfied member. Any committee of the Board, to the extent
provided in the resolution of the Board designating such committee, shall have
and may exercise all the powers and authority of the Board in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that no such committee shall have such power or authority in reference to
amending the Certificate of Incorporation (except that such a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board as provided in Section 151(a)
of the General Corporation Law, fix the designations and any of the preferences
or rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes of stock of
the Corporation or fix the number of shares of any series of stock or authorize
the increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation under Section 251 or 252 of the General Corporation Law,
recommending to the Stockholders the sale, lease or exchange of all or
substantially all the Corporation's property and assets, recommending to the
Stockholders a dissolution of the Corporation or the revocation of a
dissolution, or amending these By-laws; provided further, however, that, unless
expressly so provided in the resolution of the Board designating such committee,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law. Each committee
of the Board shall keep regular minutes of its proceedings and report the same
to the Board when so requested by the Board.
SECTION 3.08. Directors' Consent in Lieu of Meeting. Any action required
or permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by all
the members of the Board or such committee and such consent is filed with the
minutes of the proceedings of the Board or such committee.
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<PAGE> 12
SECTION 3.09. Action by Means of Telephone or Similar Communications
Equipment. Any one or more members of the Board, or of any committee thereof,
may participate in a meeting of the Board or such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
a meeting by such means shall constitute presence in person at such meeting.
SECTION 3.10. Compensation. Unless otherwise restricted by the
Certificate of Incorporation, the Board may determine the compensation of
Directors. In addition, as determined by the Board, Directors may be reimbursed
by the Corporation for their expenses, if any, in the performance of their
duties as Directors. No such compensation or reimbursement shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
OFFICERS
SECTION 4.01. Officers. The officers of the Corporation shall be the
Chairman, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer and the Secretary and may include one or
more Vice Presidents and one or more Assistant Secretaries. Any two or more
offices may be held by the same person.
SECTION 4.02. Authority and Duties. All officers shall have such
authority and perform such duties in the management of the Corporation as may
provided in these By-laws or, to the extent not so provided, by resolution of
the Board.
SECTION 4.03. Term of Office, Resignation and Removal. (a) Each officer
shall hold office until his successor has been appointed and qualified or his
earlier death or resignation or removal in the manner hereinafter provided.
(b) Any officer may resign at any time by giving written notice to the
Board, the Chairman, the President or the Secretary. Such resignation shall
take effect at the time specified in such notice or, if the time be not
specified, upon receipt thereof by the Board, the Chairman, the President or the
Secretary, as the case may be. Unless otherwise specified therein, acceptance
of such resignation shall not be necessary to make it effective.
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<PAGE> 13
(c) All officers and agents appointed by the Board shall be subject to
removal, with or without cause, at any time by the Board or by the action of
the recordholders of a majority of the combined voting power of the Shares
entitled to vote thereon.
SECTION 4.04. Vacancies. Any vacancy occurring in any office of the
Corporation, for any reason, shall be filled by action of the Board. Unless
earlier removed pursuant to Section 4.03 hereof, any officer appointed by the
Board to fill any such vacancy shall serve only until such time as the
unexpired term of his predecessor expires unless reappointed by the Board.
SECTION 4.05. The Chairman. The Chairman shall have the power to call
special meetings of Stockholders, to call special meetings of the Board and, if
present, to preside at all meetings of Stockholders and all meetings of the
Board. The Chairman shall perform all duties incident to the office of Chairman
of the Board and all such other duties as may from time to time be assigned to
him by the Board or these By-laws.
SECTION 4.06 The Chief Executive Officer. The chief executive officer
(the "Chief Executive Officer") shall be the most senior officer of the
Corporation and shall generally direct the business and affairs of the
Corporation, subject to supervision and direction by the Board, and shall see
that all orders and resolutions of the Board are carried into effect. The Chief
Executive Officer shall perform all duties incident to the office of Chief
Executive Officer and all such other duties as may from time to time be
assigned to him by the Board or these By-laws.
SECTION 4.07 The President. The President shall have general and
active management and control of the business and affairs of the Corporation,
subject to supervision and direction by the Chief Executive Officer and the
Board, and shall see that all orders and resolutions of the Board and orders of
the Chief Executive Officer are carried into effect. The President shall
perform all duties incident to the office of President and all such other
duties as may from time to time be assigned to him by the Chief Executive
Officer or these By-laws.
SECTION 4.08 The Chief Operating Officer. The chief operating officer
(the "Chief Operating Officer") shall be generally responsible for the
day-to-day conduct of the Corporation's business, subject to supervision and
direction by the Chief Executive Officer and President, and shall see that all
orders of the Chief Executive Officer and President are carried into effect.
The Chief Operating Officer shall perform all
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duties incident to the office of Chief Operating Officer and all such other
duties as may from time to time be assigned to him by the Chief Executive
Officer, the President or these By-laws.
SECTION 4.09 Vice Presidents. Vice Presidents, if any, in order of
their seniority or in any other order determined by the Board, shall generally
assist the President and perform such other duties as the Board or the
President shall prescribe, and in the absence or disability of the President,
shall perform the duties and exercise the powers of the President.
SECTION 4.10. The Secretary. The Secretary shall, to the extent
practicable, attend all meetings of the Board and all meetings of Stockholders
and shall record all votes and the minutes of all proceedings in a book to be
kept for that purpose, and shall perform the same duties for any committee of
the Board when so requested by such committee. He shall give or cause to be
given notice of all meetings of Stockholders and of the Board, shall perform
such other duties as may be prescribed by the Board, the Chairman or the
President and shall act under the supervision of the Chairman. He shall keep in
safe custody the seal of the Corporation and affix the same to any instrument
that requires that the seal be affixed to it and which shall have been duly
authorized for signature in the name of the Corporation and, when so affixed,
the seal shall be attested by his signature or by the signature of the Chief
Financial Officer of the Corporation (the "Chief Financial Officer") or an
Assistant Secretary of the Corporation. He shall keep in safe custody the
certificate books and stockholder records and such other books and records of
the Corporation as the Board, the Chairman, the Chief Executive Officer or the
President may direct and shall perform all other duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
by the Board, the Chairman, the Chief Executive Officer or the President.
SECTION 4.11 Assistant Secretaries. Assistant Secretaries of the
Corporation ("Assistant Secretaries"), if any, in order of their seniority or
in any other order determined by the Board, shall generally assist the
Secretary and perform such other duties as the Board or the Secretary shall
prescribe, and, in the absence or disability of the Secretary, shall perform
the duties and exercise the powers of the Secretary.
SECTION 4.12 The Chief Financial Officer. The Chief Financial Officer
shall have the care and custody of all the funds of the Corporation and shall
deposit such funds in such banks or other depositories as the Board, or any
officer or officers, or any officer and agent jointly, duly authorized by
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the Board, shall, from time to time, direct or approve. He shall disburse the
funds of the Corporation under the supervision and direction of the Board, the
Chief Executive Officer, the Chief Operating Officer and the President. He
shall keep a full and accurate account of all moneys received and paid on
account of the Corporation and shall render a statement of his accounts
whenever the Board, the Chairman, the Chief Executive Officer or the President
shall so request. The Chief Financial Officer shall also be the principal
accounting officer of the Corporation, unless the Board shall assign such
duties to another officer. He shall perform all other necessary actions and
duties in connection with the administration of the financial affairs of the
Corporation and shall generally perform all the duties usually appertaining to
the office of treasurer of a corporation. When required by the Board, he shall
give bonds for the faithful discharge of his duties in such sums and with such
sureties as the Board shall approve.
SECTION 4.13 Other Officers. The Board may designate and appoint by
resolution such other officers, including without limitation a treasurer,
assistant treasurers and a controller, as they determine to be in the best
interests of the Corporation. The duties and obligations of each such officer
shall be as set forth in the resolution designating and appointing such officer.
ARTICLE V
CHECKS, DRAFTS, NOTES AND PROXIES
SECTION 5.01. Checks, Drafts and Notes. All checks, drafts and other orders
for the payment of money, notes and other evidences of indebtedness issued in
the name of the Corporation shall be signed by such officer or officers, agent
or agents of the Corporation and in such manner as shall be determined, from
time to time, by resolution of the Board.
SECTION 5.02. Execution of Proxies. The Chairman, the Chief Executive
Officer or the President, or, in the absence or disability of any of them, any
Vice President, may authorize, from time to time, the execution and issuance of
proxies to vote shares of stock or other securities of other corporations held
of record by the Corporation and the execution of consents to action taken or to
be taken by any such corporation. All such proxies and consents, unless
otherwise authorized by the Board, shall be signed in the name of the
Corporation by the Chairman, the Chief Executive Officer, the President or any
Vice President.
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<PAGE> 16
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
SECTION 6.01. Certificates Evidencing Shares. Shares may, but need not
be, represented by certificates in such from or forms as shall be approved by
the Board. Certificates shall be issued in consecutive order and shall be
numbered in the order of their issue, and shall be signed by the Chairman, the
President or any Vice President and by the Secretary or any Assistant Secretary.
Any signature on the certificate may be a facsimile. In the event any such
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to hold such office or to be employed by the
Corporation before such certificate is issued, such certificate may be issued
by the Corporation with the same effect as if such officer had held such
office on the date of issue.
SECTION 6.02 Stock Ledger. A stock ledger in one or more counterparts
shall be kept by the Secretary or by a registrar duly appointed by the
Corporation, in which shall be recorded the name and address of each person,
firm or corporation owning the Shares evidenced by each certificate evidencing
Shares issued by the Corporation, the number of Shares evidenced by each such
certificate, the date of issuance thereof and, in the case of cancellation, the
date of cancellation. Except as otherwise expressly required by law, the person
in whose name Shares stand on the stock ledger of the Corporation shall be
deemed the owner and recordholder thereof for all purposes.
SECTION 6.03 Transfers of Shares. Registration of transfers of Shares
shall be made only in the stock ledger of the Corporation upon request of the
registered holder of such shares, of his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or with the
registrar of the Corporation, and upon the surrender of the certificate or
certificates evidencing such Shares properly endorsed or accompained by a
stock power duly executed, together with such proof of the authenticity of
signatures as the Corporation may reasonably required.
SECTION 6.04 Addresses of Stockholders. Each Stockholder shall
designate to the Secretary an address at which notices of meetings and
all other corporate notices may be served or mailed to such Stockholder, and, if
any Stockholder shall fail to so designate such an address, corporate notices
may be served upon such Stockholder by mail directed to the mailing address, if
any, as the same appears in the stock ledger of the Corporation or at the last
known mailing address of such Stockholder.
-12-
<PAGE> 17
SECTION 6.05. Lost, Destroyed and Mutilated Certificates. Each
recordholder of Shares shall promptly notify the Corporation of any loss,
destruction or mutilation of any certificate or certificates evidencing any
Share or Shares of which he is the recordholder. The Board may, in its
discretion, cause the Corporation or its transfer agent to issue a new
certificate in place of any certificate theretofore issued by it and alleged to
have been mutilated, lost, stolen or destroyed, upon the surrender of the
mutilated certificate or, in the case of loss, theft or destruction of the
certificate, upon satisfactory proof of such loss, theft or destruction, and the
Board may, in its discretion, require the recordholder of the Shares evidenced
by the lost, stolen or destroyed certificate or his legal representative to give
the Corporation a bond sufficient to indemnify the Corporation against any claim
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
SECTION 6.06. Regulations; Transfer Agent and Registrar. The Board may
make such other rules and regulations as it may deem expedient, not inconsistent
with these By-laws, concerning the issue, transfer and registration of
certificates evidencing Shares including, without limitation, the appointment of
one or more transfer agents and one or more registrars.
SECTION 6.07. Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the Stockholders entitled to notice
of or to vote at any meeting of Stockholders or any adjournment thereof, or to
express consent to, or to dissent from, corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board may fix, in advance, a record date, which shall not be
more than 60 nor less than 10 days before the date of such meeting, nor more
than 60 days prior to any other such action. A determination of the
Stockholders entitled to notice of or to vote at a meeting of Stockholders
shall apply to any adjournment of such meeting; provided, however, that the
Board may fix a new record date for the adjourned meeting.
ARTICLE VII
SEAL
SECTION 7.01. Seal. The Board may approve and adopt a corporate seal,
which shall be in the form of a circle and shall
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<PAGE> 18
bear the full name of the Corporation, the year of its incorporation and the
words "Corporate Seal Delaware".
ARTICLE VIII
FISCAL YEAR
SECTION 8.01. Fiscal Year. The fiscal year of the Corporation shall end
on the thirty-first day of December of each year unless changed by resolution of
the Board.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 9.01. Indemnification. (a) The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or
-14-
<PAGE> 19
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 9.01 (a) and (b) of these
By-laws, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under Section 9,01 (a) and (b) of these By-laws
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in Section 9.01 (a) and (b) of
these By-laws. Such determination shall be made (i) by the Board by a majority
vote of a quorum consisting of directors who were not parties to such action,
suite or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders of the
Corporation.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation pursuant to this Article IX. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the Board deems appropriate.
-15-
<PAGE> 20
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, other Sections of this Article IX shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any law, by-law, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in an official
capacity and as to action in another capacity while holding such office.
(g) For purposes of this Article IX, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article IX with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(h) For purposes of this Article IX, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves service by, such director, officer, employee or
agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
IX.
(i) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article IX shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
SECTION 9.02. Insurance for Indemnification. The Corporation may purchase
and maintain insurance on behalf of any
-16-
<PAGE> 21
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against such liability
under the provisions of Section 145 of the General Corporation Law.
ARTICLE X
AMENDMENTS
SECTION 10.01. Amendments. The Board may adopt, amend or repeal the
Corporation's By-laws unless (a) the Certificate of Incorporation or the
General Corporation Law reserves this power exclusively to the Stockholders in
whole or in part; or (b) the Stockholders in adopting, amending or repealing a
particular By-law expressly provide that the Board may not amend or repeal that
By-law. The Stockholders of the Corporation may adopt, amend or repeal the
Corporation's By-laws even though the By-laws may also be adopted, amended or
repealed by its Board.
-17-
<PAGE> 1
EXHIBIT 5.1
September 16, 1998
Budget Group Capital Trust
c/o Budget Group, Inc.
125 Basin Street, Suite 210
Daytona Beach, Florida 32114
Re: Budget Group Capital Trust
Ladies and Gentlemen:
We have acted as counsel to Budget Group, Inc., a Delaware
corporation (the "Company"), in connection with the shelf registration, pursuant
to a Registration Statement on Form S-3 (File No. 333-61429) filed with the
Securities and Exchange Commission (the "Commission") on August 13, 1998, as
amended by Amendment No. 1 filed with the Commission on September 16, 1998 (the
"Registration Statement") of the Company and Budget Group Capital Trust, a
statutory business trust formed under the laws of the State of Delaware (the
"Trust") under the Securities Act of 1933 (the "Securities Act"), of (i)
6,000,000 shares of 6.25% Convertible Preferred, Remarketable Term Income
Deferrable Equity Securities of the Trust representing undivided beneficial
interests in the assets of the Trust (the "HIGH TIDES") issued on June 19, 1998
pursuant to the Amended and Restated Declaration of Trust of the Trust dated
June 19, 1998 between the Company and the trustees named therein, (ii) the
guarantee of the Company as to the payment of distributions and payments upon
redemption or liquidation of the HIGH TIDES pursuant to and to the extent set
forth in the Guarantee Agreement dated as of June 19, 1998 between the Company,
the Trust and The Bank of New York, as trustee (the "Guarantee"), (iii) the
6.25% HIGH TIDES Debentures Due 2028 of the Company (the "HIGH TIDES
Debentures") issued on June 19, 1998 pursuant to the Indenture dated June 19,
1998 between the Company and The Bank of New York, as trustee (the "Indenture"),
and (iv) the shares of Class A Common Stock, $0.01 par value, of the Company
(the "Common Stock") issuable upon conversion of the HIGH TIDES.
In our capacity as such counsel, we have reviewed (i) the
Registration Statement, (ii) the Indenture, and (iii) the Guarantee. We have
also reviewed such matters of law and examined original, certified, conformed or
photographic copies of such other documents, records, agreements and
certificates as we have deemed necessary as a basis for the opinions hereinafter
expressed. In such review, we have assumed the genuineness of signatures on all
documents submitted to us as originals, the conformity to original documents of
all copies submitted to us as certified, conformed or photographic copies, and,
as to certificates of public officials, we have assumed the same to be accurate
and to have been given properly. We have
<PAGE> 2
relied, as to the matters set forth therein, on certificates of public
officials, and we have assumed the same to have been properly given and to be
accurate.
We have assumed that the Indenture and the Guarantee are valid and
binding agreements of the parties thereto (other than the Company) enforceable
against the parties thereto (other than the Company) in accordance with their
respective terms.
This opinion is limited in all respects to the laws of the State of
New York, and no opinion is expressed with respect to the laws of any other
jurisdiction or any effect that such laws may have on the opinions expressed
herein. This opinion is limited to the matters stated herein, and no opinion is
implied or may be inferred beyond the matters expressly stated herein.
Based upon and subject to the foregoing, we are of the opinion that:
1. The HIGH TIDE Debentures issued under the Indenture constitute
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, subject, as to the
enforcement of remedies, to bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights generally and
to general equitable principles.
2. The Guarantee constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights generally and to general equitable principles.
3. The Common Stock, when issued upon conversion of the HIGH TIDES in
accordance with the terms of the HIGH TIDES, will be duly authorized,
validly issued, fully paid and nonassessable.
This opinion is given as of the date hereof, and we assume no
obligation to update this opinion to reflect any fact or circumstance that may
hereafter come to our attention or any change in any law or regulation that may
hereafter occur.
We hereby consent to the filing of this opinion letter as an exhibit
to the Registration Statement and to the reference to us under the caption
"Legal Matters" in the prospectus included in the Registration Statement. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/S/ King & Spalding
<PAGE> 1
EXHIBIT 5.2
[RICHARDS, LAYTON & FINGER LETTERHEAD]
September 16, 1998
Budget Group Capital Trust
c/o Budget Group, Inc.
125 Basin Street, Suite 210
Daytona Beach, FL 32114
Re: Budget Group Capital Trust
Ladies and Gentlemen:
We have acted as special Delaware counsel for Budget Group,
Inc., a Delaware corporation (the "Company"), and Budget Group Capital Trust, a
Delaware business trust (the "Trust"), in connection with the matters set forth
herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated as of
June 4, 1998 (the "Certificate"), as filed in the office of the Secretary of
State of the State of Delaware (the "Secretary of State") on June 4, 1998;
(b) The Declaration of Trust of the Trust, dated as of
June 4, 1998, by and among the Company and the trustees of the Trust named
therein;
(c) The Amended and Restated Declaration of Trust of the
Trust, dated as of June 19, 1998 (including Annex I and Exhibits A-1 and A-2
thereto) (the "Declaration"), by and among the Company, as sponsor, the trustees
of the Trust named therein, and the holders, from time to time, of undivided
beneficial interests in the assets of the Trust;
(d) Amendment No. 1 to the Registration Statement on Form
S-3 (the "Registration Statement"), including a preliminary prospectus (the
"Prospectus"), relating to the 6 1/4% Convertible Preferred Securities
Remarketable Term Income Deferrable Equity Securities (HIGH TIDES) of the Trust
representing undivided beneficial interests in the assets of
<PAGE> 2
the Trust (each, a "Preferred Security" and collectively, the "Preferred
Securities"), as proposed to be filed by the Company and the Trust with the
Securities and Exchange Commission on or about September 16, 1998; and
(e) A Certificate of Good Standing for the Trust, dated
September 16, 1998, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise
defined are used as defined in the Declaration.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (e) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (e) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the
Declaration constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation and termination of the Trust, and that the Declaration and the
Certificate are in full force and effect and have not been amended, (ii) except
to the extent provided in paragraph 1 below, the due creation or due
organization or due formation, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its creation, organization or formation, (iii) the legal
capacity of natural persons who are parties to the documents examined by us,
(iv) that each of the parties to the documents examined by us has the power and
authority to execute and deliver, and to perform its obligations under, such
documents, (v) the due authorization, execution and delivery by all parties
thereto of all documents examined by us, (vi) the receipt by each Person to whom
a Preferred Security was issued by the Trust (collectively, the "Preferred
Security Holders") of a certificate substantially in the form attached to the
Declaration as Exhibit A-1, in accordance with the Declaration and as described
in the Registration Statement, and (vii) that the Preferred Securities were
issued to the Preferred Security Holders in accordance with the Declaration, and
as described in the Registration
<PAGE> 3
Statement. We have not participated in the preparation of the Registration
Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder that are currently in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly
existing in good standing as a business trust under the Business Trust Act.
2. The Preferred Securities have been duly authorized
and are validly issued and, subject to the qualifications set forth in paragraph
3 below, fully paid and nonassessable undivided beneficial interests in the
assets of the Trust.
3. The Preferred Security Holders, as beneficial owners
of the Trust, are entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Declaration.
We consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement. In
addition, we hereby consent to the use of our name under the heading "Legal
Matters" in the Prospectus. In giving the foregoing consents, we do not thereby
admit that we come within the category of Persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder. Except as
stated above, without our prior written consent, this opinion may not be
furnished or quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
/s/ Richards, Layton & Finger, P.A.
BJK/BJ
<PAGE> 1
EXHIBIT 12.1
Budget Group Inc.
Computation of Ratio of Earnings to Fixed Charges
In Thousands
<TABLE>
<CAPTION> Six-Months Pro Forma
Year Ended December 31, Ended ---------------------------
------------------------------- June 30, December 31, June 30,
1997 1996 1995 1998 1997 1998
------------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income from
continuing operations 55,599 12,852 3,179 883 2,513 (7,603)
Fixed Charges:
Interest incurred, amortization
of debt discount and premium
on all indebtedness, and
reasonable interest on rental
expense 142,890 40,402 22,937 113,489 227,450 116,335
------------------------------------------------------------------------
Earnings before income taxes,
minority interest and fixed
charges 198,489 53,254 26,116 114,372 229,963 108,732
Ratio of earnings to fixed charges 1.39 1.32 1.14 1.01 1.01 .93
</TABLE>
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report on the
consolidated financial statements of Budget Group, Inc. (formerly known as Team
Rental Group, Inc.) and subsidiaries as of December 31, 1996 and 1997, and for
each of the three years in the period ended December 31, 1997, dated March 20,
1998 (except with respect to the matters discussed in Note 17, as to which the
date is June 19, 1998), included in Budget Group, Inc.'s Current Report on Form
8-K filed on July 2, 1998, and to all references to our firm included in or
made a part of this Registration Statement.
/s/ Arthur Andersen LLP
----------------------------------
September 15, 1998,
Orlando, Florida
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-61429 of Budget Group, Inc. (formerly Team
Rental Group, Inc.) on Form S-3 of our report dated April 12, 1996, appearing
in the Annual Report on Form 10-K of Budget Group, Inc. for the year ended
December 31, 1997, and to the reference to us under the heading "Experts" in
the prospectus, which is part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
September 15, 1998
<PAGE> 1
(KPMG Peat Marwick LLP Letterhead)
EXHIBIT 23.5
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors of
Budget Rent a Car Corporation:
We consent to the incorporation by reference in this Amendment No.1 to
Registration Statement of Budget Group, Inc. on Form S-3 (file no. 333-61429),
of our report dated February 18, 1997, related to the Budget Rent a Car
Corporation consolidated financial statements as of December 31, 1995 and
1996 and for the each of the years in the three-year period ended December 31,
1996, from Budget Group, Inc.'s current report on Form 8-K dated May 13, 1997,
and to the reference to our firm under the heading "Experts" in this
Registration Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
September 15, 1998
Chicago, Illinois
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Budget Group, Inc. on Form S-3 of our report dated March 5, 1998, on our audits
of the consolidated financial statements of Ryder TRS, Inc. and Subsidiaries
from Budget Group, Inc.'s Registration Statement on Form S-4 (SEC File No.
333-49679) filed on April 8, 1998, as amended April 27, 1998. We also consent
to the reference to our firm under the heading "Experts" in this Registration
Statement.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
September 16, 1998
<PAGE> 1
EXHIBIT 23.7
Independent Auditors' Consent
The Board of Directors
Budget Group, Inc.:
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement on Form S-3 of Budget Group, Inc. (SEC File No.
333-61429) of our report dated December 20, 1996 on our audit of the combined
balance sheet of Ryder Consumer Truck Rental (a division of Ryder Truck Rental,
Inc., a wholly owned subsidiary of Ryder System, Inc.) as of October 16, 1996,
and the related combined statements of earnings and changes in Ryder investment
and cash flows for the period from January 1, 1996 to October 16, 1996,
contained in the Budget Group, Inc.'s Registration Statement on Form S-4 (SEC
File No. 333-49679) filed on April 8, 1998, and to the reference to our firm
under the heading "Experts" in the prospectus. This consent should not be
regarded as in any way updating the aforementioned report or representing that
we performed any procedures subsequent to the date of such report.
/s/ KPMG Peat Marwick LLP
Miami, Florida
September 15, 1998
