<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 24, 1995)
2,400,000 PREFERRED SECURITIES LOGO (R)
SOUTHWEST GAS CAPITAL I
9.125% TRUST ORIGINATED PREFERRED SECURITIES(SM) ("TOPRS(SM)")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
SOUTHWEST GAS CORPORATION
------------------------
The 9.125% Trust Originated Preferred Securities (the "Preferred
Securities") offered hereby represent preferred undivided beneficial
interests in the assets of Southwest Gas Capital I, a statutory business
trust formed under the laws of the State of Delaware (the "Trust").
Southwest Gas Corporation, a California corporation (the "Company"),
will own all the common securities (the "Common Securities" and, together with
the Preferred Securities, the "Trust Securities") representing undivided
beneficial interests in the assets of the Trust. The Trust exists for the sole
purpose of issuing the Preferred Securities and Common Securities and investing
the proceeds thereof in an equivalent amount of 9.125% Subordinated Deferrable
Interest Notes due December 31, 2025 (the "Subordinated Debt Securities") of the
Company. Upon an event of a default under the
(continued on next page)
------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE S-6 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED
SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF SUCH DEFERRAL.
The Preferred Securities have been approved for listing upon notice of
issuance on the New York Stock Exchange, Inc. (the "New York Stock Exchange").
Trading of the Preferred Securities on the New York Stock Exchange is expected
to commence within a 30-day period after the initial delivery of the Preferred
Securities. See "Underwriting."
------------------------
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 SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE(1) DISCOUNT(2) TRUST(3)(4)
- ----------------------------------------------------------------------------------------------------------------
Per Preferred Security..................... $25.00 (3) $25.00
- ----------------------------------------------------------------------------------------------------------------
Total...................................... $60,000,000 (3) $60,000,000
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued distributions, if any, from the date of initial issuance.
(2) The Trust and the Company have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) Because the proceeds of the sale of the Preferred Securities will be used to
purchase Subordinated Debt Securities, the Company has agreed, in the
Underwriting Agreement, to pay to the Underwriters as compensation
("Underwriters' Compensation") for their services $.7875 per Preferred
Security (or $1,890,000 in the aggregate); provided that, such compensation
for sales of 10,000 or more Preferred Securities to a single purchaser will
be $.50 per Preferred Security. Therefore, to the extent of such sales, the
actual amount of Underwriters' Compensation will be less than the aggregate
amount specified in the preceding sentence. See "Underwriting."
(4) Expenses of the offering which are payable by the Company are estimated to
be $300,000.
------------------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company, on or about October 31,
1995.
------------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
------------------------
The date of this Prospectus Supplement is October 26, 1995.
(SM) "TRUST ORIGINATED PREFERRED SECURITIES" AND "TOPRS" ARE SERVICE MARKS OF
MERRILL LYNCH & CO., INC.
<PAGE> 2
(continued from previous page)
Declaration (as defined herein), the holders of Preferred Securities will have a
preference over the holders of the Common Securities with respect to payments in
respect of distributions and payments upon redemption, liquidation and
otherwise.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 9.125% of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing December 31, 1995 ("distributions"). The payment of
distributions out of moneys held by the Trust and payments on liquidation of the
Trust or the redemption of Preferred Securities, as set forth below, are
guaranteed by the Company (the "Guarantee") to the extent described under
"Description of the Guarantee" in the accompanying Prospectus. The obligations
of the Company under the Guarantee are subordinate and junior in right of
payment to all other liabilities of the Company and pari passu with the most
senior preferred stock issued, from time to time, if any, by the Company. The
obligations of the Company under the Subordinated Debt Securities are
subordinate and junior in right of payment to all present and future Senior
Indebtedness (as defined herein) of the Company, which aggregated approximately
$731 million at June 30, 1995, and rank pari passu with the Company's other
general unsecured creditors.
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and interest and other
payment dates on the Subordinated Debt Securities, which will be the sole assets
of the Trust. As a result, if principal or interest is not paid on the
Subordinated Debt Securities, no amounts will be paid on the Preferred
Securities. If the Company does not make principal or interest payments on the
Subordinated Debt Securities, the Trust will not have sufficient funds to make
distributions on the Preferred Securities, in which event, the Guarantee will
not apply to such distributions until the Trust has sufficient funds available
therefor.
The Company has the right to defer payments of interest on the Subordinated
Debt Securities by extending the interest payment period on the Subordinated
Debt Securities at any time for up to 20 consecutive quarters (each, an
"Extension Period"). If interest payments are so deferred, distributions will
also be deferred. During such Extension Period, distributions will continue to
accrue with interest thereon (to the extent permitted by applicable law) at an
annual rate of 9.125% per annum compounded quarterly. During any Extension
Period, holders of Preferred Securities will be required to include deferred
interest income in their gross income for United States federal income tax
purposes in advance of the receipt of the cash distributions with respect to
such deferred interest payments. There could be multiple Extension Periods of
varying lengths throughout the term of the Subordinated Debt Securities. If the
Company exercises the right to extend an interest payment period, the Company
shall not during such Extension Period (i) declare or pay dividends on, or make
a distribution with respect to, or redeem, purchase or acquire or make a
liquidation payment with respect to, any of its capital stock, or (ii) make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by the Company that rank pari passu with or
junior to the Subordinated Debt Securities; provided, however, that restriction
(i) above does not apply to any stock dividends paid by the Company where the
dividend stock is the same as that on which the dividend is being paid. The
Company has no present intention of exercising its right to extend an interest
payment period. See "Description of the Subordinated Debt Securities -- Option
to Extend Interest Payment Period." See "Risk Factors -- Option to Extend
Interest Payment Period" and "United States Federal Income Taxation -- Original
Issue Discount."
The Subordinated Debt Securities are redeemable by the Company, in whole or
in part, from time to time, on or after December 31, 2000, or at any time in
certain circumstances upon the occurrence of a Tax Event (as defined herein). If
the Company redeems Subordinated Debt Securities, the Trust must redeem Trust
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Subordinated Debt Securities so redeemed at $25 per
Preferred Security plus accrued and unpaid distributions thereon, including
interest thereon, to the date fixed for redemption (the "Redemption Price"). See
"Description of the Preferred Securities -- Mandatory Redemption." The Preferred
Securities will be redeemed upon maturity of the Subordinated Debt Securities.
The Subordinated Debt Securities mature on
S-2
<PAGE> 3
December 31, 2025, but the maturity date may be extended only once, for up to an
additional 19 years at the option of the Company, provided certain financial
conditions are met. See "Description of the Subordinated Debt
Securities -- Option to Extend Maturity Date." In addition, upon the occurrence
of a Tax Event arising from a change in law or a change in legal interpretation
regarding tax matters, unless the Subordinated Debt Securities are redeemed in
the limited circumstances described herein, the Trust will be dissolved with the
result that the Subordinated Debt Securities will be distributed to the holders
of the Preferred Securities, on a pro rata basis, in lieu of any cash
distribution. See "Description of the Preferred Securities -- Tax Event
Redemption or Distribution." In certain circumstances, the Company will have the
right to redeem the Subordinated Debt Securities, which would result in the
redemption by the Trust of Trust Securities in the same amount on a pro rata
basis. If the Subordinated Debt Securities are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the
Subordinated Debt Securities listed on the New York Stock Exchange or on such
other exchange or organization as the Preferred Securities are then listed. See
"Description of the Preferred Securities -- Tax Event Redemption or
Distribution" and "Description of the Subordinated Debt Securities."
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive for each Preferred Security a liquidation amount of $25 plus
accrued and unpaid distributions thereon (including interest thereon) to the
date of payment, unless, in connection with such dissolution, the Subordinated
Debt Securities are distributed to the holders of the Preferred Securities. See
"Description of the Preferred Securities -- Liquidation Distribution Upon
Dissolution."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE> 4
SUMMARY FINANCIAL INFORMATION
The following selected financial information should be read in conjunction
with the financial statements and notes thereto incorporated by reference into
this Prospectus Supplement and the accompanying Prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE 30, ----------------------------------------
1995 1994 1993 1992
-------------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues............................... $ 746,086 $ 728,169 $ 689,841 $ 718,483
Operating income....................... 92,439 102,754 87,578 75,848
Net income............................. 18,677 26,301 15,406(1) 17,661
Net income applicable to common
stock................................ 18,254 25,791 14,665(1) 16,610
Earnings per share..................... .84 1.22 .71(1) .81
Dividends paid per common share........ .82 .80 .74 .70
Weighted average number of shares of
common stock outstanding (000's)..... 21,615 21,078 20,729 20,598
NATURAL GAS SEGMENT DATA:
Revenues............................... $ 609,345 $ 599,553 $ 539,105 $ 534,390
Cost of gas............................ 258,154 249,922 212,290 214,293
---------- ---------- ---------- ----------
Margin................................. $ 351,191 $ 349,631 $ 326,815 $ 320,097
Operating income....................... 79,353 88,690 77,682 85,575
Contribution to consolidated net
income............................... 17,024 23,524 13,751(1) 32,214
Construction expenditures.............. 153,475 141,390 113,903 102,517
Net gas utility property (end of
period).............................. 1,077,495 1,035,916 954,488 906,420
Number of customers (end of period).... 993,000 980,000 932,000 897,000
FINANCIAL SERVICES SEGMENT DATA:
Net interest income (before credit loss
provision)........................... $ 58,960 $ 58,644 $ 57,249 $ 53,761
Operating income (loss)................ 13,086 14,064 9,896 (9,727)
Contribution to consolidated net
income............................... 1,653 2,777(2) 1,655(1) (14,553)(3)
Interest-earning assets at period
end.................................. 1,706,380 1,675,368 1,582,720 2,022,121
Interest-bearing liabilities at period
end.................................. 1,632,925 1,629,419 1,546,158 2,058,663
Net yield on interest-earning assets... 3.63% 3.69% 3.15% 2.70%
Classified assets at period end (4).... 31,510 60,385 79,268 81,911
</TABLE>
- ---------------
(1) In 1993, the Company wrote off $15.9 million in gross plant related to its
central and southern Arizona pipe replacement programs. The impact of this
disallowance, net of accumulated depreciation, tax benefits and other
related items, was a non-cash reduction to consolidated net income and
natural gas segment net income of $9.3 million, or $0.44 per share. In
addition, during 1993 the Company recorded the cumulative effect of an
accounting change relating to the adoption of SFAS No. 109, "Accounting for
Income Taxes," which increased consolidated net income and financial
services segment net income by $3 million, or $0.15 per share.
(2) Includes first quarter 1994 recognition of a $1.7 million gain ($1.1 million
after tax) on the sale of the Bank's credit card portfolio.
(3) The Bank incurred pretax losses from real estate development activities of
$15.3 million in 1992. The Bank no longer invests in real estate held for
development and has substantially divested its real estate development
portfolio.
(4) OTS regulations require the Bank to classify certain assets and establish
prudent valuation allowances. Classified assets include: (i) assets
inadequately protected by the current net worth or paying capacity of the
obligor or the collateral pledged, if any, (ii) foreclosed real estate, and
(iii) investments in real estate no longer permitted to be held by savings
associations.
S-4
<PAGE> 5
<TABLE>
<CAPTION>
AS OF JUNE 30, 1995
---------------------------------------------------
ACTUAL AS ADJUSTED (1)
----------------------- -----------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets..................................... $3,077,939 $3,077,939
========== ==========
Short-term borrowings (2)........................ $ 16,000 $ --
========== ==========
Long-term debt, including current maturities
(2)............................................ $ 901,688 70.1% $ 901,688 67.1%
---------- ----- ---------- -----
Company-obligated mandatorily redeemable
preferred securities of Southwest Gas Capital I
(3)............................................ -- -- 60,000 4.5
---------- ----- ---------- -----
Mandatory redeemable preferred stock............. 4,000 0.3 4,000 0.3
---------- ----- ---------- -----
Stockholders' equity:
Common stock and additional paid-in capital.... 331,809 25.8 329,619 24.5
Unrealized gain, net of tax, on debt securities
available for sale (4)...................... 858 0.1 858 0.1
Retained earnings.............................. 47,757 3.7 47,757 3.5
---------- ----- ---------- -----
Total stockholders' equity....................... 380,424 29.6 378,234 28.1
---------- ----- ---------- -----
Total capitalization........................... $1,286,112 100.0% $1,343,922 100.0%
========== ===== ========== =====
</TABLE>
- ---------------
(1) Adjusted for the sale of 2.4 million Preferred Securities and $61.8 million
of Subordinated Debt Securities and the application of the estimated net
proceeds from the sale of the Subordinated Debt Securities to repay the
Company's short-term borrowings. At September 30, 1995 the Company had $56
million of short-term borrowings outstanding. See "Use of Proceeds."
(2) Excludes Bank's deposit liabilities, securities sold under agreements to
repurchase and Federal Home Loan Bank advances.
(3) As described in this Prospectus Supplement, the sole asset of the Trust
(which is a subsidiary trust of the Company) will be approximately $61.8
million of Subordinated Debt Securities of the Company which will bear
interest at the rate of 9.125% per annum. The obligations of the Company
under the Declaration, the Guarantee, the Indenture (as defined herein) and
the Subordinated Debt Securities collectively provide a full and
unconditional guarantee on a subordinated basis by the Company of payments
due on the Preferred Securities to the extent the Trust has funds available
therefor as a result of payments of interest or principal on the
Subordinated Debt Securities by the Company.
(4) Securities classified as available for sale are those which the Bank intends
to hold for an indefinite period and which may be sold in response to
changes in market interest rates, changes in the security's prepayment risk,
the Bank's need for liquidity, changes in the availability and yield of
alternative investments, and other asset/liability management needs.
Securities classified as available for sale are stated at fair value in
consolidated financial statements filed with the Securities and Exchange
Commission. Unrealized gains or losses on debt securities available for sale
are reported net of tax as a separate component of stockholders' equity, but
are not included in net income. Realized gains or losses are recorded into
income if and when the securities are sold.
S-5
<PAGE> 6
The following information concerning the Company, the Trust, the Preferred
Securities, the Guarantee and the Subordinated Debt Securities supplements, and
should be read in conjunction with, the information contained in the
accompanying Prospectus.
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following matters.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE SUBORDINATED DEBT SECURITIES AND
THE GUARANTEE
The obligations of the Company under the Subordinated Debt Securities are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of the Company and pari passu with obligations to, or rights of,
the Company's other general unsecured creditors. The Company's obligations under
the Guarantee are subordinate and junior in right of payment to all liabilities
of the Company and pari passu with the most senior preferred stock issued, from
time to time, if any, by the Company. As of June 30, 1995, Senior Indebtedness
aggregated approximately $731 million. There are no terms in the Preferred
Securities, the Subordinated Debt Securities or the Guarantee that limit the
Company's ability to incur additional indebtedness, including indebtedness that
ranks senior to the Subordinated Debt Securities and the Guarantee. See
"Description of the Guarantee" and "Particular Terms of the Subordinated Debt
Securities Issued in Connection with the Preferred Securities" in the
accompanying Prospectus and "Description of the Subordinated Debt
Securities -- Subordination" herein.
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). Harris Trust and Savings
Bank will act as indenture trustee under the Guarantee for the purposes of
compliance with the provisions of the Trust Indenture Act (the "Guarantee
Trustee"). The Guarantee Trustee will hold the Guarantee for the benefit of the
holders of the Preferred Securities.
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accrued and unpaid distributions that are required to be paid
on the Preferred Securities, to the extent the Company has made a payment of
principal or interest on the Subordinated Debt Securities, (ii) the Redemption
Price, including all accrued and unpaid distributions with respect to Preferred
Securities called for redemption by the Trust, to the extent the Company has
made a payment of principal and interest on the Subordinated Debt Securities,
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Trust (other than in connection with the distribution of Subordinated
Debt Securities to the holders of Preferred Securities or a redemption of all
the Preferred Securities upon the maturity or redemption of the Subordinated
Debt Securities), the lesser of (a) the aggregate of the liquidation amount and
all accrued and unpaid distributions (including interest thereon) on the
Preferred Securities to the date of payment to the extent the Trust has funds
available therefor or (b) the amount of assets of the Trust remaining available
for distribution to holders of the Preferred Securities in liquidation of the
Trust. The holders of a majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee. If the Guarantee Trustee fails to enforce the Guarantee, any holder
of Preferred Securities may institute a legal proceeding directly against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity. If the Company were to default on its obligation to
pay amounts payable on the Subordinated Debt Securities, the Trust would lack
available funds for the payment of distributions or amounts payable on
redemption of the Preferred Securities or otherwise, and, in such event, holders
of the Preferred Securities would not be able to rely upon the Guarantee for
payment of such amounts. Instead, holders of the Preferred Securities would be
required to rely on the enforcement by the Property Trustee of its rights as
registered holder of the Subordinated Debt Securities against the Company
pursuant to
S-6
<PAGE> 7
the terms of the Subordinated Debt Securities or, if the Property Trustee fails
to enforce such rights after written notice, on the holder's right to institute
a suit against the Company to enforce the Property Trustee's rights. See
"Description of the Guarantee" and "Particular Terms of the Subordinated Debt
Securities Issued in Connection with the Preferred Securities" in the
accompanying Prospectus. The Declaration provides that each holder of Preferred
Securities, by acceptance thereof, agrees to the provisions of the Guarantee,
including the subordination provisions thereof, and the Indenture (as such term
is defined in "Description of Subordinated Debt Securities" herein).
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
The holders of a majority in aggregate liquidation amount of the Preferred
Securities will have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Property Trustee or to
direct the exercise of any trust or power conferred upon the Property Trustee
under the Declaration, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the Subordinated Debt
Securities. If the Property Trustee fails to enforce its rights under the
Subordinated Debt Securities, a holder of Preferred Securities may institute a
legal proceeding directly against the Company to enforce the Property Trustee's
rights under the Subordinated Debt Securities without first instituting any
legal proceeding against the Property Trustee or any other person or entity.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debt Securities by extending the interest payment period at
any time, and from time to time, on the Subordinated Debt Securities. As a
consequence of such an extension, quarterly distributions on the Preferred
Securities would be deferred (but despite such deferral would continue to accrue
with interest thereon compounded quarterly) by the Trust during any such
extended interest payment period. Such right to extend the interest payment
period for the Subordinated Debt Securities is limited to a period not exceeding
20 consecutive quarters (each, an "Extension Period"). In the event that the
Company exercises this right to defer interest payments, then (i) the Company
must not declare or pay dividends on, or make a distribution with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock and (ii) the Company must not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Company that rank pari passu with or junior to the
Subordinated Debt Securities; provided, however, that restriction (i) above does
not apply to any stock dividends paid by the Company, where the dividend stock
is the same stock as that on which the dividend is being paid. Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period; provided that, such Extension Period, together with all
such previous and further extensions within such Extension Period, may not
exceed 20 consecutive quarters. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may commence a new Extension
Period, subject to the above requirements. See "Description of the Preferred
Securities -- Distributions" and "Description of the Subordinated Debt
Securities -- Option to Extend Interest Payment Period."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities will
continue to accrue income (as original issue discount ("OID")) in respect of the
deferred interest allocable to its Preferred Securities for United States
federal income tax purposes, which will be allocated but not distributed to
holders of record of Preferred Securities. As a result, each such holder of
Preferred Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash from
the Trust related to such income if such holder disposes of its Preferred
Securities prior to the record date for the date on which distributions of such
amounts are made. The Company has no current intention of exercising its right
to defer payments of interest by extending the interest payment period on the
Subordinated Debt Securities. However, should the Company determine to exercise
such right in the future, the market price of the Preferred Securities is likely
to be affected. A holder that disposes of its Preferred Securities during an
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to hold its Preferred
S-7
<PAGE> 8
Securities. In addition, as a result of the Company's right to defer interest
payments, the market price of the Preferred Securities (which represent an
undivided beneficial interest in the Subordinated Debt Securities) may be more
volatile than other securities on which OID accrues but with respect to which
there is no right to defer interest payments. See "United States Federal Income
Taxation -- Original Issue Discount."
TAX EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Tax Event (as defined herein), the Trust will be
dissolved, except in the limited circumstance described below, with the result
that the Subordinated Debt Securities will be distributed to the holders of the
Trust Securities in connection with the liquidation of the Trust. In certain
circumstances, the Company has the right to redeem the Subordinated Debt
Securities, in whole or in part, in lieu of a distribution of the Subordinated
Debt Securities by the Trust, in which event the Trust will redeem the Trust
Securities on a pro rata basis to the same extent as the Subordinated Debt
Securities are redeemed by the Company. See "Description of the Preferred
Securities -- Tax Event Redemption or Distribution."
Under current United States federal income tax law, a distribution of
Subordinated Debt Securities upon the dissolution of the Trust would not be a
taxable event to holders of the Preferred Securities. Upon occurrence of a Tax
Event, however, a dissolution of the Trust pursuant to which holders of the
Preferred Securities receive cash would be a taxable event to such holders. See
"United Stated Federal Income Taxation -- Receipt of Subordinated Debt
Securities or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debt Securities that may be distributed in
exchange for Preferred Securities if a dissolution or liquidation of the Trust
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Subordinated Debt Securities that a holder of Preferred Securities may
receive on dissolution and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby. Because holders of Preferred Securities may receive Subordinated Debt
Securities upon the occurrence of a Tax Event, prospective purchasers of
Preferred Securities are also making an investment decision with regard to the
Subordinated Debt Securities and should carefully review all the information
regarding the Subordinated Debt Securities contained herein and in the
accompanying Prospectus. See "Description of the Preferred Securities -- Tax
Event Redemption or Distribution" and "Description of the Subordinated Debt
Securities -- General."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will
not be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of, the Regular Trustees, which voting rights are vested
exclusively in the holder of the Common Securities.
TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debt Securities. A holder who disposes of Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Subordinated Debt Securities through
the date of disposition as ordinary income (i.e., OID), and to add such amount
to the adjusted tax basis of such Holder's pro rata share of the underlying
Subordinated Debt Securities deemed disposed of. To the extent the selling price
is less than the holder's adjusted tax basis (which will include, in the form of
OID, all accrued but unpaid interest), a holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes. See
"United States Federal Income Taxation -- Original Issue Discount" and "Sales of
Preferred Securities."
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THE COMPANY
The Company is comprised of two business segments: natural gas operations
and financial services. The gas segment purchases, transports and distributes
natural gas to residential, commercial and industrial customers in
geographically diverse portions of Arizona, Nevada and California. The financial
services segment conducts its operations through the Bank, a wholly owned
subsidiary of the Company. For the twelve months ended June 30, 1995, the
natural gas operations segment contributed $17 million, or 91 percent, and the
financial services segment contributed $1.7 million, or 9 percent, to the
Company's consolidated net income of $18.7 million.
NATURAL GAS SEGMENT
The Company is the largest distributor of natural gas in Arizona,
distributing and transporting natural gas in most of southern, central and
northwestern Arizona including the Phoenix and Tucson metropolitan areas. The
Company is also the largest distributor and transporter of natural gas in
Nevada, and serves the Las Vegas metropolitan area and northern Nevada. In
addition, the Company distributes and transports gas in portions of California,
including the Lake Tahoe area in northern California and high desert and
mountain areas of San Bernardino County in southern California.
During the twelve months ended June 30, 1995, the contribution to total
natural gas operating margin from each of the Company's major geographic
operations areas was as follows: Arizona -- 58 percent, Nevada -- 31 percent
and California -- 11 percent. During that same period, the Company earned 60
percent of operating margin from residential customers, 24 percent from
commercial customers, and 16 percent from industrial customers. These patterns
are consistent with prior years and are expected to continue.
At December 31, 1994, approximately 583,000 (or 59 percent) of the
Company's natural gas segment customers were in Arizona, 292,000 (or 30 percent)
were in Nevada and 105,000 (or 11 percent) were in California. A federal Census
Bureau report for the year ended July 1, 1994 showed that Nevada and Arizona
ranked first and second, respectively, in terms of percentage population growth.
Customer growth in the Company's three-state territory was 27,000 in 1992,
35,000 in 1993 and 48,000 in 1994. This translates into growth rates of three
percent in 1992, four percent in 1993 and five percent in 1994. Based on current
commitments from builders, 60,000 new customers are expected to be added to the
Company's gas distribution system during 1995, resulting in a projected annual
growth rate of six percent. The national average annual customer growth rate as
reported by the American Gas Association for 1993 was approximately three
percent.
For the twelve months ended June 30, 1995, the Company's natural gas
construction expenditures totaled $153 million, a 21 percent increase over the
$126 million of construction expenditures incurred during the same period a year
ago. The increase is primarily attributed to the investment in new transmission
and distribution plant in Arizona, Nevada and California to meet the demand from
the Company's growing customer base. During the three-year period ended June 30,
1995, the Company's total investment in gas plant in service has increased from
$1.2 billion to $1.5 billion, or at an annual growth rate of eight percent. The
Company currently estimates that natural gas segment construction expenditures
for the three-year period ending December 31, 1997 will be approximately $410
million. See "Capital Expenditures and Financing Programs."
The Company is authorized to charge its distribution system customers rates
determined by the Arizona Corporation Commission, the California Public
Utilities Commission and the Public Service Commission of Nevada in general rate
cases, which rates are derived using rate base, cost of service and cost of
capital experienced in an adjusted historical test year in Arizona and Nevada,
and in a projected future test year in California. The Federal Energy Regulatory
Commission regulates the northern Nevada transmission and the liquefied natural
gas storage facilities of Paiute Pipeline Company ("Paiute"), a wholly owned
subsidiary of
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the Company, as well as the rates Paiute charges for transportation of gas
directly to certain end-users and to various local distribution companies.
In light of its substantial construction program, the Company plans to file
for additional rate relief in its Nevada jurisdictions in late 1995, with new
rates expected to be in effect approximately six months later. The Company plans
to file for additional rate relief in its Arizona jurisdictions no later than
the fourth quarter of 1996, with new rates expected to be in effect
approximately twelve months after filing. As part of recent rate case
settlements, the Company agreed not to file another general rate request for its
southern Arizona jurisdiction before November 1996, and its current rate
settlement for its California jurisdictions, effective January 1995, will remain
in effect through 1998. The Company's rate schedules in all of its service areas
contain purchased gas adjustment clauses which permit the Company to adjust its
rates periodically as the cost of purchased gas changes.
FINANCIAL SERVICES SEGMENT
The Bank is a federally chartered stock savings bank conducting business
through branch offices in Nevada. The Bank's deposit accounts are insured to the
maximum extent permitted by law by the Federal Deposit Insurance Corporation
("FDIC") through the Savings Association Insurance Fund. The Bank is regulated
by the Office of Thrift Supervision ("OTS") and the FDIC, and is a member of the
Federal Home Loan Bank System.
The Bank's principal business is to attract deposits from the general
public and make and acquire loans secured by real estate and other collateral to
enable borrowers to purchase, refinance, construct and improve such property.
Single-family residential mortgage loans comprised 50 percent of the Bank's loan
portfolio at June 30, 1995. Commercial and construction portfolios, consisting
of amortizing mortgage loans on multi-family residential and nonresidential real
estate, comprised 33 percent of the Bank's loan portfolio at June 30, 1995.
Consumer loans, including installment loans secured by recreational vehicles,
boats, automobiles and mobile homes, home equity loans and loans secured by
deposit accounts, comprised 17 percent of the Bank's loan portfolio at June 30,
1995.
The Bank invests in instruments such as mortgage-backed securities and
collateralized mortgage obligations to supplement its loan production and to
provide liquidity to meet unforeseen cash outlays. The Bank also invests in a
variety of other securities including U.S. Government and U.S. agency
obligations, repurchase agreements and federal funds. Income from cash
equivalents and debt securities provides a significant source of revenue for the
Bank, constituting 32 percent of total revenues for the year ended June 30,
1995.
The Bank had been active in single-family residential real estate
development until stringent regulatory capital requirements were imposed by the
Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA") which
made it impractical for the Bank to continue its real estate development
activities. As a result, the Bank no longer invests in real estate projects.
As part of a restructuring program designed to allow the Bank to operate
more effectively under the guidelines of FIRREA, the Bank reduced its total
assets from $2.71 billion at December 31, 1990 to $1.75 billion at December 31,
1993. The Bank's total assets at June 30, 1995 were $1.84 billion and included
$586 million of debt securities and over a billion dollars of loans receivable,
net of allowances. During 1993, in conjunction with the balance sheet
restructuring, the Bank sold its Arizona branch operations including all related
deposit liabilities of approximately $321 million. The Bank sold $334 million of
mortgage-backed securities to effect the sale of the deposit liabilities.
As of June 30, 1995, the Bank exceeded all three fully phased-in minimum
capital standards under applicable regulatory capital requirements and continues
to be "well capitalized" under the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") capital standards.
In August 1995, the FDIC reduced the deposit insurance premiums paid by
most commercial banks insured by the Bank Insurance Fund ("BIF") to four cents
per $100 of deposits. This regulatory change will
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give commercial banks a competitive advantage over savings associations and
place additional pressure on the Savings Association Insurance Fund ("SAIF").
A number of plans have been proposed in Congress to deal with the
undercapitalization of the SAIF. Several proposals provide for a one-time
special assessment on SAIF-insured deposits to fully capitalize the SAIF to 1.25
percent of insured deposits. These proposals would subsequently reduce annual
premiums to levels similar to those of BIF-insured commercial banks and
eventually merge the BIF and SAIF insurance funds. The Bank is unable to predict
if these proposals, or other proposals, will ultimately be approved by Congress.
Assuming such a one-time special assessment was approved by Congress and
became law in 1995 and was immediately charged against results of operations,
the one-time assessment would, most likely, have a material impact on the Bank's
1995 results of operations. However, management believes the Bank would continue
to be classified as "well-capitalized" under fully phased-in FDICIA capital
rules. In addition, management of the Bank believes that it would not face any
liquidity problems as a result of such a one-time assessment.
The Bank is not permitted at any time to declare a dividend that would
reduce the Bank's regulatory net worth below minimum regulatory requirements. In
addition, under OTS regulations, the Bank is restricted to paying no more than
75 percent of its net income over the preceding four quarters to the Company.
Cash dividends in excess of this amount require regulatory approval. The Bank
has not paid any cash dividends to the Company during the past three years.
However, in June 1995, the Bank declared a $250,000 cash dividend payable to the
Company which was paid during the third quarter of 1995.
RECENT OPERATING RESULTS
The Company reported earnings of $0.23 per share for the six months ended
June 30, 1995, a $0.37 decrease from the $0.60 per share reported for the first
half of 1994. Consolidated net income applicable to common stock was $5.1
million, compared to $12.7 million for the same period in 1994. Average
outstanding common shares increased to 22.1 million in 1995 from 21 million in
1994.
The gas operations segment's contribution to consolidated net income was
$4.5 million, compared to a $11 million contribution reported for the first six
months of 1994. The decrease was principally the result of higher operating
expenses and net interest deductions incurred as a result of the continued
expansion and upgrading of the gas system to accommodate customer growth.
Overall, operating margin increased only one percent when compared to the
first half of 1994. Margin increases from continued customer growth and
authorized rate relief in California and southern Arizona were offset by the
effects of unseasonably warm weather during the first quarter of 1995 in the
Company's three largest operating areas: Phoenix, Las Vegas, and Tucson.
Operating expenses and net interest deductions increased due to new
investment in gas plant and higher costs incurred to accommodate the Company's
record customer growth. Such expenses temporarily penalize earnings, but the
Company believes that the gas operations segment's contribution to net earnings
should improve as construction programs are completed, additional rate relief is
granted, and new customers contribute incremental operating margin. See "The
Company -- Natural Gas Segment" above for a discussion of the Company's plans to
seek additional rate relief.
The Bank reported 1995 year-to-date net income of $3.8 million
(contributing $806,000 to consolidated net income after deducting tax-effected
carrying costs associated with its acquisition by the Company), compared to net
income of $4.4 million reported for the first half of 1994 (resulting in a
contribution of $1.9 million after deducting tax-effected carrying costs). The
difference between periods was principally due to the first quarter 1994
recognition of a $1.7 million net gain ($1.1 million after tax) on the sale of
the Bank's credit card portfolio. Compared to first half 1994 core bank earnings
(net income exclusive of goodwill amortization and one-time, nonrecurring
transactions) of $5.3 million, 1995 core bank earnings were $6 million, a 13
percent improvement.
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For the twelve months ended June 30, 1995, consolidated net income
applicable to common stock was $18.3 million and earnings per share were $0.84,
compared to consolidated net income applicable to common stock of $23.7 million
and earnings per share of $1.13 during the twelve months ended June 30, 1994.
The gas operations segment's contribution to consolidated net income for
the twelve months ended June 30, 1995 was $17 million compared to a $17.2
million contribution reported for the prior period. Increases in operating
expenses and net interest deductions offset an increase in operating margin
during the current twelve-month period. Prior period results include the
write-off of certain pipe replacement costs in Arizona, as ordered by the
Arizona Corporation Commission. The Company wrote off $19.1 million in gross
plant, which resulted in a noncash, after-tax reduction to prior period net
income of $9.6 million, or $0.45 per share.
Net earnings from the Bank were $7.1 million (contributing $1.7 million to
consolidated net income after deducting tax-effected carrying costs) for the
twelve months ended June 30, 1995, compared to net income of $12 million
(resulting in a contribution of $7.1 million after deducting tax-effected
carrying costs) for the twelve-month period ended June 30, 1994. Core bank
earnings were $12 million, compared to $9.3 million for the earlier period, a 29
percent improvement.
CAPITAL EXPENDITURES AND FINANCING PROGRAMS
During the three-year period ended December 31, 1994, the Company's gas
segment customer base has grown at an annual average rate of approximately four
percent. The Company anticipates adding 60,000 customers per year over the next
three years, resulting in a projected average annual customer growth rate of
approximately six percent.
The Company currently estimates that the total financing requirements for
the natural gas segment for the three-year period ending December 31, 1997 will
be approximately $425 million. Of this amount, construction expenditures will
approximate $410 million, and debt maturities and repayments and other cash
requirements are expected to approximate $15 million. It is currently estimated
that cash flow from operating activities of the natural gas segment (net of
dividends) will generate approximately one-half of the natural gas segment's
financing requirements during the three-year period ending December 31, 1997. A
portion of the remaining financing requirements will be provided by $83 million
of funds held in trust, at December 31, 1994, from the issuance of 1993 Clark
County, Nevada, Series A and 1993 City of Big Bear, California, Series A
industrial development revenue bonds and $28.5 million of funds obtained from
the sale of the Company's Common Stock in May 1995. The remaining requirements
are expected to be provided by external financing sources, including the
proceeds from this transaction.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, dated as of August 17, 1995, executed by the
Company, as sponsor (the "Sponsor"), and the trustees of the Trust and (ii) the
filing of a certificate of trust with the Secretary of State of the State of
Delaware on August 17, 1995. Such declaration will be amended and restated in
its entirety (as so amended and restated, the "Declaration") substantially in
the form filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and the accompanying Prospectus form a part. The
Declaration will be qualified as an indenture under the Trust Indenture Act.
Upon issuance of the Preferred Securities, the purchasers thereof will own all
of the Preferred Securities. See "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company." The
Company will directly or indirectly acquire Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of the Trust. The Trust
exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Subordinated Debt
Securities, and (iii) engaging in only those other activities necessary or
incidental thereto.
Pursuant to the Declaration, the number of trustees of the Trust will
initially be four. Two of the trustees of the Trust (the "Regular Trustees")
will be persons who are employees or officers of, or who are affiliated,
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with the Company. The third trustee, Wilmington Trust Company, is a financial
institution that maintains its principal place of business in the state of
Delaware and is unaffiliated with the Company. Except as otherwise provided in
the Declaration, the Delaware Trustee's sole duty shall be to, upon the request
of the other Trustees or the Company, execute any documents and maintain custody
of any records required to maintain the existence of, or dissolve, the Trust
under the Trust Act. The fourth trustee, Harris Trust and Savings Bank, will
serve as property trustee under the Declaration and as indenture trustee for the
purposes of compliance with the provisions of the Trust Indenture Act (the
"Property Trustee"), until removed or replaced by the Company, as the holder of
all the Common Securities. Harris Trust and Savings Bank will also act as the
Guarantee Trustee. See "Description of the Guarantee" in the accompanying
Prospectus.
The Property Trustee will hold title to the Subordinated Debt Securities
for the benefit of the holders of the Trust Securities and will have the power
to exercise all rights, powers, and privileges under the Indenture as the holder
of the Subordinated Debt Securities. In addition, the Property Trustee will
maintain exclusive control of a segregated non-interest bearing bank account
(the "Property Account") to hold all payments made in respect of the
Subordinated Debt Securities for the benefit of the holders of the Trust
Securities. The Property Trustee will make payments of distributions and
payments on liquidation, redemption and otherwise to the holders of the Trust
Securities out of funds from the Property Account. The Guarantee Trustee will
hold the Guarantee for the benefit of the holders of the Preferred Securities.
The Company, as the holder of all the Common Securities, will have the right to
appoint, remove or replace any Regular Trustee and to increase or decrease the
number of the Regular Trustees; provided that, (i) the number of Regular
Trustees will be at least three, and (ii) a majority will be persons who are
employees or officers of, or who are affiliated with, the Company. The Company
will pay all debts and obligations of the Trust (other than with respect to
Trust Securities), including all fees and expenses related to the Trust and the
offering of the Trust Securities. See "Description of the Subordinated Debt
Securities -- Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities."
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements, with the Preferred Securities shown as a
separate item below total liabilities, and above stockholders' equity, under the
caption "Company-Obligated Mandatorily Redeemable Preferred Securities of
Southwest Gas Capital I" on the Company's consolidated statements of financial
condition and as a separate item before net income (loss) under the caption
"Payments on Company-Obligated Mandatorily Redeemable Preferred Securities of
Southwest Gas Capital I" on the Company's consolidated statements of income.
It will be disclosed, if necessary, in a footnote to the consolidated
statements of financial position of the Company that all of the assets of the
Trust will be approximately $61.8 million of Subordinated Debt Securities of the
Company which will bear interest at a rate of 9.125% per annum. It will also be
disclosed in a footnote to the Company's consolidated financial statements that
(i) the Trust is wholly owned, (ii) the obligations of the Company under the
Declaration, the Guarantee, the Indenture and the Subordinated Debt Securities
collectively provide a full and unconditional guarantee on a subordinated basis
by the Company of payments due on the Preferred Securities, to the extent the
Trust has funds available therefor as a result of payments of interest or
principal on the Subordinated Debt Securities by the Company. In addition, the
disclosure on the Company's consolidated statements of financial position will
be repeated.
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USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Securities will be
invested by the Trust in Subordinated Debt Securities of the Company issued
pursuant to the Indenture and ultimately will be used by the Company to repay
short-term borrowings incurred primarily to finance utility construction. The
weighted average cost of the Company's short-term debt at June 30, 1995 was 6.53
percent.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, Harris Trust and Savings Bank, will act as
indenture trustee under the Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Preferred Securities
will include those stated in the Declaration and those made part of the
Declaration by the Trust Indenture Act. The following summary of the principal
terms and provisions of the Preferred Securities does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the
Declaration, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part, the Trust Act and the
Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities will be owned, directly or
indirectly, by the Company. The Common Securities rank pari passu, and payments
will be made thereon on a pro rata basis, with the Preferred Securities, except
that upon the occurrence of a Declaration Event of Default (as defined herein)
the rights of the holders of the Common Securities to receive payment of
periodic distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Preferred Securities.
The Declaration does not permit the issuance by the Trust of any securities
other than the Trust Securities or the incurrence of any indebtedness by the
Trust. Pursuant to the Declaration, the Property Trustee will own the
Subordinated Debt Securities purchased by the Trust for the benefit of the
holders of the Trust Securities. The payment of distributions out of money held
by the Trust, and payments upon redemption of the Preferred Securities or
liquidation of the Trust, are guaranteed by the Company to the extent described
under "Description of the Guarantee" in the accompanying Prospectus. The
Guarantee will be held by Harris Trust and Savings Bank, the Guarantee Trustee,
for the benefit of the holders of the Preferred Securities. The Guarantee does
not cover payment of distributions when the Trust does not have sufficient
available funds to pay such distributions. In such event, the remedy of a holder
of Preferred Securities is to direct the Property Trustee to enforce the
Property Trustee's rights under the Subordinated Debt Securities and, if the
Property Trustee fails to enforce such rights, to institute a suit directly
against the Company to enforce the Property Trustee's rights. See "Description
of the Preferred Securities -- Voting Rights."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 9.125% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon at
the rate per annum of 9.125% thereof compounded quarterly. The term
"distribution" as used herein includes any such interest payable, unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from October 31, 1995, and will be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, commencing December 31,
1995. When, as and if available for payment, distributions will be made by the
Property Trustee, except as otherwise described below.
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debt Securities by extending the interest payment period
from time to time on the Subordinated Debt Securities,
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which, if exercised, would defer quarterly distributions on the Preferred
Securities (though such distributions would continue to accrue with interest
since interest would continue to accrue on the Subordinated Debt Securities)
during any such Extension Period. Such right to extend the interest payment
period for the Subordinated Debt Securities is limited to a period not exceeding
20 consecutive quarters. In the event that the Company exercises this right,
then (i) the Company shall not declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of its capital stock and (ii) the Company shall not make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities issued by the Company that rank pari passu with or
junior to such Subordinated Debt Securities; provided, however, that, the
foregoing restriction (i) does not apply to any stock dividends paid by the
Company where the dividend stock is the same stock as that on which the dividend
is being paid. Prior to the termination of any such Extension Period, the
Company may further extend the interest payment period; provided that, such
Extension Period, together with all such previous and further extensions within
such Extension Period, may not exceed 20 consecutive quarters. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may select a new Extension Period, subject to the above requirements.
See "Description of the Subordinated Debt Securities -- Interest" and "-- Option
to Extend Interest Payment Period." If distributions are deferred, the deferred
distributions and accrued interest thereon will be paid to holders of record of
the Preferred Securities as they appear on the books and records of the Trust on
the record date next following the termination of such deferral period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from the Company on the Subordinated Debt Securities. See
"Description of the Subordinated Debt Securities." The payment of distributions
out of moneys held by the Trust is guaranteed by the Company to the extent set
forth under "Description of the Guarantee" in the accompanying Prospectus.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day prior to the relevant payment dates. Such
distributions will be paid through the Property Trustee who will hold amounts
received in respect of the Subordinated Debt Securities in the Property Account
for the benefit of the holders of the Trust Securities. Subject to any
applicable laws and regulations and the provisions of the Declaration, each such
payment will be made as described under "Book-Entry Only Issuance -- The
Depository Trust Company" below. In the event that the Preferred Securities do
not continue to remain in book-entry only form, the Regular Trustees will have
the right to select relevant record dates, which must be more than one Business
Day prior to the relevant payment dates. In the event that any date on which
distributions are to be made on the Preferred Securities is not a Business Day,
then payment of the distributions payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such record date. A "Business Day" means any day other than Saturday, Sunday
or any other day on which banking institutions in New York, New York, Chicago,
Illinois or Los Angeles, California are permitted or required by any applicable
law to close.
MANDATORY REDEMPTION
The Subordinated Debt Securities will mature on December 31, 2025, unless
the maturity date is extended at the option of the Company (provided certain
financial conditions are met), and may be redeemed, in whole or in part, at any
time on or after December 31, 2000, or at any time in certain circumstances upon
the occurrence of a Tax Event. Upon the repayment of the Subordinated Debt
Securities, whether at maturity or upon redemption, the proceeds from such
repayment or payment will simultaneously be applied to redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Subordinated Debt Securities so repaid or redeemed at the Redemption
Price; provided that, holders of Trust
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Securities are given not less than 30 nor more than 60 days notice of such
redemption. See "Description of the Subordinated Debt Securities -- Optional
Redemption." In the event that fewer than all of the outstanding Preferred
Securities are to be redeemed, the Preferred Securities will be redeemed pro
rata as described under "Book-Entry Only Issuance -- The Depository Trust
Company" below.
TAX EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means the receipt by, and upon the request of, the Regular
Trustees of an opinion of nationally recognized independent tax counsel
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) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, (ii) any amendment
to or change in an interpretation or application of such laws or regulations by
any legislative body, court, governmental agency or regulatory authority
(including the enactment of any legislation and the publication of any judicial
decision or regulatory determination on or after the date of this Prospectus
Supplement), (iii) any interpretation or pronouncement by any such body, court,
agency or authority that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position or
(iv) any action taken by any governmental agency or regulatory authority, which
amendment or change is enacted, promulgated or effective, or which
interpretation or pronouncement is issued or announced, or which action is
taken, in each case on or after the date of this Prospectus Supplement, there is
more than an insubstantial risk that (a) the Trust is, or within 90 days of the
date thereof will be, subject to United States federal income tax with respect
to income accrued or received on the Subordinated Debt Securities, (b) interest
payable to the Trust on the Subordinated Debt Securities is not, or within 90
days of the date thereof will not be, deductible by the Company for United
States federal income tax purposes or (c) the Trust is, or within 90 days of the
date thereof will be, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
If, at any time, a Tax Event occurs and is continuing, the Trust will,
except in the limited circumstances described below, be dissolved with the
result that the Subordinated Debt Securities with an aggregate principal amount
equal to the aggregate stated liquidation amount of the Trust Securities, will
be distributed to the holders of the Trust Securities in liquidation of such
holders' interests in the Trust on a pro rata basis within 90 days following the
occurrence of such Tax Event; provided, however, that such dissolution and
distribution will be conditioned on (i) the Regular Trustees receipt of an
opinion of nationally recognized independent tax counsel experienced in such
matters (a "No Recognition Opinion"), which opinion may rely on published
revenue rulings of the Internal Revenue Service, to the effect that the holders
of the Trust Securities will not recognize any gain or loss for United States
federal income tax purposes as a result of such dissolution and distribution of
Subordinated Debt Securities and (ii) the inability of the Company and the Trust
to avoid such Tax Event within such 90-day period by taking some ministerial
action or pursuing some other reasonable measure that will have no adverse
effect on the Trust, the Company or the holders of the Trust Securities.
Furthermore, if, after receipt of a Dissolution Tax Opinion by and upon the
request of the Regular Trustees, (i) the Company has received an opinion of
nationally recognized independent tax counsel experienced in such matters (a
"Redemption Tax Opinion") to the effect 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 Subordinated Debt Securities for United States
federal income tax purposes even after the Subordinated Debt Securities were
distributed to the holders of Trust Securities in liquidation of such holders'
interests in the Trust, as described above, or (ii) the Regular Trustees have
been informed by such tax counsel that it cannot deliver a No Recognition
Opinion to the Trust, the Company will have the right, upon not less than 30 nor
more than 60 days notice, to redeem the Subordinated Debt Securities, in whole
or in part, for cash within 90 days following the occurrence of such Tax Event
and, following such redemption, Trust Securities with an aggregate liquidation
amount equal to the aggregate principal amount of the Subordinated Debt
Securities so redeemed will be redeemed by the Trust at the Redemption Price on
a pro rata basis; provided, however, that, if at the time there is available to
the Company or the Trust the opportunity to avoid, within such 90-day period,
the Tax Event by taking some ministerial action, such as filing a form or making
an election or pursuing some other similar reasonable measure that has no
adverse effect on the Trust, the Company or the holders of the Trust Securities,
the Company or the Trust will pursue such measure in lieu of redemption.
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If the Subordinated Debt Securities are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to cause the
Subordinated Debt Securities to be listed on the New York Stock Exchange or on
such other exchange as the Preferred Securities are then listed.
After the date for any distribution of Subordinated Debt Securities upon
dissolution of the Trust, (i) the Preferred Securities will no longer be deemed
to be outstanding, (ii) the Depositary (as defined herein) or its nominee, as
the record holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Subordinated Debt Securities to be
delivered upon such distribution, and (iii) any certificates representing
Preferred Securities not held by the Depositary or its nominee will be deemed to
represent Subordinated Debt Securities having an aggregate principal amount
equal to the aggregate stated liquidation amount of such Preferred Securities
until such certificates are presented to the Company or its agent for transfer
or reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Subordinated Debt Securities that may be distributed in
exchange for the Preferred Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Subordinated Debt Securities that an investor may receive if a
dissolution and liquidation of the Trust were to occur, may trade at a discount
to the price that the investor paid to purchase the Preferred Securities offered
hereby.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New York
City time, on the redemption date, provided the Company has paid to the Property
Trustee a sufficient amount of cash in connection with the related redemption or
maturity of the Subordinated Debt Securities, then the Trust will irrevocably
deposit with the Depositary funds sufficient to pay the applicable Redemption
Price and will give the Depositary irrevocable instructions and authority to pay
the Redemption Price to the holders of the Preferred Securities. See "Book-Entry
Only Issuance -- The Depository Trust Company." If notice of redemption has been
given and funds deposited as required, then, immediately prior to the close of
business on the date of such deposit, distributions will cease to accrue and all
rights of holders of such Preferred Securities so called for redemption will
cease, except the right of the holders of such Preferred Securities to receive
the Redemption Price but without interest on such Redemption Price. In the event
that any date fixed for redemption of Preferred Securities is not a Business
Day, then payment of the Redemption Price payable on such date will be made on
the next succeeding day that is a Business Day (without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the Redemption Price in
respect of Preferred Securities is improperly withheld or refused and not paid
either by the Trust, or by the Company pursuant to the Guarantee, distributions
on such Preferred Securities will continue to accrue at the then applicable rate
from the original redemption date to the date of payment, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities
are to be redeemed, the Preferred Securities will be redeemed pro rata as
described below under "Book-Entry Only Issuance -- The Depository Trust
Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
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LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each, a "Liquidation"), the then holders
of the Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors of the Trust,
distributions in an amount equal to the aggregate of the stated liquidation
amount of $25 per Preferred Security plus accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation, Subordinated Debt Securities in an aggregate
stated principal amount equal to the aggregate stated liquidation amount of the
Preferred Securities have been distributed on a pro rata basis to the holders of
the Preferred Securities in exchange for such Preferred Securities. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities must be paid on a pro rata basis. If a
Declaration Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities with regard to
such distributions.
Pursuant to the Declaration, the Trust will terminate (i) on December 31,
2050, the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company or the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the holder of the
Common Securities or the Company, the filing of a certificate of cancellation
with respect to the Trust, or the revocation of the charter of the holder of the
Common Securities or the Company and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iv) upon the distribution of
Subordinated Debt Securities upon the occurrence of a Tax Event, (v) upon the
entry of a decree of a judicial dissolution of the holder of the Common
Securities, the Company or the Trust, or (vi) upon the redemption of all the
Trust Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"), provided that, pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Preferred Securities have been so cured, waived, or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the holders of the Preferred Securities and only the holders of the
Preferred Securities will have the right to direct the Property Trustee with
respect to certain matters under the Declaration, and therefore the Indenture.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Subordinated Debt Securities will have the right under
the Indenture to declare the principal of and interest on the Subordinated Debt
Securities to be immediately due and payable. The Company and the Trust are each
required to file annually with the Property Trustee an officer's certificate as
to its compliance with all conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of the Guarantee" in the accompanying Prospectus, and as
otherwise required by law and the Declaration, the holders of the Preferred
Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
Securities, have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee, or direct the
exercise of any trust or power conferred upon the
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Property Trustee under the Declaration including the right to direct the
Property Trustee, as holder of the Subordinated Debt Securities, to (i) exercise
the remedies available under the Indenture with respect to the Subordinated Debt
Securities, (ii) waive any past Indenture Event of Default that is waivable
under Section 513 of the Base Indenture (as defined herein), or (iii) exercise
any right to rescind or annul a declaration that the principal of all the
Subordinated Debt Securities shall be due and payable; provided, however, that,
where a consent or action under the Indenture would require the consent or act
of all of the holders of the Subordinated Debt Securities, all of the holders of
the Preferred Securities may direct the Property Trustee to give such consent or
take such action. If the Property Trustee fails to enforce its rights under the
Subordinated Debt Securities, a record holder of Preferred Securities may
institute a legal proceeding directly against the Company to enforce the
Property Trustee's rights under the Subordinated Debt Securities without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. The Property Trustee must notify all holders of the Preferred
Securities of any notice of default received from the Indenture Trustee with
respect to the Subordinated Debt Securities. Such notice will state that such
Indenture Event of Default also constitutes a Declaration Event of Default.
Except with respect to directing the time, method and place of conducting a
proceeding for a remedy, the Property Trustee will not take any of the actions
described in clauses (i), (ii) or (iii) above unless the Property Trustee has
obtained an opinion of tax counsel to the effect that, as a result of such
action, the Trust will not fail to be classified as a grantor trust for United
States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debt Securities, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture, the Property
Trustee will request the direction of the holders of the Trust Securities with
respect to such amendment, modification or termination and will vote with
respect to such amendment, modification or termination as directed by a majority
in liquidation amount of the Trust Securities voting together as a single class;
provided, however, that where a consent under the Indenture would require the
consent of all of the holders of the Subordinated Debt Securities, the Property
Trustee may only give such consent at the direction of the holders of all of the
Trust Securities. The Property Trustee will be under no obligation to take any
such action in accordance with the directions of the holders of the Trust
Securities unless the Property Trustee has obtained an opinion of tax counsel to
the effect that for the purposes of United States federal income tax the Trust
will not be classified as other than a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken, (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought, and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for the Trust to redeem
and cancel Preferred Securities or distribute Subordinated Debt Securities in
accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, will not be entitled to vote or consent and will, for
purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "-- Book-Entry Only Issuance -- The
Depository Trust Company" below.
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Holders of the Preferred Securities will have no rights to appoint or
remove the Regular Trustees, who may be appointed, removed or replaced solely by
the Company as the holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority of
the Regular Trustees (and in certain circumstances the Property Trustee),
provided that, if any proposed amendment provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up
or termination of the Trust other than pursuant to the terms of the Declaration,
then the holders of the Trust Securities voting together as a single class will
be entitled to vote on such amendment or proposal and such amendment or proposal
will not be effective except with the approval of at least 66 2/3% in
liquidation amount of the Trust Securities affected thereby; provided that if
any amendment or proposal referred to in clause (i) above would adversely affect
only the Preferred Securities or the Common Securities, then only the affected
class will be entitled to vote on such amendment or proposal and such amendment
or proposal will not be effective except with the approval of 66 2/3% in
liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the Investment Company Act of
1940, as amended (the "1940 Act").
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge or be replaced by, or
convey, transfer or lease its properties and assets substantially as an
entirety, to any corporation or other body, except as described below. The Trust
may, with the consent of a majority of the Regular Trustees and without the
consent of the holders of the Trust Securities, consolidate, amalgamate, merge
with or into, or be replaced by a trust organized as such under the laws of any
State; provided that, (i) such successor entity either (a) expressly assumes all
of the obligations of the Trust under the Trust Securities or (b) substitutes
for the Preferred Securities other securities having substantially the same
terms as the Trust Securities (the "Successor Securities"), so long as the
Successor Securities rank the same as the Trust Securities with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii) the
Company expressly acknowledges a trustee of such successor entity possessing the
same powers and duties of the Property Trustee as the holder of the Subordinated
Debt Securities, (iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Preferred Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation or replacement, the Company has received an opinion
of a nationally recognized independent counsel to the Trust experienced in such
matters to the effect that, (a) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect, and (b) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor such successor entity will be required to
register as an investment company under the 1940 Act and (viii) the Company
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee and the Common
Securities Guarantee. Notwithstanding the foregoing, the Trust may not, except
with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it, if such
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consolidation, amalgamation, merger or replacement would cause the Trust or such
successor entity to be classified as other than a grantor trust for United
States federal income tax purposes.
There are no provisions which afford the holders of the Preferred
Securities protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company. There are also no provisions which require the repurchase of the
Preferred Securities upon a change in control of the Company.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company (the "Depositary") will act as securities
depository for the Preferred Securities. The Preferred Securities will be issued
only as fully-registered securities registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully-registered global Preferred Securities
certificates, representing the total aggregate number of Preferred Securities,
will be issued and will be deposited with the Depositary.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Preferred
Securities as represented by a global certificate.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Depositary holds
securities that its participants ("Participants") deposit with the Depositary.
The Depositary also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
The Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc. (the "New York Stock Exchange"), the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the depository system is also available to others, such as securities brokers
and dealers, banks and trust companies that clear transactions through or
maintain a direct or indirect custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable to
the Depositary and its Participants are on file with the Commission.
Purchases of Preferred Securities within the depository system must be made
by or through Direct Participants, which will receive a credit for the Preferred
Securities on the Depositary's records. The ownership interest of each actual
purchaser of each Preferred Security ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from the Depositary of their purchases,
but Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Preferred Securities. Transfers of ownership interests in the
Preferred Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with the Depositary are registered in the name of the
Depositary's nominee, Cede & Co. The deposit of Preferred Securities with the
Depositary and their registration in the name of Cede & Co. effect no change in
beneficial ownership. The Depositary has no knowledge of the actual Beneficial
Owners of the Preferred Securities. The Depositary's records reflect only the
identity of the Direct Participants to whose accounts such Preferred Securities
are credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of their
customers.
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Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, the Depositary will reduce the amount
of the interest of each Direct Participant in such Preferred Securities in
accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither the Depositary nor Cede & Co. will
itself consent or vote with respect to Preferred Securities. Under its usual
procedures, the Depositary would mail an Omnibus Proxy to the Trust as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co. consenting
or voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy). The Company and the Trust believe that the arrangements
among the Depositary, Direct and Indirect Participants and Beneficial Owners
will enable the Beneficial Owners to exercise rights equivalent in substance to
the rights that can be directly exercised by a holder of a beneficial interest
in the Trust.
Distribution payments on the Preferred Securities will be made to the
Depositary. The Depositary's practice is to credit Direct Participants' accounts
on the relevant payment date in accordance with their respective holdings shown
on the Depositary's records unless the Depositary has reason to believe that it
will not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the account of customers in
bearer form or registered in "street name," and such payments will be the
responsibility of such Participants and not of the Depositary, the Trust or the
Company, subject to any statutory or regulatory requirements to the contrary
that may be in effect from time to time. Payment of distributions to the
Depositary is the responsibility of the Trust, disbursement of such payments to
Direct Participants is the responsibility of the Depositary, and disbursement of
such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security certificate will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of the Depositary to exercise any rights under the Preferred
Securities.
The Depositary may discontinue providing its services as securities
depository with respect to the Preferred Securities at any time by giving
reasonable notice to the Trust. Under such circumstances, in the event that a
successor securities depository is not obtained, Preferred Securities
certificates are required to be printed and delivered. Additionally, the Regular
Trustees (with the consent of the Company) may decide to discontinue use of the
system of book entry transfers through the Depositary (or any successor
depository) with respect to the Preferred Securities. In that event,
certificates for the Preferred Securities will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
and the Trust believe to be reliable, but neither the Company nor the Trust
takes responsibility for the accuracy thereof.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities, undertakes to perform only such duties as are specifically
set forth in the Declaration and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the 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 Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The holders of Preferred Securities will not be required to offer such
indemnity in the event such holders, by exercising their voting rights, direct
the Property Trustee to take any action following a Declaration Event of
Default.
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PAYING AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the following provisions would apply:
The Property Trustee will act as paying agent, and may designate an
additional or substitute paying agent at any time.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other governmental charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be (i) required to register as an
"investment company" under the 1940 Act or (ii) characterized as other than a
grantor trust for United States federal income tax purposes. The Company is
authorized and directed to conduct its affairs so that the Subordinated Debt
Securities will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Company and the Regular
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust of the Trust or the articles of incorporation of
the Company, that each of the Company and the Regular Trustees determines in its
discretion to be necessary or desirable to achieve such end, as long as such
action does not adversely affect the interests of the holders of the Preferred
Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Subordinated
Debt Securities in which the Trust will invest the proceeds from the issuance
and sale of the Trust Securities. This description supplements the description
of the general terms and provisions of Subordinated Debt Securities set forth in
the accompanying Prospectus under the captions "Description of Debt Securities"
and "Particular Terms of the Subordinated Debt Securities Issued in Connection
with Preferred Securities." The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the description in the accompanying Prospectus and the Subordinated Debt
Securities Indenture, dated as of October 31, 1995 (the "Base Indenture")
between the Company and Harris Trust and Savings Bank, as Trustee (the
"Indenture Trustee"), as supplemented by a First Supplemental Indenture, dated
as of October 31, 1995 (the Base Indenture, as so supplemented, is hereinafter
referred to as the "Indenture"), the forms of which are filed as exhibits to the
Registration Statement of which this Prospectus Supplement and the accompanying
Prospectus form a part. Certain capitalized terms used herein are defined in the
Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Tax Event, Subordinated Debt Securities may be
distributed to the holders of the Trust Securities in liquidation of the Trust.
See "Description of the Preferred Securities -- Tax Event Redemption or
Distribution."
If the Subordinated Debt Securities are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the
Subordinated Debt Securities listed on the New York Stock Exchange or on such
other national securities exchange or similar organization on which the
Preferred Securities are then listed or quoted.
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<PAGE> 24
GENERAL
The Subordinated Debt Securities will be issued as unsecured debt under the
Indenture. The Subordinated Debt Securities will be limited in aggregate
principal amount to approximately $61.8 million, such amount being the sum of
the aggregate stated liquidation amount of the Preferred Securities and the
capital contributed by the Company in exchange for the Common Securities (the
"Company Payment").
The Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Subordinated Debt Securities will
mature and become due and payable, together with any accrued and unpaid interest
thereon including Compound Interest (as defined herein) and Additional Interest
(as defined herein), if any, on December 31, 2025, subject to the election of
the Company to extend the scheduled maturity date of the Subordinated Debt
Securities to a date not later than December 31, 2044, which election is subject
to the Company's satisfying certain financial conditions. See "-- Option to
Extend Maturity Date."
If Subordinated Debt Securities are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, such
Subordinated Debt Securities will initially be issued as a Global Security (as
defined below). As described herein, under certain limited circumstances,
Subordinated Debt Securities may be issued in certificated form in exchange for
a Global Security. See "-- Book-Entry and Settlement" below. In the event that
Subordinated Debt Securities are issued in certificated form, such Subordinated
Debt Securities will be in denominations of $25 and integral multiples thereof
and may be transferred or exchanged at the offices described below. Payments on
Subordinated Debt Securities issued as a Global Security will be made to the
Depositary, a successor depository or, in the event that no depository is used,
to a Paying Agent for the Subordinated Debt Securities. In the event
Subordinated Debt Securities are issued in certificated form, principal and
interest will be payable, the transfer of the Subordinated Debt Securities will
be registrable and Subordinated Debt Securities will be exchangeable for
Subordinated Debt Securities of other denominations of a like aggregate
principal amount at the corporate trust office of the Indenture Trustee in New
York, New York; 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.
SUBORDINATION
The Indenture provides that the Subordinated Debt Securities are
subordinated and junior in right of payment to all Senior Indebtedness of the
Company. No payment of principal (including redemption and sinking fund
payments), premium, if any, or interest on the Subordinated Debt Securities may
be made (i) if any Senior Indebtedness of the Company is not paid when due, and
such default has not been cured or waived or ceased to exist, or (ii) if the
maturity of any Senior Indebtedness of the Company has been accelerated because
of a default. Upon any distribution of assets of the Company to creditors upon
any dissolution, winding-up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all principal, premium, if any, and interest due or to become due on all Senior
Indebtedness of the Company must be paid in full before the holders of
Subordinated Debt Securities are entitled to receive or retain any payment. Upon
satisfaction of all claims of all Senior Indebtedness then outstanding, the
rights of the holders of the Subordinated Debt Securities will be subrogated to
the rights of the holders of Senior Indebtedness of the Company to receive
payments or distributions applicable to Senior Indebtedness until all amounts
owing on the Subordinated Debt Securities are paid in full.
The term "Senior Indebtedness" means, with respect to the Company, Debt of
the Company, except for (1) any such Debt that is by its terms subordinated to
or pari passu with the Subordinated Debt Securities and (2) any Debt (including
all other debt securities and guarantees in respect of those debt securities)
initially issued to any other trust, or a trustee of such trust, partnership, or
other entity affiliated with the Company that is, directly or indirectly, a
financing vehicle of the Company in connection with the issuance by such entity
of preferred securities or other similar securities. The term "Debt" means, with
respect to the Company, (i) the principal, premium, if any, and interest in
respect of (A) indebtedness of the Company for money borrowed and (B)
indebtedness evidenced by securities, debentures, bonds or other similar
instruments
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issued by the Company, (ii) all capital lease obligations of the Company, (iii)
all obligations of the Company issued or assumed as the deferred purchase price
of property, all conditional sale obligations of the Company and all obligations
of the Company under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of the
Company for the reimbursement of any letter of credit, banker's acceptance,
security purchase facility or similar credit transaction, (v) all obligations of
the type referred to in clauses (i) through (iv) above of other persons for the
payment of which the Company is responsible or liable as obligor, guarantor or
otherwise, and (vi) all obligations of the type referred to in clauses (i)
through (v) above of other persons secured by any lien on any property or asset
of the Company (whether or not such obligation is assumed by the Company).
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company. As of June 30, 1995, Senior Indebtedness of
the Company aggregated approximately $731 million.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Subordinated Debt
Securities, in whole or in part, from time to time, on or after December 31,
2000, or at any time in certain circumstances upon the occurrence of a Tax Event
as described under "Description of the Preferred Securities -- Tax Event
Redemption or Distribution," upon not less than 30 nor more than 60 days notice,
at a redemption price equal to 100% of the principal amount to be redeemed plus
any accrued and unpaid interest, including Additional Interest, if any, to the
redemption date. If a partial redemption of the Preferred Securities resulting
from a partial redemption of the Subordinated Debt Securities would result in
the delisting of the Preferred Securities, the Company may only redeem the
Subordinated Debt Securities in whole.
INTEREST
Each Subordinated Debt Security will bear interest at the rate of 9.125%
per annum from the original date of issuance, payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year (each, an "Interest
Payment Date"), commencing December 31, 1995, to the person in whose name such
Subordinated Debt Security is registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment Date.
In the event the Subordinated Debt Securities do not remain in book-entry only
form, the Company has the right to select record dates, which must be more than
one Business Day prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed,
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the
Subordinated Debt Securities is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
OPTION TO EXTEND MATURITY DATE
The maturity date of the Subordinated Debt Securities is December 31, 2025
(the "Stated Maturity Date"). The Company, however, may, before the Stated
Maturity Date, extend such maturity date no more than one time for up to an
additional 19 years from the Stated Maturity Date; provided that (i) the Company
is not in bankruptcy or otherwise insolvent, (ii) the Company is not in default
on any Subordinated Debt Securities issued to the Trust or to any other trust or
to any trustee of the Trust or any other trust in connection with an issuance of
Trust Securities by the Trust or any other trust, (iii) the Company has made
timely payments on the Subordinated Debt Securities for the immediately
preceding 18 months without deferrals, (iv) the Trust is not in arrears on
payments of distributions on the Preferred Securities, (v) the Subordinated Debt
Securities are rated in one of the four highest rating categories by any one of
Standard & Poor's Ratings Group, Moody's Investors Service, Inc., Fitch Investor
Services, Duff & Phelps Credit Rating
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Company or any other nationally recognized statistical rating organization, and
(vi) the final maturity of the Subordinated Debt Securities is not later than
the 49th anniversary of the issuance of the Preferred Securities. Pursuant to
the Declaration, the Regular Trustees are required to give notice of the
Company's election to extend the Stated Maturity Date to the holders of the
Preferred Securities.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right at any time, and from time to time, during the
term of the Subordinated Debt Securities to defer payments of interest by
extending the interest payment period for a period not exceeding 20 consecutive
quarters, at the end of which Extension Period, the Company must pay all
interest then accrued and unpaid (including any Additional Interest) together
with interest thereon compounded quarterly at the rate specified for the
Subordinated Debt Securities to the extent permitted by applicable law
("Compound Interest"); provided that, during any such Extension Period, (i) the
Company shall not declare or pay any dividends on, make any distribution with
respect to, or redeem, purchase or acquire or make a liquidation payment with
respect to, any of its capital stock and (ii) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by the Company that rank pari passu with or
junior to the Subordinated Debt Securities; provided, however, that, the
foregoing restriction (i) does not apply to any stock dividends paid by the
Company where the dividend stock is the same as that on which the dividend is
paid.
Prior to the termination of any such Extension Period, the Company may
further defer payments of interest by extending the interest payment period;
provided, however, that, such Extension Period, including all such previous and
further extensions within such Extension Period, may not exceed 20 consecutive
quarters. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may commence a new Extension Period, subject to
the terms described in this section. No interest during an Extension Period,
except at the end thereof, is due and payable. The Company has no present
intention of exercising its right to defer payments of interest by extending the
interest payment period on the Subordinated Debt Securities. If the Property
Trustee is the sole holder of the Subordinated Debt Securities, the Company is
required to give the Regular Trustees and the Property Trustee notice of its
selection of such Extension Period one Business Day prior to the earlier of (i)
the date distributions on the Preferred Securities are payable or (ii) the date
the Regular Trustees are required to give notice to the New York Stock Exchange
(or other applicable self-regulatory organization) or to holders of the
Preferred Securities of the record date or the date such distribution is
payable. The Regular Trustees must give notice of the Company's selection of
such Extension Period to the holders of the Preferred Securities. If the
Property Trustee is not the sole holder of the Subordinated Debt Securities, the
Company must give the holders of the Subordinated Debt Securities notice of its
selection of such Extension Period ten Business Days prior to the earlier of (i)
the Interest Payment Date or (ii) the date on which the Company is required to
give notice to the New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Subordinated Debt Securities of the record or
payment date of such related interest payment.
ADDITIONAL INTEREST
If at any time the Trust is required to pay any taxes, duties, assessments
or governmental charges of whatever nature (other than withholding taxes)
imposed by the United States, or any other taxing authority, then, in such case,
the Company will pay as additional interest on the Subordinated Debt Securities
("Additional Interest") such additional amounts as shall be required so that the
net amounts received and retained by the Trust after paying such taxes, duties,
assessments or other governmental charges will be not less than the amounts the
Trust would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
EQUAL AND RATABLE SECURITY
Pursuant to the Indenture, the Company will not create, incur, issue or
assume any Debt secured by any lien on any property or assets owned by the
Company, and the Company will not create, incur, issue or assume any Debt
secured by any lien on any shares of stock of any subsidiary of the Company
(such shares of stock
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being called "Restricted Securities"), unless (i) in the case of Debt which is
expressly by its terms subordinate or junior in right of payment to the
Subordinated Debt Securities, the Subordinated Debt Securities are secured by a
lien on such property, assets or Restricted Securities that is senior to such
other lien, or (ii) in the case of liens securing Debt that is ranked pari passu
with the Subordinated Debt Securities, the Subordinated Debt Securities are
secured by a lien on such property, assets or Restricted Securities that is
equal and ratable with such other lien; provided, however, that nothing
contained in the Indenture shall apply to or prevent the creation of: (1)
existing liens on any property or indebtedness of any entity which is merged
with or into or consolidated with the Company; (2) liens in favor of the United
States of America, any state or any foreign country or any department, agency or
instrumentality or political subdivision of any such jurisdiction, to secure
partial, progress, advance or other payment pursuant to any contract or statute
or to secure any indebtedness incurred for the purpose of financing all or any
part of the purchase price or cost of constructing or improving the property
subject to such liens, including, without limitation, liens to secure Debt of
the pollution control or industrial revenue bond type; (3) liens to secure loans
to the Company which mature within twelve months from the creation thereof and
which are made in the ordinary course of business; (4) liens on any property
(including any natural gas, oil or other mineral property) to secure all or part
of the cost of exploration or drilling for, or development of, oil or gas
reserves or laying a pipeline or to secure Debt incurred to provide funds for
any such purpose; (5) Liens on moneys or U.S. Government Obligations deposited
with the Trustee pursuant to the Indenture; and (6) liens for the sole purposes
of extending, renewing or replacing, in whole or in part, liens securing Debt of
the type referred to in the foregoing clauses (1) through (4) inclusive or this
clause (6); provided, however, that the principal amount of Debt so secured at
the time of such extension, renewal or replacement shall not be increased, and
that such extension, renewal or replacement will be limited to all or part of
the property or indebtedness which secured the lien so extended, renewed or
replaced (plus improvements on such property).
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default occurs and is continuing, the Property
Trustee, as the holder of the Subordinated Debt Securities, will have the right
to declare the principal of and the interest on the Subordinated Debt Securities
(including any Compound Interest and Additional Interest, if any) 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 Subordinated Debt
Securities. See "Description of Debt Securities -- Events of Default" in the
accompanying Prospectus for a description of the Events of Default. An Indenture
Event of Default also constitutes a Declaration Event of Default. The holders of
Preferred Securities in certain circumstances have the right to direct the
Property Trustee to exercise its rights as the holder of the Subordinated Debt
Securities. See "Description of the Preferred Securities -- Declaration Events
of Default" and "Voting Rights."
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary dissolution, winding-up or liquidation of the Trust as a result of
the occurrence of a Tax Event, the Subordinated Debt Securities will be issued
in the form of one or more global securities registered in the name of the
Depositary or its nominee (each, a "Global Security"). Except under the limited
circumstances described below, Subordinated Debt Securities represented by the
Global Security will not be exchangeable for, and will not otherwise be issuable
as, Subordinated Debt Securities in definitive form. See "-- Discontinuance of
the Depositary's Services". The Global Securities described above may not be
transferred except by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated Debt
Securities in definitive form and will not be considered the
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holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Subordinated Debt Securities is
exchangeable, except for another Global Security of like denomination and tenor
to be registered in the name of the Depositary or its nominee or to a successor
Depositary or its nominee. Accordingly, each Beneficial Owner must rely on the
procedures of the Depositary or if such person is not a Participant, on the
procedures of the Participant through which such person owns its interest to
exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Subordinated Debt Securities are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, the
Depositary will act as securities depositary for the Subordinated Debt
Securities. For a description of the Depositary and the specific terms of the
depositary arrangements, see "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company." As of
the date of this Prospectus Supplement, the description therein of the
Depositary's book-entry system and the Depositary's practices as they relate to
purchases, transfers, notices and payments with respect to the Preferred
Securities apply in all material respects to any debt obligations represented by
one or more Global Securities held by the Depositary. The Company may appoint a
successor to the Depositary or any successor depository in the event the
Depositary or such successor depository is unable or unwilling to continue as a
depository for the Global Securities.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Subordinated Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security is exchangeable for Subordinated Debt Securities
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies the Company that it is unwilling or unable to
continue as a depository for such Global Security and no successor depository
shall have been appointed, (ii) the Depositary at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the Depositary
is required to be so registered to act as such depository and no successor
depository shall have been appointed, (iii) the Company, in its sole discretion,
determines that such Global Security is so exchangeable or (iv) there shall have
occurred an Event of Default with respect to such Subordinated Debt Securities.
Any Global Security that is exchangeable pursuant to the preceding sentence is
exchangeable for Subordinated Debt Securities registered in such names as the
Depositary shall direct. It is expected that such instructions will be based
upon directions received by the Depositary from its Participants with respect to
ownership of beneficial interests in such Global Security.
MISCELLANEOUS
The Indenture provides that the Company will pay all debts and obligations
of the Trust (other than with respect to Trust Securities), including all fees
and expenses related to (i) the offering of the Trust Securities and the
Subordinated Debt Securities, (ii) the organization, maintenance and dissolution
of the Trust, (iii) the retention of the Regular Trustees and (iv) the
enforcement by the Property Trustee of the rights of the holders of the
Preferred Securities. The payment of such fees and expenses will be fully and
unconditionally guaranteed by the Company.
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EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust, and to invest the proceeds from such issuance and sale in the
Subordinated Debt Securities.
As long as payments of interest and other payments are made when due on the
Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the following
factors: (i) the aggregate principal amount of Subordinated Debt Securities will
be equal to the sum of the aggregate stated liquidation amount of the Trust
Securities, (ii) the interest rate and the interest and other payment dates on
the Subordinated Debt Securities will match the distribution rate and
distribution and other payment dates for the Preferred Securities, (iii) the
Company is required to pay all, and the Trust is not be obligated to pay,
directly or indirectly, any, costs and expenses of the Trust, and (iv) the
Declaration further provides that the Regular Trustees will not cause or permit
the Trust to, among other things, engage in any activity that is not consistent
with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of the Guarantee" in the accompanying Prospectus. If the Company
does not make interest payments on the Subordinated Debt Securities purchased by
the Trust, it is expected that the Trust will not have sufficient funds to pay
distributions on the Preferred Securities. The Guarantee is a full and
unconditional guarantee on a subordinated basis from the time of its issuance
but does not apply to any payment of distributions unless and until the Trust
has sufficient funds for the payment of such distributions.
If the Company fails to make interest or other payments on the Subordinated
Debt Securities when due (taking account of any Extension Period), the
Declaration provides a mechanism whereby the holders of the Preferred
Securities, using the procedures described in "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company" and
"-- Voting Rights," may direct the Property Trustee to enforce its rights under
the Subordinated Debt Securities. If the Property Trustee fails to enforce its
rights under the Subordinated Debt Securities, a holder of Preferred Securities
may institute a legal proceeding against the Company to enforce the Property
Trustee's rights under the Subordinated Debt Securities without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. The Company, under the Guarantee, acknowledges that the
Guarantee Trustee will enforce the Guarantee on behalf of the holders of the
Preferred Securities. If the Company fails to make payments under the Guarantee,
the Guarantee provides a mechanism whereby the holders of the Preferred
Securities may direct the Guarantee Trustee to enforce its rights thereunder. If
the Guarantee Trustee fails to enforce the Guarantee, any holder of Preferred
Securities may institute a legal proceeding directly against the Company to
enforce the Guarantee Trustee's rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity.
The obligations of the Company under the Declaration, the Guarantee, the
Indenture and the Subordinated Debt Securities collectively provide a full and
unconditional guarantee on a subordinated basis by the Company of payments due
on the Preferred Securities, to the extent the Trust has funds available
therefor as a result of payments of interest or principal on the Subordinated
Debt Securities. See "Description of the Guarantee -- General" in the
accompanying Prospectus.
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UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Preferred
Securities is based upon laws, regulations, rulings and decisions now in effect,
all of which are subject to change (with possible retroactive effect) and
possible differing interpretations. This discussion deals only with Preferred
Securities held as capital assets and does not purport to deal with persons in
special tax situations, such as financial institutions, insurance companies,
regulated investment companies, dealers in securities or currencies, persons
holding Preferred Securities as a hedge against currency risks or as a position
in a "straddle" for tax purposes or as part of a "conversion transaction," or
persons whose functional currency is not the United States dollar. This
discussion also does not deal with holders other than the original purchasers of
the Preferred Securities or with holders who are not U.S. Holders (as defined
below). Persons considering the purchase of Preferred Securities should consult
their tax advisors concerning the application of United States federal income
tax laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the Preferred Securities arising under
the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Preferred Security that is for United States federal income tax purposes (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, or (iv) any other person whose income or gain in respect of a Preferred
Security is effectively connected with the conduct of a United States trade or
business. As used herein, the term "Non-U.S. Holder" means a holder of a
Preferred Security that is not a U.S. Holder.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, O'Melveny &
Myers, counsel to the Company and the Trust, will render its opinion generally
to the effect that, under then current law and assuming full compliance with the
terms of the Declaration and the Indenture (and certain other documents), and
based on certain facts and assumptions contained in such opinion, the Trust will
be classified for United States federal income tax purposes as a grantor trust
and not as an association taxable as a corporation. Accordingly, for United
States federal income tax purposes, each U.S. Holder of a Preferred Security
will be considered the owner of an undivided interest in the Subordinated Debt
Securities, and each U.S. Holder will be required to include in its gross income
the OID accrued with respect to its allocable share of those Subordinated Debt
Securities.
CLASSIFICATION OF THE SUBORDINATED DEBT SECURITIES
Although not entirely free from doubt, the Company believes, after
consultation with counsel, that the Subordinated Debt Securities should be
classified for United States federal income tax purposes as indebtedness. No
assurance can be given that such position will not be challenged by the Internal
Revenue Service or, if challenged, that such a challenge will not be successful.
The Company intends to take the position that the Subordinated Debt Securities
will be classified for United States federal income tax purposes as
indebtedness, and by acceptance of a Trust Security, each holder covenants to
treat the Subordinated Debt Securities as indebtedness and the Preferred
Securities as evidence of an indirect beneficial ownership interest in the
Subordinated Debt Securities. The remainder of this discussion assumes that the
Subordinated Debt Securities will be classified for United States federal income
tax purposes as indebtedness of the Company.
ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the Subordinated
Debt Securities, to defer payments of interest by extending interest payment
periods for up to 20 quarters, all of the stated interest payments on the
Subordinated Debt Securities will be treated as OID. Holders of debt instruments
issued with OID must include that discount in income on an economic accrual
basis before the receipt of cash
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attributable to the interest, regardless of their method of tax accounting.
Generally, all of a U.S. Holder's taxable interest income with respect to the
Subordinated Debt Securities will be accounted for as OID, and actual
distributions of stated interest will not be separately reported as taxable
income. The amount of OID that accrues for any quarter will approximately equal
the amount of the interest that accrues on the Subordinated Debt Securities in
that quarter at the stated interest rate. In the event that the interest payment
period is extended, U.S. Holders will continue to accrue OID approximately equal
to the amount of the interest payment due at the end of an Extension Period on
an economic accrual basis over the length of the Extension Period, even though
no payments of stated interest are being made.
Corporate U.S. Holders of Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Preferred Securities.
MARKET DISCOUNT AND BOND PREMIUM
U.S. Holders other than those who purchase the Preferred Securities upon
their original issuance, may be considered to have acquired their undivided
interests in the Subordinated Debt Securities with market discount, premium or
acquisition premium as such phrases are defined for United States federal income
tax purposes. Such U.S. Holders are advised to consult their tax advisors as to
the income tax consequences of the acquisition, ownership and disposition of the
Preferred Securities.
RECEIPT OF SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Tax Event Redemption or Distribution," Subordinated
Debt Securities may be distributed to U.S. Holders in exchange for the Preferred
Securities and in liquidation of the Trust. Under current law, such a
distribution, for United States federal income tax purposes, would be treated as
a non-taxable event to each U.S. Holder, and each U.S. Holder would receive an
aggregate tax basis in the Subordinated Debt Securities equal to such U.S.
Holder's aggregate tax basis in its Preferred Securities. A U.S. Holder's
holding period in the Subordinated Debt Securities so received in liquidation of
the Trust would include the period during which the Preferred Securities were
held by such U.S. Holder.
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Tax Event Redemption or Distribution," the
Subordinated Debt Securities may be redeemed for cash and the proceeds of such
redemption distributed to U.S. Holders in redemption of their Preferred
Securities. Under current law, such a redemption would, for United States
federal income tax purposes, constitute a taxable disposition of the redeemed
Preferred Securities, and a U.S. Holder would recognize gain or loss as if it
had sold such redeemed Preferred Securities for cash. See "United States Federal
Income Taxation -- Sales of Preferred Securities."
SALES OF PREFERRED SECURITIES
A U.S. Holder that sells a Preferred Security will recognize gain or loss
equal to the difference between its adjusted tax basis in the Preferred
Securities and the amount realized on the sale of such Preferred Securities. A
U.S. Holder's adjusted tax basis in the Preferred Securities generally will be
its initial purchase price increased by the amount of OID previously includible
in such U.S. Holder's gross income to the date of disposition and decreased by
the amount of payments received on the Preferred Securities (whether denominated
as interest or principal). Such gain or loss generally will be a capital gain or
loss and generally will be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debt Securities. A U.S. Holder that disposes of Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Subordinated Debt
Securities through the date of disposition as OID, and to add such amount to the
adjusted tax basis of such U.S. Holder's pro rata share of the underlying
Subordinated Debt Securities deemed disposed of. To the extent the selling price
is less than such U.S. Holder's adjusted tax basis (which will include, in the
form of OID, all accrued but unpaid interest), such U.S. Holder will recognize a
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capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
NON-U.S. HOLDERS
This discussion does not address the tax consequences of the acquisition,
ownership or disposition of a Preferred Security by a Non-U.S. Holder. Non-U.S.
Holders should consult their tax advisors concerning these matters.
INFORMATION REPORTING TO U.S. HOLDERS
Subject to the qualifications discussed below, income on the Preferred
Securities will be reported to U.S. Holders on Forms 1099, which forms should be
mailed to U.S. Holders of Preferred Securities by January 31 following each
calendar year.
The Trust will be obligated to report annually to Cede & Co., as holder of
record of the Preferred Securities, the OID related to the Subordinated Debt
Securities that accrued during the year. The Trust currently intends to report
such information on Form 1099 prior to January 31 following each calendar year
even though the Trust is not legally required to report to record holders until
April 15 following each calendar year. The Underwriters have indicated to the
Trust that, to the extent that they hold Preferred Securities as nominees for
beneficial holders, they currently expect to report to such beneficial holders
on Forms 1099 by January 31 following each calendar year. Under current law,
holders of Preferred Securities who hold as nominees for beneficial holders will
not have any obligation to report information regarding the beneficial holders
to the Trust. The Trust, moreover, will not have any obligation to report to
beneficial holders who are not also record holders. Thus, beneficial holders of
Preferred Securities who hold their Preferred Securities through the
Underwriters will receive Forms 1099 reflecting the income on their Preferred
Securities from such nominee holders rather than the Trust.
BACKUP WITHHOLDING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of, and proceeds from the sale of Preferred
Securities, or Subordinated Debt Securities distributed to Holders of Preferred
Securities who are not "exempt recipients" or who fail to comply with certain
procedures for providing certain identifying information (such as the Holder's
taxpayer identification number) in the required manner.
Any amounts withheld under the backup withholding rules from a payment to a
Holder would be allowed as a refund or a credit against such Holder's United
States federal income tax provided the required information is furnished to the
Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
S-32
<PAGE> 33
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") among the Company, the Trust and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Dean Witter Reynolds Inc., PaineWebber
Incorporated and Smith Barney Inc. (the "Underwriters"), the Trust has agreed to
sell to each of the Underwriters, and each of the Underwriters has severally
agreed to purchase the number of Preferred Securities set forth opposite its
name below. In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the
Preferred Securities offered hereby if any of the Preferred Securities are
purchased. In the event of default by an Underwriter, the Underwriting Agreement
provides that, in certain circumstances, the purchase commitments of the
nondefaulting Underwriters may be increased or the Underwriting Agreement may be
terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS PREFERRED SECURITIES
------------------------------------------------------------------ --------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................... 600,000
Dean Witter Reynolds Inc.......................................... 600,000
PaineWebber Incorporated.......................................... 600,000
Smith Barney Inc.................................................. 600,000
---------
Total................................................ 2,400,000
=========
</TABLE>
The Underwriters propose to offer the Preferred Securities to the public at
the initial public offering price set forth on the cover page of this Prospectus
Supplement, and to certain dealers at such price less a concession not in excess
of $.50 per Preferred Security. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $.30 per Preferred Security to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
Because the proceeds of the sale of the Preferred Securities will be used
to purchase the Subordinated Debt Securities of the Company, the Underwriting
Agreement provides that the Company will pay as compensation ("Underwriters'
Compensation") to the Underwriters for their services an amount in New York
Clearing House (next day) funds of $.7875 per Preferred Security (or $1,890,000
in the aggregate) for the accounts of the several Underwriters; provided that
such compensation for sales of 10,000 or more Preferred Securities to a single
purchaser will be $.50 per Preferred Security. Therefore, to the extent of such
sales, the actual amount of Underwriters' Compensation will be less than the
aggregate amount specified in the preceding sentence.
During a period of 30 days from the date of the Prospectus Supplement,
neither the Trust nor the Company will, without the prior written consent of the
Underwriters, directly or indirectly, sell, offer to sell, grant any option for
the sale of, or otherwise dispose of, any Preferred Securities, any security
convertible into or exchangeable into or exercisable for Preferred Securities or
Subordinated Debt Securities or any debt securities substantially similar to the
Subordinated Debt Securities or equity securities substantially similar to the
Preferred Securities (except for the Subordinated Debt Securities and the
Preferred Securities offered hereby).
The Preferred Securities have been approved for listing upon notice of
issuance on the New York Stock Exchange. Trading of the Preferred Securities on
the New York Stock Exchange is expected to commence within a 30 day period after
the initial delivery of the Preferred Securities. The Underwriters have advised
the Trust that they intend to make a market in the Preferred Securities prior to
the commencement of trading on the New York Stock Exchange. The Underwriters
will have no obligation to make a market in the Preferred Securities, however,
and may cease market making activities, if commenced, at any time.
Prior to this offering there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the New York Stock Exchange, the Underwriters will undertake to
sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial
holders.
S-33
<PAGE> 34
The Trust and the Company have agreed to indemnify the Underwriters
against, or contribute to payments that the Underwriters may be required to make
in respect of, certain liabilities, including liabilities under the Securities
Act of 1933, as amended.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, the Company and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
The validity of the Preferred Securities, the Subordinated Debt Securities,
the Guarantee and certain matters relating thereto will be passed upon for the
Company by O'Melveny & Myers and for the Trust by Skadden, Arps, Slate, Meagher
& Flom. Certain legal matters will be passed upon for the Underwriters by
Winthrop, Stimson, Putnam & Roberts. Certain United States federal income
taxation matters will be passed upon for the Company and the Trust by O'Melveny
& Myers.
S-34
<PAGE> 35
PROSPECTUS
$270,400,000
SOUTHWEST GAS CORPORATION
SENIOR DEBT SECURITIES AND SUBORDINATED DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
SOUTHWEST GAS CAPITAL I
PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY SOUTHWEST GAS CORPORATION
Southwest Gas Corporation (the "Company") may offer from time to time, in
one or more series, its unsecured debt securities (the "Debt Securities"),
consisting of either unsecured Debt Securities which, if issued, will rank on a
parity with all other unsecured and unsubordinated indebtedness of the Company
(the "Senior Debt Securities") or unsecured Debt Securities which, if issued,
will be subordinate and junior in right of payment to certain other indebtedness
of the Company on terms to be determined at the time of the offering (the
"Subordinated Debt Securities"), shares of its Preferred Stock, $50 par value
(the "Preferred Stock") and shares of its Common Stock, $1 par value (the
"Common Stock"). Southwest Gas Capital I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), may offer, from time to
time, preferred securities representing undivided beneficial interests in the
assets of the Trust (the "Preferred Securities"). The Debt Securities, the
Preferred Stock, the Common Stock and the Preferred Securities are collectively
referred to herein as the "Securities." Securities will have a maximum aggregate
offering price of $270,400,000 and will be offered on terms to be determined at
the time of offering.
The payment of periodic cash distributions ("distributions") with respect to
the Preferred Securities out of moneys held by the Trust and payments on
liquidation, redemption or otherwise with respect to the Preferred Securities,
will be guaranteed by the Company to the extent described herein (the
"Guarantee"). See "Description of the Guarantee". The Company's obligations
under the Guarantee are subordinate and junior in right of payment to all other
liabilities of the Company and rank pari passu with the most senior preferred
stock, if any, issued from time to time by the Company. Subordinated Debt
Securities may be issued and sold by the Company to the Trust, or a trustee of
the Trust, in connection with the investment of the proceeds from the offering
of Preferred Securities and Common Securities (as defined herein) of the Trust.
The Subordinated Debt Securities purchased by the Trust may be subsequently
distributed pro rata to holders of Preferred Securities and Common Securities in
connection with the dissolution of the Trust upon the occurrence of certain
events as described in an accompanying Prospectus Supplement (as defined below).
In the case of Debt Securities, the specific title, the aggregate principal
amount, the purchase price, the maturity, the rate (or method of calculation)
and time of payment of interest, if any, the right of the Company, if any, to
defer payment of interest on the Debt Securities and the maximum length of such
deferral period, any redemption or sinking fund provisions, any conversion
provisions, any subordination terms, any covenants and any other specific term
of the Debt Securities will be set forth in an accompanying supplement to this
Prospectus (each, a "Prospectus Supplement"). In the case of Preferred Stock,
the specific number of shares, designation, liquidation preference per share,
issuance price, dividend rate (or method of calculation), dividend payment
dates, any redemption or sinking fund provisions, any conversion rights and
other specific terms of the series of Preferred Stock will be set forth in the
accompanying Prospectus Supplement. In addition, the Prospectus Supplement will
describe whether interests in the Preferred Stock will be represented by
depositary shares (the "Depositary Shares") evidenced by depositary receipts
("Depositary Receipts"). In the case of Common Stock, the specific number of
shares and issuance price per share will be set forth in the accompanying
Prospectus Supplement. In the case of Preferred Securities, the designation,
number of securities, liquidation preference per security, purchase price,
distribution rate (or method of calculation thereof), dates on which
distributions shall be payable and dates from which distributions shall accrue,
any voting rights, terms for any conversion or exchange into other securities,
any redemption, exchange or sinking fund provisions, any other rights,
preferences, privileges, limitations or restrictions related to the Preferred
Securities and the terms upon which the proceeds of the sale of the Preferred
Securities shall be used to purchase Subordinated Debt Securities of the Company
will be set forth in the accompanying Prospectus Supplement. The Prospectus
Supplement will also disclose whether the Securities will be listed on a
national securities exchange and if they are not to be listed, the possible
effects thereof on their marketability. If so specified in the accompanying
Prospectus Supplement, Securities may be issued, in whole or in part, in
book-entry form.
Securities may be sold directly, through agents from time to time, through
underwriters and/or dealers or through a combination of such methods. If any
agent of the Company or any underwriter is involved in the sale of the
Securities, the name of such agent or underwriter and any applicable commission
or discount will be set forth in the accompanying Prospectus Supplement. See
"Plan of Distribution."
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 24, 1995
<PAGE> 36
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, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at Room 1024 of the offices of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should be available for inspection and copying at the regional offices of the
Commission located at Seven World Trade Center 13th Floor, New York, New York
10048 and Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can be obtained from the
principal offices of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Reports, proxy materials and other
information concerning the Company may also be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005 and at the
offices of the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104.
No separate financial statements of the Trust have been included herein.
The Company does not consider that such financial statements would be material
to holders of the Preferred Securities because (i) all of the voting securities
of the Trust will be owned directly or indirectly, by the Company, a reporting
company under the Exchange Act, (ii) the Trust has no independent operations but
exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in Subordinated Debt Securities issued by the Company, and (iii) the
obligations of the Trust under the Trust Securities (as defined herein) will be
fully and unconditionally guaranteed by the Company to the extent that the
Company has made a payment of interest or principal on the Subordinated Debt
Securities. See "Particular Terms of the Subordinated Debt Securities Issued in
Connection with Preferred Securities" and "Description of the Guarantee." The
financial information for the Trust will be included in the consolidated
financial statements of the Company.
This Prospectus does not contain all the information set forth in the
Registration Statement and exhibits thereto which the Company and the Trust have
filed with the Commission under the Securities Act of 1933, and reference is
hereby made to such Registration Statement, including the exhibits thereto.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference the following documents of the
Company filed with the Commission: (1) Annual Report on Form 10-K for the fiscal
year ended December 31, 1994; (2) Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1995 and June 30, 1995, (3) Current Reports on Form 8-K
dated April 17, 1995 and May 3, 1995; and (4) 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.
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,
in a Prospectus Supplement or in any subsequently filed document which is
incorporated by reference herein modifies or supersedes such statements. 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 information relating to the Company contained in this Prospectus
summarizes, is based upon, or refers to, information and financial statements
contained in one or more of the documents incorporated by reference herein;
accordingly, such information contained herein is qualified in its entirety by
reference to such incorporated documents and should be read in conjunction
therewith.
The Company will provide without charge to each person, including any
beneficial holder, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all the foregoing
documents incorporated by reference herein, including exhibits specifically
incorporated by reference in such documents but excluding all other exhibits to
such documents. Requests should be directed to George C. Biehl, Senior Vice
President and Chief Financial Officer, Southwest Gas Corporation,
2
<PAGE> 37
5241 Spring Mountain Road, P.O. Box 98510, Las Vegas, Nevada 89193-8510,
telephone number (702) 876-7237.
THE COMPANY
The Company, a California corporation, is comprised of two operating
segments: natural gas operations and financial services. The financial services
segment consists of PriMerit Bank, a Federal Savings Bank (the "Bank"), a wholly
owned subsidiary, which operates principally in the thrift industry.
The natural gas operations segment is engaged in the business of
purchasing, transporting, and distributing natural gas in portions of Arizona,
Nevada and California. Its several service areas are geographically as well as
economically diverse. The Company is the largest distributor in Arizona,
distributing and transporting gas in most of southern, central and northwestern
Arizona. The Company is also the largest distributor and transporter of natural
gas in Nevada. The Company also distributes and transports gas in portions of
California, including the Lake Tahoe area and the high desert and mountain areas
in San Bernardino County.
The Company is subject to regulation by the Arizona Corporation Commission,
the Public Service Commission of Nevada (the "PSCN") and the California Public
Utilities Commission (the "CPUC"). The CPUC regulates the issuance of all
securities by the Company, with the exception of short-term borrowings. Certain
of the Company's accounting practices, transmission facilities and rates are
subject to regulation by the Federal Energy Regulatory Commission.
The Bank is a federally chartered stock savings bank conducting business
through branch offices in Nevada. The Bank's deposit accounts are insured to the
maximum extent permitted by law by the Federal Deposit Insurance Corporation
(the "FDIC") through the Savings Association Insurance Fund. The Bank is
regulated by the Office of Thrift Supervision (the "OTS") and the FDIC and is a
member of the Federal Home Loan Bank system.
The Bank's principal business is to attract deposits from the general
public and to make loans secured by real estate and other collateral that enable
borrowers to purchase, refinance, construct or improve such property. Revenues
are derived from interest on real estate loans and debt securities and, to a
lesser extent, from interest on nonmortgage loans, gains on sales of loans and
debt securities, and fees received in connection with loans and deposits. The
Bank's major expense is the interest it pays on savings deposits and borrowings.
The executive offices of the Company are located at 5241 Spring Mountain
Road, P.O. Box 98510, Las Vegas, Nevada 89193-8510, telephone number (702)
876-7237.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust (a "Declaration") executed by the Company, as
sponsor for the Trust (the "Sponsor"), and Trustees (as defined herein) of the
Trust and (ii) the filing of a certificate of trust with the Secretary of State
of the State of Delaware on August 17, 1995. The Trust exists for the exclusive
purposes of (i) issuing the Preferred Securities and common securities
representing undivided beneficial interests in the assets of the Trust (the
"Common Securities" and, together with the Preferred Securities, the "Trust
Securities"), (ii) investing the gross proceeds from the sale of the Trust
Securities in the Subordinated Debt Securities and (iii) engaging in only those
other activities necessary or incidental thereto. All of the Common Securities
will be directly or indirectly owned by the Company. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that, upon 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 will be
subordinated to the rights of the holders of the Preferred Securities. The
Company will directly or indirectly acquire Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of the Trust. The Trust has
a term of approximately 55 years but may terminate earlier, as provided in the
Declaration.
3
<PAGE> 38
The Trust's business and affairs will be conducted by the trustees (the
"Trustees") appointed by the Company as the direct holder of all the Common
Securities. The holder of the Common Securities will be entitled to appoint,
remove or replace any of, or increase or reduce the number of, the Trustees of
the Trust; provided that the number of Trustees may not be reduced to less than
three. The duties and obligations of the Trustees will be governed by the
Declaration. A majority of the Trustees of the Trust will be persons who are
employees or officers of or who are affiliated with the Company (the "Regular
Trustees"). One Trustee of the Trust will be a financial institution that is not
affiliated with the Company, has a specified minimum amount of aggregate
capital, surplus, and undivided profits of not less than $50,000,000 and will
have a principal place of business or reside in the State of Delaware (the
"Delaware Trustee"). The Delaware Trustee will not be a trustee for purposes of
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and
will not perform the functions of a trustee under such Act. Another financial
institution that is not affiliated with the Company and has a specified minimum
amount of aggregate capital and surplus and undivided profits of not less than
$50,000,000 shall act as property trustee and as indenture trustee and trustee
under the Guarantee, in each case, for the purposes of the Trust Indenture Act
(the "Property Trustee"). The Company will pay all debts and obligations of the
Trust (other than with respect to the Trust Securities) and all fees and
expenses related to the Trust and the offering of the Trust Securities, the
payment of which will be guaranteed by the Company.
The Delaware Trustee for the Trust will be Wilmington Trust Company, 1100
N. Market Street, Wilmington, Delaware 19890. The Property Trustee, indenture
trustee and trustee under the Guarantee will be Harris Trust and Savings Bank,
430 Park Avenue, 14th Floor, New York, New York 10022. The address for the Trust
is c/o Southwest Gas Corporation, the sponsor of the Trust, at the Company's
corporate headquarters located at 5241 Spring Mountain Road, Las Vegas, Nevada
89102, telephone (702) 876-7237.
Harris Trust and Savings Bank and its affiliates may from time to time
maintain lines of credit, act as trustee for senior debt and otherwise have
customary banking relationships with the Company. Neither the Declaration nor
the Indenture for the Subordinated Debt Securities precludes Harris Trust and
Savings Bank or any of its affiliates from enforcing its rights or the rights of
any holders of senior debt for which it acts as trustee as creditors of the
Company unless there is an event of default under the Declaration or the
Indenture for the Subordinated Debt Securities.
USE OF PROCEEDS
The Trust will use all proceeds received from the sale of the Preferred
Securities to purchase Subordinated Debt Securities from the Company. Except as
otherwise provided in the Prospectus Supplement, the Company intends to use the
proceeds of the sale of the Subordinated Debt Securities to the Trust and the
net proceeds from the sale of other Securities offered hereby to retire
indebtedness and for general corporate purposes, including the acquisition of
property for the construction, completion, extension or improvement of the
Company's pipeline systems and facilities located in and around the communities
it serves.
4
<PAGE> 39
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges for
(a) the natural gas operations segment of the Company and (b) the consolidated
gas and financial services operations of the Company (i) without deposit
interest included as a fixed charge and (ii) with deposit interest included as a
fixed charge.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------------------------
FOR THE TWELVE
MONTHS ENDED DECEMBER 31,
JUNE 30, ----------------------------------------
1995 1994 1993 1992 1991 1990
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratios of earnings to fixed charges(1):
Company (natural gas operations
segment)............................. 1.27 1.48 1.25 1.86 1.48 1.84
Consolidated
Without deposit interest............. 1.36 1.55 1.32 1.42 (2) 1.45
With deposit interest................ 1.23 1.36 1.18 1.20 (2) 1.24
</TABLE>
- ---------------
(1) For purposes of computing the ratios of earnings to fixed charges, earnings
are defined as the sum of pretax income plus fixed charges. Fixed charges
consist of all interest expense including capitalized interest, one-third of
rent expense (which approximates the interest component of such expense) and
amortized debt costs.
(2) For the year ended December 31, 1991, consolidated earnings were
insufficient to cover fixed charges, excluding and including deposit
interest, by $13.5 million. This was primarily due to the recording of
additional valuation reserves during 1991 by the Bank.
The following table sets forth the ratios of earnings to combined fixed
charges and preferred and preference stock dividends for (a) the natural gas
segment of the Company and (b) the consolidated gas and financial services
operations of the Company (i) without deposit interest included as a fixed
charge and (ii) with deposit interest included as a fixed charge.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------------------------
FOR THE TWELVE
MONTHS ENDED DECEMBER 31,
JUNE 30, ----------------------------------------
1995 1994 1993 1992 1991 1990
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratios of earnings to combined fixed
charges and preferred and preference
stock dividends(1)
Company (natural gas operations
segment)............................. 1.26 1.46 1.23 1.81 1.42 1.75
Consolidated
Without deposit interest............. 1.35 1.54 1.30 1.39 (2) 1.43
With deposit interest................ 1.22 1.35 1.17 1.18 (2) 1.22
</TABLE>
- ---------------
(1) See Note 1 above. Preferred and preference stock dividends have been
adjusted to represent the pretax earnings necessary to cover such dividend
requirements.
(2) For the year ended December 31, 1991, consolidated earnings were
insufficient to cover combined fixed charges and preferred and preference
stock dividends by $14.8 million. This was primarily due to the recording of
additional valuation reserves during 1991 by the Bank.
DESCRIPTION OF DEBT SECURITIES
Debt Securities may be issued from time to time in series, either as Senior
Debt Securities or Subordinated Debt Securities, each under an indenture (each,
an "Indenture") between the Company and a bank or trust company selected to act
as trustee as specified in the Prospectus Supplement relating thereto (the
"Trustee"). Each Indenture will be filed as an exhibit to or incorporated by
reference in the Registration Statement of which this Prospectus is a part. As
used under this caption, unless the context otherwise requires, Offered Debt
Securities shall mean the Debt Securities offered by this Prospectus and the
accompanying Prospectus Supplement. The statements under this caption are brief
summaries of certain provisions contained
5
<PAGE> 40
in the Indenture, do not purport to be complete and are qualified in their
entirety by reference to the applicable Indentures, including the definition
therein of certain terms, a copy of each of which is included or incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
is a part. Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable Indenture. The following sets forth certain
general terms and provisions of the Debt Securities. Additional terms of
Subordinated Debt Securities issued in connection with the Preferred Securities
are set forth under the caption "Particular Terms of Subordinated Debt
Securities Issued in Connection with Preferred Securities." Further terms of the
Offered Debt Securities will be set forth in the Prospectus Supplement.
GENERAL
Each Indenture provides for the issuance of Debt Securities in series, and
does not limit the principal amount of Debt Securities which may be issued
thereunder.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Offered Debt Securities in respect
of which this Prospectus is being delivered: (a) the title of the Offered Debt
Securities; (b) whether any of the Offered Debt Securities are to be issuable in
bearer form or permanent global form and, if so, the terms and conditions, if
any, upon which interests in such Offered Debt Securities in such bearer form or
global form may be exchanged, in whole or in part, for the Offered Debt
Securities represented thereby; (c) the person to whom any interest on any
Offered Debt Security of the series shall be payable if other than the person in
whose name the Offered Debt Security is registered on the Regular Record Date;
(d) the date or dates on which the Offered Debt Securities will mature; (e) the
rate or rates at which the Offered Debt Securities will bear interest, if any;
(f) the date or dates from which any such interest will accrue, the Interest
Payment Dates on which any such interest on the Offered Debt Securities will be
payable and the Regular Record Date for any interest payable on any Interest
Payment Date; (g) each office or agency where the principal of, premium (if any)
and interest on the Offered Debt Securities will be payable; (h) the period or
periods within which, the events upon the occurrence of which, and the price or
prices at which, the Offered Debt Securities may, pursuant to any optional or
mandatory provisions, be redeemed or purchased, in whole or in part, by the
Company and any terms and conditions relevant thereto; (i) the obligation of the
Company, if any, to redeem or repurchase the Offered Debt Securities at the
option of the Holders; (j) the denominations in which any Offered Debt
Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof with respect to Debt Securities, other than
Subordinated Debt Securities issued in connection with Preferred Securities, or
denominations of $25 and any integral multiple thereof with respect to
Subordinated Debt Securities issued in connection with Preferred Securities; (k)
the currency or currencies, including composite currencies, of payment of
principal of and any premium and interest on the Offered Debt Securities, if
other than U. S. Dollars; (l) any index or formula used to determine the amount
of payments of principal of and any premium and interest on the Offered Debt
Securities; (m) if other than the principal amount thereof, the portion of the
principal amount of the Offered Debt Securities of the series which will be
payable upon declaration of the acceleration of the Maturity thereof; (n) any
provisions relating to the conversion or exchange of the Offered Debt Securities
into Common Stock, Preferred Stock or into Debt Securities of another series;
(o) any Events of Default with respect to the Offered Debt Securities, if not
otherwise set forth under "Events of Default"; (p) any material
covenants with respect to the Offered Debt Securities; (q) the applicability of
the provisions described under "Defeasance"; and (r) any other terms of the
Offered Debt Securities not inconsistent with the provisions of the applicable
Indenture. The applicable Prospectus Supplement will also describe the following
terms of the series of Subordinated Debt Securities offered hereby in respect of
which this Prospectus is being delivered: (a) the rights, if any, to defer
payments of interest on the Subordinated Debt Securities by extending the
interest payment period, and the duration of such extensions, and (b) the
subordination terms of the Subordinated Debt Securities of such series.
Debt Securities may be issued at a discount from their principal amount.
Federal income tax considerations and other special considerations applicable to
any such Original Issue Discount Securities will be described in the applicable
Prospectus Supplement.
6
<PAGE> 41
Debt Securities may be issued in bearer form, with or without coupons.
Federal income tax considerations and other special considerations applicable to
bearer securities will be described in the applicable Prospectus Supplement.
CONVERSION RIGHTS
The terms, if any, on which Debt Securities of a series may be exchanged
for or converted into shares of Common Stock, Preferred Stock or Debt Securities
of another series will be set forth in the Prospectus Supplement relating
thereto.
EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, payment
of principal, premium, if any, and interest on the Debt Securities will be
payable, and the exchange of and the transfer of Debt Securities will be
registerable, at the office or agency of the Company maintained for such purpose
in New York, New York and at any other office or agency maintained for such
purpose. Unless otherwise indicated in the applicable Prospectus Supplement,
Debt Securities, other than Subordinated Debt Securities issued in connection
with Preferred Securities, will be issued in denominations of $1,000 or integral
multiples thereof. Subordinated Debt Securities issued in connection with
Preferred Securities will be issued in denominations of $25 or integral
multiples thereof. No service charge will be made for any registration of
transfer or exchange of the Debt Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
All moneys paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed for two years after such principal, premium or interest has become due
and payable may be repaid to the Company and thereafter the Holder of such Debt
Security may look only to the Company for payment thereof.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a Debt Depositary or its nominee
identified in the applicable Prospectus Supplement. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denominations
equal to the portion of the aggregate principal amount of Outstanding Debt
Securities of the series to be represented by such Global Security or
Securities. Each Global Security will be deposited with such Debt Depositary or
nominee or a custodian therefor and will bear a legend regarding the
restrictions on exchanges and registration of transfer thereof referred to below
and any such other matters as may be provided for pursuant to the applicable
Indenture.
Notwithstanding any provision of the applicable Indenture or any Debt
Security described herein, no Global Security may be transferred to, or
registered or exchanged for Debt Securities registered in the name of, any
Person other than the Debt Depositary for such Global Security or any nominee of
such Debt Depositary, and no such transfer may be registered, unless (a) the
Debt Depositary has notified the Company that it is unwilling or unable to
continue as Debt Depositary for such Global Security or has ceased to be
qualified to act as such as required by the Indenture, (b) the Company executes
and delivers to the Trustee a Company Order that such Global Security shall be
so transferable, registrable and exchangeable, and such transfers shall be
registrable, or (c) there shall exist such circumstances, if any, as may be
described in the applicable Prospectus Supplement. All Debt Securities issued in
exchange for a Global Security or any portion thereof will be registered in such
names as the Debt Depositary may direct.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Debt Depositary will be represented by
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a Global Security registered in the name of such Debt Depositary or its nominee.
Upon the issuance of such Global Security, and the deposit of such Global
Security with or on behalf of the Debt Depositary for such Global Security, the
Debt Depositary will credit, on its book-entry registration and transfer system,
the respective principal amounts of the Debt Securities represented by such
Global Security to the accounts of institutions that have accounts with such
Debt Depositary or its nominee ("participants"). The accounts to be credited
will be designated by the underwriters or agents of such Debt Securities or by
the Company, if such Debt Securities are offered and sold directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to participants or Persons that may hold interests through participants.
Ownership of beneficial interests by participants in such Global Security will
be shown on, and the transfer of that ownership interest will be effected only
through, records maintained by the Debt Depositary or its nominee for such
Global Security. Ownership of beneficial interests in such Global Security by
Persons that hold through participants will be shown on, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Global Securities.
So long as the Debt Depositary for a Global Security, or its nominee, is
the registered owner of such Global Security, such Depositary or such nominee,
as the case may be, will be considered the sole owner or Holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Unless otherwise specified in the applicable Prospectus
Supplement, owners of beneficial interests in such Global Security will not be
entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certified form and will
not be considered the Holders thereof for any purposes under the applicable
Indenture. Accordingly, each Person owning a beneficial interest in such Global
Security must rely on the procedures of the Debt Depositary and, if such Person
is not a participant, on the procedures of the participant through which such
Person owns its interest, to exercise any rights of a Holder under the
applicable Indenture. The Company understands that under existing industry
practices, if the Company requests any action of Holders or an owner of a
beneficial interest in such Global Security desires to give any notice or take
any action a Holder is entitled to give or take under the applicable Indenture,
the Debt Depositary would authorize the participants to give such notice or take
such action, and participants would authorize beneficial owners owning through
such participants to give such notice or take such action or would otherwise act
upon the instructions of beneficial owners owning through them.
Notwithstanding any other provisions to the contrary in the applicable
Indenture, the rights of the beneficial owners of the Debt Securities to receive
payment of the principal and premium, if any, of and interest on such Debt
Securities, on or after the respective due dates expressed in such Debt
Securities, or to institute suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of the beneficial owners.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any Holders of Outstanding Debt
Securities, may consolidate with or merge into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate with or merge into, or transfer or lease its assets substantially as
an entirety to, the Company, provided (a) that the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
which acquires or leases the assets of the Company substantially as an entirety
is a Person organized and existing under the laws of any United States
jurisdiction and assumes the Company's obligations on the Debt Securities and
under the Indentures, (b) that after giving effect to such transaction no Event
of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing, and (c) that
certain other conditions are met.
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COVENANTS OF THE COMPANY
The applicable Prospectus Supplement will describe any material covenants
in respect of a series of Offered Debt Securities. Other than the covenants of
the Company included in the Indentures as described above or as described in the
applicable Prospectus Supplement, there are no covenants or provisions in the
Offered Debt Securities or the Indentures that limit or restrict the Company's
business or operations, the pledging of the Company's assets or the incurrence
of indebtedness by the Company or that may afford Holders protection in the
event of a highly leveraged transaction or leveraged buyout involving the
Company.
EVENTS OF DEFAULT
Unless otherwise specified in the applicable Prospectus Supplement, the
following are Events of Default under the Indentures with respect to Debt
Securities of any series: (a) failure to pay principal of or premium, if any, on
any Debt Security of that series when due; provided, however, that a valid
extension of the maturity of Subordinated Debt Securities shall not constitute a
default for this purpose; (b) failure to pay any interest on any Debt Security
of that series when due, continued for 30 days; provided, however, that a valid
extension of the interest payment provided by the Company for the Subordinated
Debt Securities shall not constitute a default in the payment of interest for
this purpose, and provided further that, if Subordinated Debt Securities are
issued to the Trust or a Trustee of the Trust in connection with the issuance of
Trust Securities by the Trust, such 30-day period will be replaced by a ten day
period; (c) failure to make any sinking fund payment, when due, in respect of
any Debt Security of that series; (d) failure to perform any other covenant of
the Company in the Indenture (other than a covenant included in the Indenture
solely for the benefit of a series of Debt Securities other than that series),
continued for 60 days after written notice by the Trustee or Holders of at least
25% in principal amount of the Outstanding Debt Securities of that series as
provided in the Indenture; (e) a default under any evidence of indebtedness for
money borrowed by the Company (including a default with respect to Debt
Securities of any other series) in an individual principal amount outstanding of
at least $15,000,000 or under any instrument under which there may be issued or
by which there may be secured or evidenced any indebtedness for money borrowed
by the Company (including the Indentures) in an individual principal amount
outstanding of at least $15,000,000, whether such indebtedness exists as of the
date of the applicable Indenture or is thereafter created, which default results
in the acceleration of such indebtedness without such indebtedness having been
discharged, or such acceleration having been rescinded or annulled, within 10
Business Days after written notice to the Company by the Trustee or by the
Holders of at least 25% in principal amount of the Outstanding Debt Securities
of such series as provided in the Indenture; (f) certain events of bankruptcy,
insolvency or reorganization of the Company; (g) the voluntary or involuntary
dissolution of the Trust pursuant to which (or of a Trustee of the Trust to
which) Subordinated Debt Securities were issued in connection with the issuance
of Trust Securities by the Trust, except in connection with the distribution of
Subordinated Debt Securities to the holders of Trust Securities in liquidation
of the Trust, the redemption of all of the Trust Securities, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration; and (h)
any other Event of Default provided with respect to Debt Securities of that
series. If an Event of Default with respect to Outstanding Debt Securities of
any series shall occur and be continuing, either the Trustee or the Holders of
at least 25% in principal amount of the Outstanding Debt Securities of that
series by notice as provided in the applicable Indenture may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of all Debt Securities of that series to be due and
payable immediately. However, at any time after a declaration of acceleration
with respect to Debt Securities of any series has been made, but before a
judgment or decree based on such acceleration has been obtained, the Holders of
a majority in principal amount of the Outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul such acceleration. For
information as to waiver of defaults, see "Modification and Waiver" below.
Each Indenture provides that, subject to the duty of the Trustee during an
Event of Default to act with the required standard of care, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable security or indemnity. Subject to certain
provisions, including those requiring security
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or indemnification of the Trustee, the Holders of a majority in principal amount
of the Outstanding Debt Securities of any series will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series.
The Company will be required to furnish to the Trustee under each Indenture
annually a statement as to the performance by the Company of its obligations
under the Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of each series affected
thereby; provided, however, that no such modification or amendment may, without
the consent of the Holder of each Outstanding Debt Security affected thereby;
(a) change the Stated Maturity of the principal of, or any installment of
principal of, or interest on, any Debt Security; (b) reduce the principal amount
of, the rate of interest on, or the premium, if any, payable upon the redemption
of, any Debt Security; (c) reduce the amount of principal of an Original Issue
Discount Security payable upon acceleration of the Maturity thereof; (d) change
the currency of payment of principal of, or premium, if any, or interest on any
Debt Security; (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security on or after the Stated Maturity
or Redemption Date thereof; or (f) reduce the percentage in principal amount of
Outstanding Debt Securities of any series, the consent of the Holders of which
is required for modification or amendment of the applicable Indenture or for
waiver of compliance with certain provisions of the applicable Indenture or for
waiver of certain defaults.
The Holders of at least a majority in principal amount of the Outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned, compliance
by the Company with certain covenants of the Indenture. The applicable
Prospectus Supplement will describe the terms of any such covenants. The Holders
of not less than a majority in principal amount of the Outstanding Debt
Securities of any series may, on behalf of the Holders of all Debt Securities of
that series, waive any past default under the applicable Indenture with respect
to that series, except a default in the payment of the principal of, or premium,
if any, or interest on, any Debt Security of that series or in respect of a
provision which under such Indenture cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of that series affected.
DEFEASANCE
Unless otherwise specified in the applicable Prospectus Supplement with
respect to the Debt Securities of a series, other than Subordinated Debt
Securities issued in connection with Preferred Securities, the Company, at its
option, (i) will be discharged from any and all obligations in respect of the
Debt Securities of such series (except for certain obligations to register the
transfer or exchange of Debt Securities of such series, to replace destroyed,
stolen, lost or mutilated Debt Securities of such series, and to maintain Paying
Agents and hold moneys for payment in trust) or (ii) need not comply with
certain covenants specified in the applicable Prospectus Supplement with respect
to the Debt Securities of that series, and the occurrence of an event described
in clause (d) under "Events of Default" above with respect to any defeased
covenant and clauses (e) and (g) of the "Events of Default" above shall no
longer be an Event of Default if, in either case, the Company deposits with the
Trustee, in trust, money or U.S. Government Obligations that through the payment
of interest thereon and principal thereof in accordance with their terms will
provide money in an amount sufficient to pay all the principal of (and premium,
if any) and any interest on the Debt Securities of such series on the dates such
payments are due (which may include one or more redemption dates designated by
the Company) in accordance with the terms of such Debt Securities. Such a trust
may only be established if, among other things, (a) no Event of Default or event
which with the giving of notice or lapse of time, or both, would become an Event
of Default under the applicable Indenture shall have occurred and be continuing
on the date of such deposit, (b) no Event of Default described under clause (f)
under "Events of Default" above or event which with the giving of notice or
lapse of time, or both, would become an Event of Default described under such
clause (f) shall have occurred and be continuing at any time during the period
ending on the 91st day following such date of deposit, and (c) the Company shall
have delivered an Opinion of Counsel
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to the effect that the Holders of the Debt Securities will not recognize gain or
loss for Federal income tax purposes as a result of such deposit or defeasance
and will be subject to Federal income tax in the same manner as if such
defeasance had not occurred. In the event the Company omits to comply with its
remaining obligations under the applicable Indenture after a defeasance of the
Indenture with respect to the Debt Securities of any series as described under
clause (ii) above and the Debt Securities of such series are declared due and
payable because of the occurrence of any undefeased Event of Default, the amount
of money and U.S. Government Obligations on deposit with the Trustee may be
insufficient to pay amounts due on the Debt Securities of such series at the
time of the acceleration resulting from such Event of Default. However, the
Company will remain liable in respect of such payments.
GOVERNING LAW
Each Indenture and the Debt Securities will be governed by, and construed
in accordance with, the laws of the State of New York.
REGARDING THE TRUSTEE
Each Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Debt Securities, it must
eliminate such conflict or resign.
PARTICULAR TERMS OF SUBORDINATED DEBT SECURITIES
ISSUED IN CONNECTION WITH PREFERRED SECURITIES
The statements under this caption are brief summaries of certain provisions
of the Subordinated Debt Securities Indenture applicable to Subordinated Debt
Securities issued in connection with Preferred Securities, do not purport to be
complete and are qualified in their entirety by reference to the Subordinated
Debt Securities Indenture.
In the event Subordinated Debt Securities are issued to the Trust or a
Trustee of the Trust in connection with the issuance of Trust Securities by the
Trust, such Subordinated Debt Securities subsequently may be distributed pro
rata to the holders of the Trust Securities in connection with the dissolution
of the Trust upon the occurrence of certain events described in the applicable
Prospectus Supplement relating to the Trust Securities. Only one series of
Subordinated Debt Securities will be issued to the Trust or a Trustee of the
Trust in connection with the issuance of Trust Securities by the Trust.
If Subordinated Debt Securities are issued to the Trust or a Trustee of the
Trust in connection with the issuance of Trust Securities and (i) there shall
have occurred any event that would constitute an Event of Default, (ii) the
Company shall be in default with respect to its payment of any obligations under
the Guarantee or Common Securities Guarantee, or (iii) the Company shall have
given notice of its election to defer payments of interest on such Subordinated
Debt Securities by extending the interest payment period as provided in the
Subordinated Debt Securities Indenture and such period, or any extension
thereof, shall be continuing, then (a) the Company shall not declare or pay
dividends on, or make a distribution with respect to or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
and (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued by
the Company which rank pari passu with or junior to such Subordinated Debt
Securities; provided, however, that, restriction (a) above does not apply to any
stock dividends paid by the Company where the dividend stock is the same stock
as that on which the dividend is being paid.
In the event Subordinated Debt Securities are issued to the Trust or a
Trustee of the Trust in connection with the issuance of Trust Securities, for so
long as the Trust Securities remain outstanding, the Company will covenant (i)
to directly or indirectly maintain 100% ownership of the Common Securities;
provided, however, that any permitted successor of the Company under the
Subordinated Debt Securities Indenture may succeed
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to the Company's ownership of the Common Securities and (ii) to use its
reasonable efforts to cause the Trust (a) to remain a statutory business trust,
except in connection with the distribution of Subordinated Debt Securities to
the holders of Trust Securities in liquidation of the Trust, the redemption of
all of the Trust Securities, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration, and (b) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes.
DESCRIPTION OF THE PREFERRED SECURITIES
The Trust may issue, from time to time, only one series of Preferred
Securities having terms described in the Prospectus Supplement relating thereto.
The Declaration authorizes the Regular Trustees of the Trust to issue on behalf
of the Trust one series of Preferred Securities. The Declaration will be
qualified as an indenture under the Trust Indenture Act.
The Preferred Securities will have such terms, including distribution,
redemption, voting and liquidation rights and such other preferred, deferred or
other special rights or such restrictions as shall be set forth in the
Declaration or made part of the Declaration by the Trust Indenture Act.
Reference is made to the applicable Prospectus Supplement relating to the
Preferred Securities for specific terms, including (i) the distinctive
designation of the Preferred Securities, (ii) the number of Preferred Securities
and the date or dates upon which distributions shall be payable (provided,
however, that, distributions on the Preferred Securities shall be payable on a
quarterly basis to holders of the Preferred Securities as of a record date in
each quarter during which the Preferred Securities are outstanding), (iii)
whether distributions on Preferred Securities issued by the Trust shall be
cumulative, and, in the case of Preferred Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Preferred Securities shall be cumulative, (iv)
the amount or amounts which shall be paid out of the assets of the Trust to the
holders of Preferred Securities upon voluntary or involuntary dissolution,
winding-up or termination of the Trust, (v) the obligation, if any, of the Trust
to purchase or redeem Preferred Securities and the price or prices at which, the
period or periods within which and the terms and conditions upon which the
Preferred Securities shall be purchased or redeemed, in whole or in part,
pursuant to such obligation, (vi) the voting rights, if any, of Preferred
Securities in addition to those required by law, including the number of votes
per Preferred Security and any requirement for the approval by the holders of
Preferred Securities, as a condition to specified action or amendments to the
Declaration, and (vii) any other relevant rights, preferences, privileges,
limitations or restrictions on Preferred Securities consistent with the
Declaration and applicable law.
All Preferred Securities offered hereby will be guaranteed by the Company
to the extent set forth below under "Description of the Guarantee". Certain
United States federal income tax considerations applicable to any offering of
Preferred Securities will be described in the Prospectus Supplement relating
thereto.
In connection with the issuance of Preferred Securities, the Trust will
issue Common Securities having such terms including distribution, redemption,
voting and liquidation rights or such restrictions as shall be set forth
therein. The terms of the Common Securities will be substantially identical to
the terms of the Preferred Securities and the Common Securities, will rank pari
passu, and payments will be made thereon pro rata with the Preferred Securities
except that, upon 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 will be subordinated to the
rights of the holders of the Preferred Securities. Except in certain limited
circumstances, the Common Securities will also carry the right to vote and to
appoint, remove or replace any of the Trustees of the Trust. All of the Common
Securities will be directly or indirectly owned by the Company.
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DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by the Company for the benefit of the holders,
from time to time, of Preferred Securities. The Bank will have no obligation
under the Guarantee. The Guarantee will be qualified as an indenture under the
Trust Indenture Act. Harris Trust and Savings Bank will act as indenture trustee
under the Guarantee (the "Guarantee Trustee"). The terms of the Guarantee will
be those set forth in the Guarantee and those made part of the Guarantee by the
Trust Indenture Act. This summary does not purport to be complete and is subject
in all respects to the provisions of, and is qualified in its entirety by
reference to, the form of Guarantee, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Trust
Indenture Act. The Guarantee will be held by the Guarantee Trustee for the
benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth herein, to pay in full to the holders of the
Preferred Securities, the Guarantee Payments (as defined herein) (except to the
extent paid by the Trust), as and when due, regardless of any defense, right of
set-off or counterclaim which the Trust may have or assert. The following
payments with respect to Preferred Securities (the "Guarantee Payments"), to the
extent not paid by the Trust will be subject to the Guarantee (without
duplication): (i) any accrued and unpaid distributions that are required to be
paid on the Preferred Securities, to the extent the Company has made a payment
of interest or principal on the Subordinated Debt Securities, (ii) the
redemption price, including all accrued and unpaid distributions thereon,
including interest thereon to the date of redemption (the "Redemption Price"),
to the extent the Company has made a payment of interest or principal on the
Subordinated Debt Securities with respect to any Preferred Securities called for
redemption by the Trust and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Subordinated Debt Securities to the holders of Preferred
Securities or the redemption of all the Preferred Securities upon the redemption
or maturity of the Subordinated Debt Securities) the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Preferred Securities to the date of payment to the extent the Trust has funds
available therefor or (b) the amount of assets of the Trust remaining available
for distribution to holders of the Preferred Securities in liquidation of the
Trust. The 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
Preferred Securities or by causing the Trust to pay such amounts to such
holders.
The Guarantee will be a full and unconditional guarantee on a subordinated
basis with respect to the Preferred Securities from the time of issuance, but
will not apply to any payment of distributions, except to the extent the Trust
shall have funds available therefor as a result of payments of interest or
principal on the Subordinated Debt Securities by the Company. If the Company
does not make interest payments on the Subordinated Debt Securities purchased by
the Trust, the Trust will not pay distributions on the Preferred Securities and
will not have funds available therefor. See "Particular Terms of Subordinated
Debt Securities Issued in Connection with Preferred Securities."
The obligations of the Company under the Declaration, the Guarantee, the
Indenture with respect to the Subordinated Debt Securities issued in connection
with the Preferred Securities and the Subordinated Debt Securities issued in
connection with the Preferred Securities collectively provide a full and
unconditional guarantee on a subordinated basis by the Company of payments due
on the Preferred Securities to the extent the Trust has funds available therefor
as a result of payments of interest or principal on the Subordinated Debt
Securities by the Company.
The Company has also agreed to irrevocably and unconditionally guarantee
the obligations of the Trust with respect to the Common Securities (the "Common
Securities Guarantee") to the same extent as the Guarantee, except that, upon an
event of default under the Subordinated Debt Securities Indenture, holders of
Preferred Securities under the Guarantee will have priority over holders of
Common Securities under the
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Common Securities Guarantee with respect to distributions and payments on
liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company will covenant that, so long as any Preferred
Securities issued by the Trust remain outstanding, if there shall have occurred
any event that would constitute an event of default under the Guarantee or the
Declaration, then (a) the Company shall not declare or pay any dividend on, or
make any distribution with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock and (b) shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by the Company which rank pari
passu with or junior to such Subordinated Debt Securities. However, the
Guarantee will except from the foregoing any stock dividends paid by the
Company, where the dividend stock is the same stock as that on which the
dividend is being paid.
MODIFICATIONS OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
Guarantee may be amended only with the prior approval of the holders of not less
than 66 2/3% in liquidation amount of the Preferred Securities then outstanding.
The manner of obtaining any such approval of holders of the Preferred Securities
will be set forth in an accompanying Prospectus Supplement. All guarantees and
agreements contained in the Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to make any of the payments required by the Guarantee or to perform its
other obligations thereunder. The holders of a majority in liquidation amount of
the Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of
Preferred Securities may institute a legal proceeding directly against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity.
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Guarantee and as to any default in such performance.
The Company is required to file annually with the Guarantee Trustee an
officer's certificate as to the Company's compliance with all conditions under
the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of its own affairs.
Subject to such 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 Preferred Securities 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 as to the Preferred Securities upon full
payment of the Redemption Price of all Preferred Securities, upon distribution
of the Subordinated Debt Securities held by the Trust to the
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holders of the Preferred Securities or upon full payment of the amounts payable
in accordance with the Declaration upon liquidation of the Trust. The Guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time any holder of Preferred Securities must restore payment of any sums
paid under the Preferred Securities or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company (other than the Common Securities Guarantee or any
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any Affiliate of the Company), (ii) pari passu
with the most senior preferred or preference stock now or hereafter issued by
the Company and with any guarantee now or hereafter entered into by the Company
in respect of any preferred or preference stock of any Affiliate of the Company
and (iii) senior to the Company's Common Stock. The terms of the Preferred
Securities provide that each holder of Preferred Securities by acceptance
thereof agrees to the subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the guarantor to enforce its rights under the Guarantee without instituting a
legal proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
internal laws of the State of New York.
DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of any series of the
Preferred Stock offered by any Prospectus Supplement will be described in such
Prospectus Supplement. The description of certain provisions of the Preferred
Stock set forth below and in any Prospectus Supplement does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Company's Restated Articles of Incorporation (the "Articles of Incorporation"),
and the certificate of determination (a "Certificate of Determination") relating
to each series of the Preferred Stock which will be filed with the Commission
and incorporated by reference as an exhibit to the Registration Statement of
which this Prospectus is a part at or prior to the time of the issuance of such
series of the Preferred Stock.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, $1 par value, 200,000 shares of preferred stock, $50 par value
("preferred stock of the Company," which term, as used herein, includes the
Preferred Stock offered hereby), 500,000 shares of cumulative preferred stock,
$100 par value ("Cumulative Preferred Stock"), and 2,000,000 shares of
preference stock, $20 par value (the "Preference Stock"). As of June 30, 1995
there were outstanding 23,898,709 shares of Common Stock and 40,000 shares of
Cumulative Preferred Stock. No shares of preferred stock of the Company or
Preference Stock of the Company were outstanding on this date.
The Company is required to redeem 8,000 shares annually through 1999 of the
Cumulative Preferred Stock at par value plus accrued dividends. All outstanding
shares of Cumulative Preferred Stock are redeemable at the option of the Company
at any time upon 30 days' notice at par value plus accrued dividends and a
premium equal to the dividend rate in the first year commencing December 1, 1979
and declining ratably each year thereafter to par value. In addition, the
Company may redeem up to 8,000 shares of Cumulative Preferred Stock (but not
more than 45,000 shares in the aggregate) at par value plus accrued dividends on
any mandatory redemption date without payment of a premium. The dividend rate on
the Cumulative Preferred Stock is 9.5% and is cumulative.
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The Articles of Incorporation provide that in the event of involuntary
liquidation, (a) before distributions may be made to holders of any other class
of Junior Stock (as hereinafter defined), holders of Cumulative Preferred Stock
are entitled to payment in full at par value, together with accrued dividends.
The holders of shares of the Cumulative Preferred Stock are not entitled to
notice of any meetings of shareholders or to vote upon the election of directors
or upon any question affecting the management or affairs of the Company, except
to the extent otherwise provided by law or the Certificate of Determination for
the Cumulative Preferred Stock. The Certificate of Determination for the
Cumulative Preferred Stock provides that the holders of all shares of Cumulative
Preferred Stock, voting as a class, are entitled to elect two directors to the
Board of Directors of the Company whenever four quarterly dividends upon any
shares of Cumulative Preferred Stock are in arrears or any mandatory redemption
payment is one year in arrears, until all dividends in default and mandatory
redemption payments have been made. In addition, an affirmative vote of the
holders of all shares of Cumulative Preferred Stock outstanding is required for
the authorization or creation (or increase in the authorized amount) of any
class of stock ranking senior to the Cumulative Preferred Stock. It is, however,
permissible to issue up to 200,000 shares of preferred stock of the Company
senior to the Cumulative Preferred Stock. The affirmative vote of 66 2/3% of the
outstanding shares of Cumulative Preferred Stock is also required in order (a)
to amend the Articles of Incorporation in certain respects that would adversely
affect the rights of the holders of Cumulative Preferred Stock, (b) to increase
the amount of Cumulative Preferred Stock authorized by the Articles of
Incorporation or the authorization or creation of any class of stock ranking on
a parity with the Cumulative Preferred Stock, (c) for the Company to sell, lease
or convey substantially all of the business of the Company, the parting of
control thereof or the merger or consolidation of the Company into another
corporation in which the Company is not the surviving corporation, or (d) to
issue or reissue any shares of Cumulative Preferred Stock ranking on a parity
with the Cumulative Preferred Stock unless certain financial tests are met.
ISSUANCE OF PREFERRED STOCK
Under the Articles of Incorporation, the Board of Directors of the Company
is authorized without further shareholder action to provide for the issuance of
up to 200,000 shares of preferred stock of the Company in preference to the
holders of Cumulative Preferred Stock, Preference Stock and Common Stock (the
Common Stock, Cumulative Preferred Stock and Preference Stock being herein
referred to as "Junior Stock"), in one or more series, with such dividend
rights, dividend rate, conversion rights, voting rights, rights and time of
redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and designation, as shall be stated in the resolution or
resolutions providing for the issue of a series of such preferred stock of the
Company adopted, at any time or from time to time, by the Board of Directors of
the Company. The Board of Directors may also increase or decrease (but not below
the number of shares of such series then outstanding) the number of shares of
any such series subsequent to the issue of that series.
As described under "Description of Depositary Shares," the Company may, at
its option, elect to offer Depositary Shares evidenced by depositary receipts
(the "Depositary Receipts"), each representing a fraction (to be specified in
the Prospectus Supplement relating to the particular series of the Preferred
Stock) of a share of the particular series of the Preferred Stock issued and
deposited with a depositary, in lieu of offering full shares of such series of
the Preferred Stock.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in a Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference is
made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including: (a) the
designation of such Preferred Stock and the number of shares offered; (b) the
amount of liquidation preference per share; (c) the initial public offering
price at which such Preferred Stock will be issued; (d) the dividend rate (or
method of calculation), the dates on which dividends shall be payable and the
dates from which dividends shall commence to cumulate, if any; (e) any
redemption or sinking fund provisions; (f) any conversion rights; (g) whether
the Company has elected to offer Depositary Shares as described below under
"Description of Depositary Shares;" and (h) any additional voting, dividend,
liquidation, redemption, sinking fund and other rights, preferences, privileges,
limitations and restrictions.
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The Preferred Stock will, when issued, be fully paid and nonassessable and
will have no preemptive rights. The rights of the holders of each series of the
Preferred Stock to receive dividends and distributions of assets will be
subordinate to those of the Company's general creditors, but superior to the
rights of holders of Junior Stock. See "Description of Common Stock" for a
description of certain provisions of State and federal law and the Articles of
Incorporation and Bylaws of the Company which may affect holders of Preferred
Stock.
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
of the Company legally available therefor, cash dividends on such dates and at
such rates as are set forth in, or as are determined by the method described in,
the Prospectus Supplement relating to such series of the Preferred Stock. Such
rate may be fixed or variable or both. Each such dividend will be payable to the
holders of record as they appear on the stock books of the Company (or, if
applicable, the records of the Depositary (as hereinafter defined) referred to
under "Description of Depositary Shares") on such record dates, fixed by the
Board of Directors of the Company, as specified in the Prospectus Supplement
relating to such series of Preferred Stock.
Such dividends may be cumulative or noncumulative, as provided in the
Prospectus Supplement relating to such series of Preferred Stock. If the Board
of Directors of the Company fails to declare a dividend payable on a dividend
payment date on any series of Preferred Stock for which dividends are
noncumulative, then the right to receive a dividend in respect of the dividend
period ending on such dividend payment date will be lost, and the Company will
have no obligation to pay the dividend accrued for such period, whether or not
dividends on such series are declared payable on any future dividend payment
dates. Dividends on the shares of each series of Preferred Stock for which
dividends are cumulative will accrue from the date on which the Company
initially issues shares of such series.
Unless otherwise specified in the applicable Prospectus Supplement, so long
as the shares of any series of the Preferred Stock are outstanding, unless (a)
full dividends (including if such Preferred Stock is cumulative, dividends for
prior dividend periods) have been paid or declared and set apart for payment on
all outstanding shares of the Preferred Stock of such series and all other
classes and series of preferred stock of the Company (other than Junior Stock)
and (b) the Company is not in default or in arrears with respect to the
mandatory or optional redemption or mandatory repurchase or other mandatory
retirement of, or with respect to any sinking or other analogous fund for, any
shares of Preferred Stock of such series or any shares of any other preferred
stock of the Company of any class or series (other than Junior Stock), the
Company may not declare any dividends on any shares of Common Stock of the
Company or any other stock of the Company ranking as to dividends or
distributions of assets junior to such series of Preferred Stock, or make any
payment on account of, or set apart money for, the purchase, redemption or other
retirement of, or for a sinking or other analogous fund for, any shares of
Junior Stock or make any distribution in respect thereof, whether in cash or
property or in obligations or stock of the Company, other than Junior Stock
which is neither convertible into, nor exchangeable or exercisable for, any
securities of the Company other than Junior Stock.
LIQUIDATION PREFERENCES
Unless otherwise specified in the applicable Prospectus Supplement, in the
event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of each series of the Preferred Stock will
be entitled to receive out of the assets of the Company available for
distribution to shareholders, before any distribution of assets is made to the
holders of Junior Stock, the amount set forth in the Prospectus Supplement
relating to such series of the Preferred Stock. If, upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the amounts
payable with respect to the Preferred Stock of any series and any other shares
of preferred stock of the Company (including any other series of the Preferred
Stock) ranking as to any such distribution on a parity with such series of the
Preferred Stock are not paid in full, the holders of the Preferred Stock of such
series and of such other shares of preferred stock of the Company will share
ratably in any such distribution of assets of the Company in proportion to the
full respective preferential amounts to which they are entitled. After payment
to the holders of the Preferred Stock
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of each series of the full preferential amounts of the liquidating distribution
to which they are entitled, the holders of each such series of the Preferred
Stock will be entitled to no further participation in any distribution of assets
by the Company.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or from time to
time in part, at the option of the Company, and may be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon terms, at
the times and at the redemption prices set forth in the Prospectus Supplement
relating to such series. Unless otherwise provided in the applicable Prospectus
Supplement, shares of the Preferred Stock redeemed by the Company will be
restored to the status of authorized but unissued shares of preferred stock of
the Company.
In the event that fewer than all of the outstanding shares of a series of
the Preferred Stock are to be redeemed, whether by mandatory or optional
redemption, the number of shares to be redeemed will be determined by lot or pro
rata (subject to rounding to avoid fractional shares) as may be determined by
the Company or by any other method as may be determined by the Company in its
sole discretion to be equitable. From and after the redemption date (unless
default is made by the Company in providing for the payment of the redemption
price plus accumulated and unpaid dividends, if any) dividends will cease to
accumulate on the shares of the Preferred Stock called for redemption and all
rights of the holders thereof (except the right to receive the redemption price
plus accumulated and unpaid dividends, if any) will cease.
Unless otherwise specified in the applicable Prospectus Supplement, so long
as any dividends on shares of any series of the Preferred Stock or any other
series of preferred stock of the Company ranking on a parity as to dividends and
distribution of assets with such series of the Preferred Stock are in arrears,
no shares of any such series of the Preferred Stock or such other series of
preferred stock of the Company will be redeemed (whether by mandatory or
optional redemption) unless all such shares are simultaneously redeemed, and the
Company will not purchase or otherwise acquire any such shares; provided,
however, that the foregoing will not prevent the purchase or acquisition of such
shares pursuant to a purchase or exchange offer made on the same terms to
holders of all such shares outstanding.
CONVERSION RIGHTS
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted (mandatorily or otherwise) into shares of Common
Stock or another series of Preferred Stock will be set forth in the Prospectus
Supplement relating thereto. See "Description of Common Stock."
VOTING RIGHTS
Except as indicated below or in a Prospectus Supplement relating to a
particular series of the Preferred Stock, or except as required by applicable
law, the holders of the Preferred Stock will not be entitled to vote for any
purpose.
Unless otherwise specified in the applicable Prospectus Supplement, so long
as any shares of the Preferred Stock of a series remain outstanding, the consent
or the affirmative vote of the holders of at least a majority of the votes
entitled to be cast with respect to the then outstanding shares of such series
of the Preferred Stock together with any Other Preferred Stock (as defined
below), voting as one class, either expressed in writing or at a meeting called
for that purpose, will be necessary (a) to permit, effect or validate the
authorization, or any increase in the authorized amount, of any class or series
of shares of the Company ranking prior to the Preferred Stock of such series as
to dividends, voting or upon distribution of assets and (b) to repeal, amend or
otherwise change any of the provisions applicable to the Preferred Stock of such
series in any manner which adversely affects the powers, preferences, voting
power or other rights or privileges of such series of the Preferred Stock. In
case any series of the Preferred Stock would be so affected by any such action
referred to in clause (b) above in a different manner than one or more series of
the Other Preferred Stock then outstanding, the holders of shares of the
Preferred Stock of such series, together with any series of the Other Preferred
Stock which will be similarly affected, will be entitled to vote as a class, and
the Company
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will not take such action without the consent or affirmative vote, as above
provided, of at least a majority of the total number of votes entitled to be
cast with respect to each such series of the Preferred Stock and the Other
Preferred Stock, then outstanding, in lieu of the consent or affirmative vote
hereinabove otherwise required.
Unless otherwise specified in the applicable Prospectus Supplement, with
respect to any matter as to which the Preferred Stock of any series is entitled
to vote, holders of the Preferred Stock of such series and any other series of
preferred stock of the Company ranking on a parity with such series of the
Preferred Stock as to dividends and distributions of assets and which by its
terms provides for similar voting rights (the "Other Preferred Stock") will be
entitled to cast the number of votes set forth in the Prospectus Supplement with
respect to that series of Preferred Stock. As a result of the provisions
described in the preceding paragraph requiring the holders of shares of a series
of the Preferred Stock to vote together as a class with the holders of shares of
one or more series of Other Preferred Stock, it is possible that the holders of
such shares of Other Preferred Stock could approve action that would adversely
affect such series of Preferred Stock, including the creation of a class of
capital stock ranking prior to such series of Preferred Stock as to dividends,
voting or distributions of assets.
As more fully described below under "Description of Depositary Shares," if
the Company elects to issue Depositary Shares, each representing a fraction of a
share of a series of the Preferred Stock, each such Depositary Share will, in
effect, be entitled to such fraction of a vote per Depositary Share.
TRANSFER AGENT AND REGISTRAR
Unless otherwise indicated in a Prospectus Supplement relating thereto, the
Company will be the transfer agent, dividend and redemption price disbursement
agent and registrar for shares of each series of the Preferred Stock.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts does not purport to be complete and is subject to
and qualified in its entirety by reference to the Deposit Agreement and
Depositary Receipts relating to each series of the Preferred Stock which will be
filed with the Commission and incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part at or prior to the
time of the issuance of such series of the Preferred Stock. The forms of Deposit
Agreement and Depositary Receipt are filed as exhibits to the Registration
Statement of which this Prospectus is a part.
GENERAL
The Company may, at its option, elect to offer fractional shares of
Preferred Stock rather than full shares of Preferred Stock. In the event such
option is exercised, the Company will issue to the public receipts for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of the Preferred
Stock) of a share of a particular series of the Preferred Stock as described
below.
The shares of any series of the Preferred Stock represented by Depositary
Shares will be deposited under a separate deposit agreement (the "Deposit
Agreement") among the Company, a bank or trust company selected by the Company
(the "Depositary") and the holders from time to time of the Depositary Receipts.
Subject to the terms of the Deposit Agreement, each owner of a Depositary Share
will in general be entitled, in proportion to the applicable fraction of a share
of Preferred Stock represented by such Depositary Share, to all the rights and
preferences of the Preferred Stock represented thereby (including dividend,
voting, redemption and liquidation rights).
The Depositary Shares relating to any series of the Preferred Stock will be
evidenced by Depositary Receipts issued pursuant to the related Deposit
Agreement. Depositary Receipts will be distributed to those persons purchasing
such Depositary Shares in accordance with the terms of the offering made by the
related Prospectus Supplement.
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Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to the
terms thereof, a holder of Depositary Receipts is entitled to have the
Depositary deliver to such holder the whole shares of Preferred Stock underlying
the Depositary Shares evidenced by the surrendered Depositary Receipts. However,
there may be no market for the underlying Preferred Stock and once the
underlying Preferred Stock is withdrawn from the Depositary, it may not be
redeposited.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Receipts relating to such Preferred Stock in proportion, insofar
as practicable, to the respective numbers of Depositary Shares evidenced by such
Depositary Receipts held by such holders on the relevant record date. The
Depositary will distribute only such amount, however, as can be distributed
without attributing to any holder of Depositary Receipts a fraction of one cent,
and any balance not so distributed will be added to and treated as part of the
next sum received by the Depositary for distribution to record holders of
Depositary Receipts then outstanding.
In the event of a distribution other than in cash, the Depositary will
distribute such amounts of the securities or property received by it as are, as
nearly as practicable, in proportion to the respective numbers of Depositary
Shares evidenced by the Depositary Receipts held by such holders on the relevant
record date, unless the Depositary determines that it is not feasible to make
such distribution, in which case the Depositary may, with the approval of the
Company, adopt such method as it deems equitable and practicable for the purpose
of effecting such distribution, including the sale of such securities or
property.
The Deposit Agreement will also contain provisions relating to the manner
in which any subscription or similar rights offered by the Company to holders of
the Preferred Stock will be made available to holders of Depositary Receipts.
The amount distributed in all of the foregoing cases will be reduced by any
amounts required to be withheld by the Company or the Depositary on account of
taxes and governmental charges.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock represented by Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of the Preferred Stock held by the Depositary. The Depositary
will mail notice of redemption not less than 30 and not more than 60 days prior
to the date fixed for redemption to the record holders of the Depositary
Receipts evidencing the Depositary Shares to be so redeemed at their respective
addresses appearing in the Depositary's books. The redemption price per
Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such series of the Preferred Stock plus
all money and other property, if any, payable with respect to such Depositary
Share, including all amounts payable by the Company in respect of any
accumulated but unpaid dividends. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Stock so redeemed. If less than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata (subject to rounding to avoid fractions of Depositary Shares) as may be
determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of Depositary Receipts evidencing such Depositary Shares will cease,
except the right to receive the moneys payable upon such redemption and any
moneys or other property to which such holders were entitled upon such
redemption upon surrender to the Depositary of the Depositary Receipts
evidencing such Depositary Shares.
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VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting or action to be taken by written
consent at or as to which the holders of the Preferred Stock are entitled to
vote or consent, the Depositary will mail the information contained in such
notice of meeting or action to the record holders of the Depositary Receipts
evidencing the Depositary Shares relating to such Preferred Stock. Each record
holder of such Depositary Receipts on the record date (which will be the same
date as the record date for the Preferred Stock) will be entitled to instruct
the Depositary as to the exercise of the voting rights or the giving or refusal
of consent, as the case may be, pertaining to the number of shares of the
Preferred Stock represented by the Depositary Shares evidenced by such holder's
Depositary Receipts. The Depositary will endeavor, insofar as practicable, to
vote, or give or withhold consent with respect to, the maximum number of whole
shares of the Preferred Stock represented by all Depositary Shares as to which
any particular voting or consent instructions are received, and the Company will
agree to take all action which may be deemed necessary by the Depositary in
order to enable the Depositary to do so. The Depositary will abstain from
voting, or giving consents with respect to, shares of the Preferred Stock to the
extent it does not receive specific instructions from the holders of Depositary
Receipts evidencing Depositary Shares representing such Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares relating to
any series of Preferred Stock and any provision of the related Deposit Agreement
may at any time and from time to time be amended by agreement between the
Company and the Depositary in any respect which they may deem necessary or
desirable. However, any amendment which imposes or increases any fees, taxes or
charges upon holders of Depositary Shares or Depositary Receipts relating to any
series of Preferred Stock or which materially and adversely alters the existing
rights of such holders will not be effective unless such amendment has been
approved by the record holders of Depositary Receipts evidencing at least a
majority of such Depositary Shares then outstanding. Notwithstanding the
foregoing, no such amendment may impair the right of any holder of Depositary
Shares or Depositary Receipts to receive any moneys or other property to which
such holder may be entitled under the terms of such Depositary Receipts or the
Deposit Agreement at the times and in the manner and amount provided for
therein. A Deposit Agreement may be terminated by the Company or the Depositary
only after (a) all outstanding Depositary Shares relating thereto have been
redeemed and any accumulated and unpaid dividends on the Preferred Stock
represented by the Depositary Shares, together with all other moneys and
property, if any, to which holders of the related Depositary Receipts are
entitled under the terms of such Depositary Receipts or the related Deposit
Agreement, have been paid or distributed as provided in the Deposit Agreement or
provision therefor has been duly made, (b) there has been a final distribution
in respect of the Preferred Stock of the relevant series in connection with any
liquidation, dissolution or winding up of the Company and such distribution has
been distributed to the holders of the related Depositary Receipts, or (c) in
the event the Depositary Shares relate to a series of Preferred Stock which is
convertible into shares of Common Stock or another series of Preferred Stock,
all outstanding Depositary Shares have been converted into shares of Common
Stock or another series of Preferred Stock.
MISCELLANEOUS
The Depositary will forward to record holders of Depositary Receipts, at
their respective addresses appearing in the Depositary's books, all reports and
communications from the Company which are delivered to the Depositary and which
the Company is required to furnish to the holders of the Preferred Stock or
Depositary Receipts.
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and the initial issuance of the Depositary Receipts evidencing
the Depositary Shares, any redemption of the Preferred Stock and any withdrawals
of Preferred Stock by the holders of Depositary Shares. Holders of Depositary
Shares will pay other transfer and other taxes and
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governmental charges and such other charges as are expressly provided in the
Deposit Agreement to be for their accounts.
The Deposit Agreement will contain provisions relating to adjustments in
the fraction of a share of Preferred Stock represented by a Depositary Share in
the event of a change in par value, split-up, combination or other
reclassification of the Preferred Stock or upon any recapitalization, merger or
sale of substantially all of the assets of the Company as an entirety.
Neither the Depositary nor any of its agents nor any registrar nor the
Company will be (a) liable if it is prevented or delayed by law or any
circumstance beyond its control in performing its obligations under the Deposit
Agreement, (b) subject to any liability under the Deposit Agreement to holders
of Depositary Receipts other than for the relevant party's gross negligence or
willful misconduct, or (c) obligated to prosecute or defend any legal proceeding
in respect of any Depositary Receipts, Depositary Shares or the Preferred Stock
unless satisfactory indemnity is furnished. They may rely upon written advice of
counsel or accountants, or information provided by holders of Depositary
Receipts or other persons in good faith believed to be competent and on
documents reasonably believed to be genuine.
RESIGNATION OR REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice
of its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal.
DESCRIPTION OF COMMON STOCK
GENERAL
The holders of the outstanding shares of Common Stock have full voting
rights, one vote for each share held of record. Shareholders have cumulative
voting rights with respect to the election of directors, if certain conditions
are met. Upon liquidation, dissolution, or winding up of the Company (but
subject to the rights of holders of preferred stock of the Company, Cumulative
Preferred Stock and Preference Stock), the assets legally available for
distribution to holders of Common Stock will be distributed ratably among such
holders. Holders of Common Stock have no preemptive or other subscription or
conversion rights, and no liability for further calls upon shares. The Common
Stock is not subject to assessment. Shares of Common Stock may be issued in
series with a special initial dividend rate as hereinafter described (any such
series, being referred to herein as "Special Common Stock"). No shares of
Special Common Stock are outstanding and the Company does not intend to offer
such securities in the future.
Subject to the rights of holders of preferred stock of the Company,
Cumulative Preferred Stock and Preference Stock, holders of Common Stock are
entitled to receive such dividends as may be declared by the Board of Directors
of the Company out of funds legally available therefor. Dividends on all series
of Common Stock must have the same record and payment dates. No series of Common
Stock may have preference over any other series as to the payment of dividends,
but the amount of cash dividends paid may vary among series.
Under the terms of the Articles of Incorporation, the initial dividend rate
on any Special Common Stock issued by the Company must be established by the
Board of Directors of the Company at or before the issuance thereof at an annual
rate greater than four times the last quarterly dividend paid on Common Stock
which is not Special Common Stock (referred to herein as "Original Common
Stock").
The initial dividend rate on each share of Special Common Stock must be
reduced if the quarterly dividend on a share of Original Common Stock is reduced
and on the same percentage basis. The initial dividend rate on each share of
Special Common Stock must also be increased if the dividend on a share of
Original Common Stock is increased and on the same percentage basis; provided
that at no time may the dividend on a share of Special Common Stock of any
series exceed the greater of (a) one-fourth of the initial
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<PAGE> 57
annual dividend rate established at the time of issuance of any such share of
Special Common Stock, or (b) the dividend rate concurrently being paid on each
of the outstanding shares of Original Common Stock. Shares of Special Common
Stock of any series will cease to be shares of Special Common Stock (and will
thereafter be considered to be shares of Original Common Stock) at any time that
the aggregate of all dividends paid during any fiscal year on shares of Special
Common Stock of that series fails to exceed the aggregate of all dividends paid
by the Company during such year on each share of Original Common Stock.
The Company is the transfer agent and registrar for the Common Stock.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
The Company's Articles of Incorporation contain provisions which require a
super-majority vote of the holders of Common Stock in order for certain types of
business combinations to be approved. These provisions are applicable to (a) any
merger or consolidation of the Company with or into a dominant stockholder (as
hereinafter defined) or any entity controlled by a dominant stockholder, (b) any
merger of a dominant stockholder with or into the Company or any corporation
controlled by or under common control with the Company, (c) any sale, lease,
exchange or transfer of all or substantially all of the property and assets of
the Company to a dominant stockholder or any entity controlled by or under
common control with a dominant stockholder, (d) any purchase, lease, exchange,
transfer or acquisition by the Company of all or substantially all of the
property and assets of a dominant stockholder or any entity controlled by or
under common control with a dominant stockholder, (e) any recapitalization of
the Company that would have the effect of increasing the voting power of a
dominant stockholder, and (f) any agreement, contract or other arrangement
providing for any of the foregoing. The term "dominant stockholder" is defined
as any person that, together with any affiliate or associate, beneficially owns
in the aggregate 10% or more of the outstanding Common Stock of the Company.
The affirmative vote of not fewer than 85% of the outstanding shares of
Common Stock must approve a business combination, unless (a) the Board of
Directors of the Company has approved the business combination by the
affirmative vote of (i) not fewer than 65% of its members if the business
combination is approved in advance of the dominant stockholder becoming a
dominant stockholder or the acquisition of shares of Common Stock that caused
the dominant stockholder to become a dominant stockholder has been approved in
advance, or (ii) not fewer than 85% of its members in all other circumstances,
or (b) the Board of Directors of the Company by an affirmative vote of not fewer
than 85% has determined that the cash or fair value of the properties,
securities or other consideration to be received by the holders of Common Stock
in the business combination is not less than the highest per share price paid by
the dominant stockholder in acquiring any of its holdings of the Common Stock.
These provisions may only be amended by an affirmative vote of 65% of the
outstanding shares of the Company's Common Stock, unless there is a dominant
stockholder at the time of the vote, in which event a vote of 85% of the
outstanding shares of Common Stock is required.
California law permits corporations to limit or eliminate the personal
liability of their directors in any action, including actions brought by the
corporation or its shareholders for monetary damages for breach of a director's
fiduciary duty of care. The duty of care requires that, when acting on behalf of
the corporation, a director must act in good faith, in a manner such director
believes to be in the best interests of the corporation and its shareholders and
with such care, including reasonable inquiry, as an ordinarily prudent person in
a like position would use under similar circumstances. As a result, the
available relief to a corporation and its shareholders may be limited to
equitable remedies such as injunction or rescission if a company indemnifies its
directors to the fullest extent permitted by California law.
Article VIII of the Company's Articles of Incorporation and Bylaws limit
the liability of directors of the Company to the Company or its shareholders (in
their capacity as directors, but not in their capacity as officers) to the
fullest extent permitted by California law. Specifically, directors of the
Company are not personally liable to the Company or its shareholders for
monetary damages for breach of a director's fiduciary duty as a director, except
(a) on account of profits made in connection with a purchase or sale of
securities in violation of Section 16(b) of the Exchange Act, (b) if a court of
competent jurisdiction determines that indemnification is unlawful, (c) for acts
or omissions involving intentional misconduct or knowing and
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<PAGE> 58
culpable violations of law, (d) for acts or omissions that the director believed
to be contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of the director, (e) for any
transaction for which the director derived an improper benefit, (f) for acts or
omissions that show a reckless disregard for the director's duty to the Company
or its shareholders in circumstances in which the director was aware, or should
have been aware, in the ordinary course of performing his or her duties, of a
risk of serious injury to the Company or its shareholders, (g) for acts or
omissions that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duties to the corporation or its shareholders, (h)
for liabilities arising out of transactions in which the director had a personal
interest, (i) for the approval of distributions to the Company's shareholders in
violation of California law, or (j) for the approval of the making by the
Company of any loan of money or property to a director or officer of the Company
or the guarantee of the obligations of any such director or officer in violation
of California law. The inclusion of these provisions in the Company's Articles
of Incorporation and Bylaws may have the effect of reducing the likelihood of
litigation against directors of the Company, even though such an action, if
successful, might otherwise have benefited the Company or its shareholders.
CERTAIN PROVISIONS OF STATE AND FEDERAL LAW
Arizona regulates certain business combinations by an "interested
shareholder" of a public corporation if the public corporation (a) has issued
securities under Section 12 of the Exchange Act, (b) has its principal place of
business in the State of Arizona, (c) owns or controls assets located within the
State of Arizona with a fair market value of at least one million dollars, and
(d) has more than 500 employees in the State of Arizona. The Company believes
that these provisions are currently applicable to the Company. A person becomes
an interested shareholder under the Arizona business combination statute upon
the acquisition of 10% or more of the outstanding voting shares of the public
corporation. The term "business combination" is broadly defined to include not
only acquisitions, but also restructuring transactions and transactions in which
the interested shareholder, or its associates or affiliates, receive financial
assistance or tax advantages from the public corporation. Business combinations
must be approved by a majority of the members of a committee of disinterested
directors in advance of the interested person becoming an interested person or
the consummation of the business combination must be delayed for three years and
the price to be paid must meet certain fair price criteria. The committee must
consider the long term interests of the public corporation in connection with
approving any such transaction. Additional restrictions are applicable to
acquisitions of control of 20% or more of a public corporation's voting stock.
Under California law, if a tender offer or a written proposal for approval
of a reorganization of a corporation or a sale of substantially all of its
assets is made by an "interested party", an affirmative opinion in writing as to
the fairness of the consideration to be received by the shareholders must be
delivered to each shareholder. The term "interested party" means a person who is
a party to the transaction and who (a) directly or indirectly controls the
corporation that is the subject of the tender offer or proposal, (b) is, or is
directly or indirectly controlled by, an officer or director of the corporation,
or (c) is an entity in which a material financial interest is held by any
director or executive officer.
No public utility or any of its affiliates may acquire any of the capital
stock of a public utility organized under California law, without CPUC approval,
if (a) the acquiror transacts business in California, or (b) the CPUC determines
that CPUC approval is otherwise required by the public interest. In addition, a
change in control application must be filed with the CPUC in connection with any
change in control of a public utility organized under California law. PSCN
approval is also required prior to any proposed transfer of 15% or more of the
common stock of a public utility doing business in Nevada.
No person may acquire 5% or more of the voting stock of a gas utility
(other than by merger), without Securities and Exchange Commission (the
"Commission") approval, if such person owns 5% or more of the stock of another
public utility or public utility holding company. A registered public utility
holding company may not acquire any security of another gas utility without
Commission approval, unless the transaction is exempt under the Public Utility
Holding Company Act of 1935, as amended (the "PUHCA"), or the regulations
promulgated thereunder. A person becomes a holding company required to be
registered under PUHCA upon acquisition of 10% or more of the voting stock of a
gas utility, unless the Commission determines that the person does not control
the gas utility. The Commission may condition any such
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<PAGE> 59
determination upon the applicant refraining from exercising voting rights,
controlling proxies or designating officers or directors. The Commission may not
approve the acquisition of securities of a gas utility unless it determines that
the acquisition would tend toward the economical and efficient development of an
integrated public utility system and would not be detrimental to investor
interests. The Commission may also condition its approval of the acquisition of
the securities of a gas utility upon a fair offer being made for the other
securities of the utility.
In addition to being a gas utility, the Company is also a savings and loan
holding company. No person may acquire control of a savings and loan holding
company without the prior approval of the OTS, unless the transaction is exempt.
A person is conclusively deemed to have obtained control of a savings and loan
holding company if it (a) has acquired any combination of voting stock and
irrevocable proxies representing more than 25% of any class of voting stock of
the savings and loan holding company, or (b) controls in any manner the election
of a majority of the directors of the savings and loan holding company or
savings and loan association. A person who has acquired more than 10% of any
class of voting stock of the savings and loan holding company may also be deemed
to have control of the savings and loan holding company if certain control
factors are present.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
Securities will be named in the applicable Prospectus Supplement. The Company
has reserved the right to sell Securities directly to investors on its own
behalf in those jurisdictions where and in such manner as it is authorized to do
so.
Underwriters may offer and sell Securities at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Company
also may, from time to time, authorize dealers, acting as the Company's agents,
to offer and sell Securities upon the terms and conditions as are set forth in
the applicable Prospectus Supplement. In connection with the sale of Securities,
underwriters may receive compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Dealers and agents participating in the
distribution of Securities may be deemed to be underwriters, and any discounts
and commissions received by them and any profit realized by them on resale of
the Securities may be deemed to be underwriting discounts and commissions.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities.
Securities may also be offered and sold, if so indicated in the Prospectus
Supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, or otherwise, by one or
more firms ("remarketing firms"), acting as principals for their own accounts or
as agents for the Company. Any remarketing firm will be identified and the terms
of its agreement, if any, with the Company and its compensation will be
described in the applicable Prospectus Supplement. Remarketing firms may be
deemed to be underwriters in connection with the Securities remarketed thereby.
Remarketing firms may be entitled under agreements which may be entered into
with the Company to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act of 1933, and may be customers of,
engage in transactions with or perform services for the Company in the ordinary
course of business.
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LEGAL MATTERS
The validity of the Offered Securities will be passed upon for the Company
by O'Melveny & Myers.
EXPERTS
The consolidated financial statements incorporated by reference in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report included in the Annual Report on Form
10-K for the year ended December 31, 1994, and are included herein in reliance
upon the authority of said firm as experts in accounting and auditing in giving
said report.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE
OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
SOUTHWEST GAS CORPORATION, SOUTHWEST GAS CAPITAL I, OR THE UNDERWRITERS. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF SOUTHWEST GAS CORPORATION OR SOUTHWEST GAS CAPITAL I, SINCE THE
DATE HEREOF. THIS PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary Financial Information.............. S-4
Risk Factors............................... S-6
The Company................................ S-9
Recent Operating Results................... S-11
Capital Expenditures and Financing
Programs................................. S-12
The Trust.................................. S-12
Accounting Treatment....................... S-13
Use of Proceeds............................ S-14
Description of the Preferred Securities.... S-14
Description of the Subordinated Debt
Securities............................... S-23
Effect of Obligations Under the
Subordinated Debt Securities and the
Guarantee................................ S-29
United States Federal Income Taxation...... S-30
Underwriting............................... S-33
Legal Matters.............................. S-34
PROSPECTUS
Available Information...................... 2
Incorporation of Certain Documents by
Reference................................ 2
The Company................................ 3
The Trust.................................. 3
Use of Proceeds............................ 4
Ratios of Earnings to Fixed Charges........ 5
Description of Debt Securities............. 5
Particular Terms of Subordinated Debt
Securities Issued in Connection with
Preferred Securities..................... 11
Description of the Preferred Securities.... 12
Description of the Guarantee............... 13
Description of Preferred Stock............. 15
Description of Depositary Shares........... 19
Description of Common Stock................ 22
Plan of Distribution....................... 25
Legal Matters.............................. 26
Experts.................................... 26
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</TABLE>
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2,400,000
PREFERRED SECURITIES
SOUTHWEST GAS CAPITAL I
LOGO(R)
9.125% TRUST ORIGINATED
PREFERRED SECURITIES ("TOPRS")
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
SOUTHWEST GAS CORPORATION
------------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
OCTOBER 26, 1995
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- ------------------------------------------------------
