PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 28, 1996
4,000,000 Preferred Securities
SOUTHWESTERN PUBLIC SERVICE CAPITAL I
7.85% Trust Preferred Securities, Series A
(Liquidation Amount $25 per Preferred Security)
Fully and Unconditionally Guaranteed by
Southwestern Public Service Company
-------------------------
The 7.85% Trust Preferred Securities, Series A (the "Preferred
Securities") offered hereby represent undivided preferred beneficial interests
in Southwestern Public Service Capital I, a trust formed under the laws of the
State of Delaware (the "Issuer" or the "Trust"). The preferred interests
represented by the Preferred Securities will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the trust interests represented by the
Common Securities (as defined) issued by the Issuer. See "Description of
Preferred Securities -- Subordination of Common Securities" in the accompanying
Prospectus.
Southwestern Public Service Company, a New Mexico corporation (the
"Company"), will be the owner of the trust interests represented by the common
securities (the "Common Securities") issued by the Issuer. The Issuer exists for
the sole purpose of issuing its trust interests and investing the proceeds
thereof in the 7.85% Deferrable Interest Subordinated Debentures, Series A, due
2036 (the "Junior Subordinated Debentures") issued by the Company.
Holders of the Preferred Securities will be entitled to receive
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears on March 1, June 1, September 1 and December 1 of
each year, commencing December 1, 1996, at the rate of 7.85% per annum. The
Company has the right to defer interest payments on the Junior Subordinated
Debentures by extending the interest payment period thereon at any time for up
to 20 consecutive quarters (each an "Extension Period"). If interest payments
are so deferred, distributions on the Preferred Securities will also be
deferred. During an Extension Period, distributions, as well as interest thereon
to the extent permitted by law, will continue to accrue, and holders of
Preferred Securities will be required to accrue interest income for United
States Federal income tax purposes. See "Certain Terms of the Junior
Subordinated Debentures -- Option to Extend Interest Payment Period" and "United
States Taxation -- Potential Extension of Interest Payment Period and Original
Issue Discount."
As more fully described herein, the Company will enter into several
contractual arrangements (the "Surety Obligations") for the purpose of fully and
unconditionally guaranteeing the payment of distributions on, payments on any
redemption of, and any liquidation distribution with respect to the Preferred
Securities. These Surety Obligations are comprised of: (i) the guarantee by the
Company (the "Guarantee") for the benefit of holders of Preferred Securities;
(ii) the trust agreement pursuant to which the Trust was formed (the "Trust
Agreement"); (iii) an expenses and liabilities agreement (the "Expense
Agreement") provided for in the Trust Agreement pursuant to which the Company
will agree to pay all of the Trust indebtedness, expenses or liabilities (other
than obligations of the Trust to pay to holders of the Preferred Securities the
amounts due such holders pursuant to the terms of the Preferred Securities); and
(iv) the Junior Subordinated Debentures and the indenture (the "Indenture")
pursuant to which they will be issued.
<PAGE>
The Guarantee is limited to a guarantee, on a subordinated basis, to
the holders of Preferred Securities, of the payment of distributions, out of
moneys held by the Issuer, and payments upon liquidation of the Issuer or the
redemption of Preferred Securities, as set forth below. See "Certain Terms of
the Guarantee." If the Company fails to make interest payments on the Junior
Subordinated Debentures held by the Issuer, the Issuer will have insufficient
funds to pay distributions on the Preferred Securities. The Guarantee does not
cover payment of distributions when the Issuer does not have sufficient funds to
pay such distributions. In such event, the remedy of a holder of Preferred
Securities is to enforce the rights of the Issuer under the Junior Subordinated
Debentures held by the Issuer. The Company's obligations under the Guarantee are
subordinate and junior in right of payment to all other liabilities of the
Company except trade credit and any liabilities that may be made pari passu with
or subordinate to the Guarantee expressly by their terms ("Senior
Indebtedness"). Wilmington Trust Company is the Property Trustee of the Issuer
and the Guarantee Trustee of the Company.
The Preferred Securities are subject to mandatory redemption upon
repayment of the Junior Subordinated Debentures at maturity or their earlier
redemption, in whole or in part. See "Description of Preferred Securities --
Redemption" in the accompanying Prospectus. The Company will have the option at
any time on or after October 21, 2001, to redeem, in whole or in part, the
Junior Subordinated Debentures, and will also have the right at any time, upon
the occurrence of a Special Event (as defined herein), to redeem, in whole but
not in part, the Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures -- Optional Redemption" in the accompanying Prospectus.
The Junior Subordinated Debentures are subordinate and junior in right
of payment to all Senior Indebtedness of the Company. As of May 31, 1996, the
Company had approximately $771 million principal amount of Senior Indebtedness
outstanding. The terms of the Junior Subordinated Debentures do not limit the
Company's ability to incur additional Senior Indebtedness. See "Description of
Junior Subordinated Debentures -- Subordination" in the accompanying Prospectus.
In the event of the liquidation of the Issuer, the holders of the
Preferred Securities will be entitled to receive for each Preferred Security a
liquidation preference of $25 (the "Liquidation Amount") plus accrued and unpaid
distributions thereon to the date of payment and interest thereon to the extent
permitted by law, subject to certain limitations. See "Description of Preferred
Securities -- Liquidation Distribution Upon Dissolution" in the accompanying
Prospectus.
The Preferred Securities have been approved for listing on the New
York Stock Exchange, subject to notice of issuance, under the symbol "SPS PrT."
The Preferred Securities will be represented by a global certificate
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Preferred Securities will be shown on, and transfers
thereof will be effected only through, records maintained by Participants (as
defined herein) in DTC. Except as described herein, Preferred Securities in
certificated form will not be issued in exchange for the global certificate. See
"Description of Preferred Securities -- Book-Entry-Only Issuance -- The
Depository Trust Company" in the accompanying Prospectus.
--------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THE PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
S-2
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
Underwriting Proceeds to
PRICE TO PUBLIC Commissions(*) Issuer(+)(++)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Per Preferred Security....... $25.00 (+) $25.00
- ---------------------------------------------------------------------------------------------
Total........................ $100,000,000 (+) $100,000,000
=============================================================================================
</TABLE>
(*) The Issuer and the Company have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(+) In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures, the
Underwriting Agreement provides that the Company will pay to the
Underwriters, as compensation for their arranging the investment therein of
such proceeds, $0.7875 per Preferred Security; or, in the case of certain
institutions, $0.50 per Preferred Security. Accordingly, the maximum
aggregate amount of underwriting commission will be $3,150,000, but the
actual amount of underwriting commission will be less than such amount to
the extent that Preferred Securities are sold to such institutions.
(++) Before deducting expenses of the offering payable by the Company estimated
to be $640,000.
--------------------
The Preferred Securities are being offered by the Underwriters as set
forth under "Underwriting" herein. It is expected that delivery of the Preferred
Securities will be made only in book-entry form through the facilities of DTC on
or about October 21, 1996 against payment therefor in immediately available
funds. The Underwriters include:
DILLON, READ & CO. INC.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
The date of this Prospectus Supplement is October 16, 1996.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
PREFERRED SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH 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,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
THE COMPANY
The Company, incorporated under the laws of the State of New Mexico in
1921, is principally engaged in the generation, transmission, distribution and
sale of electric energy in portions of Texas, New Mexico, Oklahoma and Kansas.
The electric properties comprise an interconnected system. A major portion of
the Company's electric operating revenues is derived from operations in Texas.
The Company has two wholly owned non-utility subsidiaries, Utility Engineering
Corporation and Quixx Corporation. The principal executive offices of the
Company are located at Tyler at Sixth, Amarillo, Texas 79101 (Tel:
806-378-2121).
At the annual meeting of the Company's shareholders held on January
31, 1996, the shareholders approved the proposed "merger of equals" of the
Company and Public Service Company of Colorado ("PSCo") (the "merger"). Pursuant
to the terms of the merger, upon satisfaction or waiver of the terms and
conditions thereof, the Company and PSCo will become wholly owned subsidiaries
of a new holding company called New Century Energies, Inc. The Company and PSCo
will maintain their separate identities and continue to serve customers in their
respective service areas. The Company's obligations, such as guarantees, debt
and any preferred stock (including the Guarantee and the Junior Subordinated
Debentures) of the Company outstanding at the time of effectiveness of the
merger will remain outstanding obligations, debt and preferred stock of the
Company and the terms and conditions thereof will not change. However, because
of this merger, the securities of the Company are subject to review by various
rating agencies and may be downgraded which could adversely affect the market
value of the securities. The transaction is subject to various conditions
including the receipt of approvals from various state and federal regulators.
The Company has a targeted completion date for the merger in early 1997.
THE ISSUER
GENERAL
Southwestern Public Service Capital I is a statutory business trust
formed under the Delaware Business Trust Act pursuant to (i) a trust agreement
executed by David M. Wilks, President and Chief Operating Officer of the
Company, as depositor of the Issuer, and the Property Trustee and (ii) the
filing of a certificate of trust with the Delaware Secretary of State on June 5,
1996. Such Trust Agreement will be amended and restated in its entirety (as so
amended and restated, the "Trust Agreement") substantially in the form filed as
an exhibit to the Registration Statement of which this Prospectus Supplement is
a part. The Trust Agreement has been qualified as an indenture under the Trust
Indenture Act of 1939, as amended. The Issuer exists for the exclusive purposes
of (i) issuing the Preferred Securities and the Common Securities representing
trust interests in the Issuer, (ii) purchasing the Junior Subordinated
Debentures with the Common Securities and the proceeds from the sale of the
Preferred Securities and (iii) engaging only in those activities necessary or
incidental thereto. All of the Common Securities will be 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 the occurrence and
continuance of an Event of Default under the Trust Agreement, the rights of the
holders of the Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise will be subordinate and
junior to the rights of the holders of the Preferred Securities. The Company
will acquire Common Securities having an aggregate Liquidation Amount equal to
3% of the total capital of the Issuer. The Issuer will terminate on September 1,
2036 unless earlier terminated as provided in the Trust Agreement. The Issuer's
business and affairs will be conducted by the Property Trustee and the
Administrative Trustees. The holder of the Common Securities, or if an Event of
Default has occurred and is continuing, the holders of at least a majority in
the aggregate Liquidation Amount of the then outstanding Common Securities and
Preferred Securities, will be entitled to appoint, remove or replace the
Trustees (as defined herein) of the Issuer.
The duties and obligations of the Trustees shall be governed by the
Trust Agreement. David M. Wilks, Robert D. Dickerson and James D. Steinhilper,
all employees of the Company, will be appointed as Administrative
S-4
<PAGE>
Trustees pursuant to the terms of the Trust Agreement. Under the Trust
Agreement, the Administrative Trustees will have certain duties and powers
including, but not limited to, the delivery of certain notices to the holders of
the Preferred Securities, the appointment of the Paying Agent (as defined in the
accompanying Prospectus) and the Registrar (as defined in the accompanying
Prospectus) and the registering of transfers of the Preferred Securities. Under
the Trust Agreement, Wilmington Trust Company, as the Property Trustee, will
have certain duties and powers including, but not limited to, the holding of
legal title to the Junior Subordinated Debentures on behalf of the Trust, the
collection of payments in respect of the Junior Subordinated Debentures, the
maintenance of the Payment Account (as defined in the Trust Agreement), the
sending of default notices with respect to the Preferred Securities and the
distribution of the assets of the Trust in the event of a winding up of the
Trust. See "Description of Preferred Securities" in the accompanying Prospectus.
The Company has agreed to pay all fees and expenses related to the
Issuer and the offering of the Preferred Securities pursuant to the Expense
Agreement.
ACCOUNTING TREATMENT
The Trust is a special purpose entity which is effectively controlled
by the Company. The financial position, operating results and cash flows of this
special purpose entity will be consolidated with the Company. The Junior
Subordinated Debentures issued by the Company to the Trust and all other
intercompany transactions will be eliminated in consolidation. The Preferred
Securities issued by the Trust will be reflected as a separate line item titled
"Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Trust holding solely Subordinated Debt Securities of the Company" in the
Company's Consolidated Statement of Capitalization. In addition, the Company
will include, in a footnote to its financial statements, disclosure that the
sole asset of the Trust is Junior Subordinated Debentures, stating the principal
amount, interest rate and maturity date of such Junior Subordinated Debentures
and include, in an audited footnote to the financial statements, disclosure that
(a) the Trust is wholly owned, (b) the sole asset of the Trust is Junior
Subordinated Debentures, stating the principal amount, the interest rate and
maturity date of such Junior Subordinated Debentures and (c) considered
together, the Surety Obligations constitute a full and unconditional guarantee
by the Company of the Trust's obligations under the Preferred Securities.
S-5
<PAGE>
SUMMARY CAPITALIZATION
The following information is qualified by the detailed information and
financial statements incorporated in this Prospectus by reference.
<TABLE>
<CAPTION>
Unaudited as of May 31, 1996
----------------------------
(Dollars in Thousands)
Actual As Adjusted
---------------------------- ----------------------------
Outstanding Percentage Outstanding Percentage
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Long-Term Debt (1) $ 640,380 47.3% $ 640,380 44.1%
Company - Obligated Mandatorily
Redeemable Preferred Securities
of Subsidiary Trust holding
solely Subordinated Debt
Securities of the Company - - 100,000 6.9
Common Shareholders' Equity 712,978 52.7 712,978 49.0
------- -------- ---------- -----
Total $ 1,353,358 100.0% $ 1,453,358 100.0%
=========== ===== ========== =====
Short-Term Debt $ 86,078 $ -
</TABLE>
(1) Includes current maturities of long-term debt.
EARNINGS RATIOS
The Company's Ratio of Earnings to Fixed Charges for each of the
periods indicated is as follows:
Twelve Months Ended
---------------------------------------
August 31,
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
Ratio of Earnings
to Fixed Charges: 4.21 5.10 4.76 4.82 4.53 4.67
S-6
<PAGE>
RECENT DEVELOPMENTS
Certain of the information in this Prospectus Supplement is based on
current expectations. These statements are forward looking and involve a number
of risks and uncertainties. The Company's actual results may differ materially.
RECENT FINANCIAL RESULTS
The Company reported for the fiscal year ended August 31, 1996
earnings of $2.52 per share, down 28 cents, or 9.9%, from record earnings of
$2.80 in fiscal 1995. Earnings in the 1995 comparison period had been enhanced
by one-time adjustments, described below, totalling 24 cents per share. The sale
by the Company's subsidiary Quixx Corporation of water rights located in the
Texas Panhandle affected fiscal 1996 earnings positively. The after-tax gain on
the sale was $7.7 million, or 19 cents per share.
The fiscal year 1996 comparative decline in earnings is attributed to
non-recurring expenses and to increased operating expenses. Merger-related and
business integration expenses during the period totaled approximately $5.7
million and $2.2 million, respectively, decreasing earnings per share by 17
cents.
Operating expense increase as due primarily to greater production
maintenance expenses and to costs associated with the acquisition in September
1995 of electric properties in the Texas Panhandle from Texas-New Mexico Power
Company.
In fiscal 1996, the Company recorded increased operating revenues of
$899.4 million, up $65.3 million, or 7.8%, from last year. Kilowatt-hour ("kwh")
sales, excluding non-firm, increased 4.9%. Fiscal 1996 operating revenues
increased due to greater kwh sales and to higher fuel revenues, the latter a
result of increased fuel costs caused primarily by higher prices for natural
gas. Fuel-related revenues are a pass-through item and do not affect earnings.
Operating income of $150.7 million was down $3.5 million because
operating expenses substantially offset the effects of increased retail sales
and wholesale sales to rural electric cooperatives.
The increase in kwh sales, excluding non-firm sales, was primarily
attributable to hotter-than-normal late spring and early summer weather that
resulted in increased sales to all retail customers and to rural electric
cooperatives. Additionally, the West Texas area of Cap Rock Electric
Cooperative, of Midland, Texas, was a full- requirements customer of the Company
during only seven months of fiscal 1995, but throughout fiscal 1996.
Consolidated construction expenditures of $112.0 million in fiscal
1996 were up $17.3 million, or 18.3%, from the previous year.
The Company expects that, assuming normal weather conditions, fiscal
1997 operating income will remain relatively flat, but that net earnings for
fiscal 1997 will be negatively impacted by increased merger-related and business
integration expenses.
The one-time adjustments to income in the 1995 fiscal year were
results of the previously reported FERC rate case settlement with New Mexico
wholesale customers and of an adjustment to delivered-but-not-billed kwh. Those
adjustments had added eleven cents and thirteen cents, respectively, to per
share earnings in fiscal 1995.
S-7
<PAGE>
Fiscal Year Ended August 31,
-------------------------------------
(in thousands, except per share data)
1996 1995
----------- -----------
EARNINGS SUMMARY:
Operating Revenues $899,397 $834,083
Operating Income 150,666 154,211
Net Earnings 105,773 119,477
Earnings Applicable to
Common Stock 103,279 114,599
STATISTICAL SUMMARY:
Earnings per Common Share (1) $2.52 $2.80
Dividends per Common Share 2.20 2.20
Weighted Average Shares
Outstanding 40,918 40,918
Total Kilowatt-hour Sales 20,888,439 20,335,576
Electric Customers 379,123 367,524
Construction Expenditures $111,986 $94,662
(1) Based on weighted average shares outstanding
TAX PROPOSALS
On March 19, 1996, President Clinton proposed certain tax law changes
that would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the "Proposed Legislation") if such debt obligations have a maximum term
of in excess of 20 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. In addition, the Proposed Legislation
would deny issuers an interest deduction on any debt instrument with a weighted
average maturity of more than 40 years. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued a joint statement (the "Joint Statement") indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress would have an effective date
that is no earlier than the date of "appropriate Congressional action." There
can be no assurances, however, that the effective date guidance contained in the
Joint Statement will be incorporated into the Proposed Legislation, if enacted,
or that other legislation enacted after the date hereof will not otherwise
adversely affect the ability of the Company to deduct the interest payable on
the Junior Subordinated Debentures.
If the tax law changed, as a result of the Proposed Legislation or
otherwise, so that in the Company's judgment it would be precluded from
deducting interest on the Junior Subordinated Debentures, the Company could,
subject to receiving an Opinion of Counsel to the effect that a relevant tax law
change (as described in the accompanying Prospectus) had occurred, redeem the
Junior Subordinated Debentures in whole, thereby causing a mandatory redemption
of the Preferred Securities in whole at a price of $25 per Preferred Security,
plus accrued but unpaid distributions. The Company presently anticipates that,
as permitted by the terms of the Junior Subordinated Debentures and subject to
market and other conditions, it would cause such redemption of the Preferred
Securities if the tax law changed, as a result of the Proposed Legislation or
otherwise, in a manner that would not permit the interest deduction. The Company
also has the option, subject to receiving an Opinion of Counsel, of distributing
Junior Subordinated Debentures or the option of leaving the Preferred Securities
outstanding should such a tax law change occur as described under "Certain Terms
of the Preferred Securities -- Special Event Redemption or Distribution."
S-8
<PAGE>
USE OF PROCEEDS
The Issuer will use the proceeds from this offering of $100,000,000,
together with the Common Securities, to purchase the Junior Subordinated
Debentures. The Company will use the cash proceeds from the sale of the Junior
Subordinated Debentures, net of the Underwriters' discounts and commissions and
the other expenses of this offering, for the repayment of short-term debt and
for general corporate purposes. As of May 31, 1996, approximately $87 million of
such short-term indebtedness was outstanding and it had a weighted average
interest rate of approximately 5.36% per annum and maturities within 35 days of
its date of issuance.
CERTAIN TERMS OF THE PREFERRED SECURITIES
GENERAL
The following summary description of certain terms and provisions of
the Preferred Securities sets forth certain portions of the description of the
terms and provisions of the Preferred Securities included in the accompanying
Prospectus under the heading "Description of Preferred Securities," to which
description reference is hereby made. This summary of certain 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 Trust Agreement.
The form of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and the accompanying Prospectus
are a part. See "Description of Preferred Securities" in the accompanying
Prospectus.
DISTRIBUTIONS
The Preferred Securities represent undivided preferred beneficial
interests in the assets of the Issuer, and the distributions on each Preferred
Security are payable at the rate set forth on the cover page of this Prospectus
Supplement, payable, except in the event of an extension, quarterly in arrears
on March 1, June 1, September 1 and December 1 of each year, commencing December
1, 1996. Distributions in arrears after the payment date therefor will
accumulate additional distributions thereon (to the extent permitted by law)
compounded quarterly at the rate per annum set forth on the cover page of this
Prospectus Supplement. The term "distributions" as used herein shall include any
such additional distributions to the extent permitted by law. Distributions will
accrue from the date of original issuance of the Preferred Securities. The
amount of distributions payable for any period will be computed on the basis of
a 360-day year of twelve 30-day months and, for any period shorter than a full
monthly period, shall be computed on the basis of the actual number of days
elapsed in such period. The distribution payable for the first payment period
will be computed on the basis of 40 days in a 360-day year.
So long as an Event of Default under the Indenture has not occurred
and is continuing, the Company has the right at any time and from time to time
to extend the interest payment period on the Junior Subordinated Debentures for
not more than 20 consecutive quarters, provided that any such Extension Period
shall not extend beyond the maturity date or redemption date of the Junior
Subordinated Debentures. During any Extension Period quarterly distributions on
the Preferred Securities would be deferred by the Issuer, would continue to
accrue, and holders of Preferred Securities would be required to accrue interest
income for United States federal income tax purposes. See "Certain Terms of the
Junior Subordinated Debentures -- Option to Extend Interest Payment Period" and
"United States Taxation -- Potential Extension of Interest Payment Period and
Original Issue Discount." In the event that the Company exercises this right,
during such period it may not declare or pay any dividends or distributions
(other than dividends or distributions payable in common stock of the Company or
other securities ranking junior in right of payment to the Junior Subordinated
Debentures) on, or redeem, purchase, acquire, or make a liquidation payment with
respect to, any of its capital stock or any security ranking pari passu with or
junior in right of payment to the Junior Subordinated Debentures, or make any
guarantee payment with respect to the foregoing (other than pro rata payments
under the Guarantee) or repurchase, or cause any of its subsidiaries to
S-9
<PAGE>
repurchase, any security of the Company ranking pari passu with or junior in
right of payment to the Junior Subordinated Debentures (except for payments made
on any series of Junior Subordinated Debentures upon the stated maturity of such
Junior Subordinated Debentures); provided that the Company may redeem, purchase,
acquire or make a liquidation payment with respect to any of its capital stock
or any security ranking pari passu with or junior in right of payment to the
Junior Subordinated Debentures, make any guarantee payment with respect to the
foregoing or repurchase, or cause any of its subsidiaries to repurchase, any
security of the Company ranking pari passu with or junior in right of payment to
the Junior Subordinated Debentures with securities (or the proceeds from the
issuance of securities) having no higher ranking than the capital stock or the
other securities which are to be redeemed, purchased, or acquired, with respect
to which a liquidation payment is to be made, to which a guarantee payment is to
be made with respect to the foregoing or which are to be repurchased. This
covenant effectively requires that an interest payment on the Junior
Subordinated Debentures may be extended only if the interest periods on all
other series of Junior Subordinated Debentures that may be outstanding at the
time are likewise extended. Prior to the termination of any such extended
interest payment period, the Company may further extend the interest payment
period, provided that such Extension Period together with all such previous and
further extensions thereof may not exceed 20 consecutive quarters or extend
beyond the maturity or redemption date of the Junior Subordinated Debentures.
Upon the termination of any Extension Period and the payment of all amounts then
due, the Company may select a new extended interest payment period, subject to
the above requirements. See "Certain Terms of the Junior Subordinated Debentures
- -- Option to Extend Interest Payment Period" and "United States Taxation --
Potential Extension of Interest Payment Period and Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of distributions on the Preferred Securities by extending the interest
payment period on the Junior Subordinated Debentures.
REDEMPTION
Upon the payment of the Junior Subordinated Debentures, whether at
maturity or upon earlier redemption as provided in the Indenture, the proceeds
from such payment will be applied by the Property Trustee to redeem a Like
Amount (as defined below) of the Common Securities and the Preferred Securities,
upon not less than 30 nor more than 90 days' notice, at a redemption price equal
to the aggregate Liquidation Amount plus accumulated and unpaid distributions,
plus additional distributions thereon to the extent permitted by law, to the
redemption date (the "Redemption Price"). See "Certain Terms of Junior
Subordinated Debentures -- Redemption."
The Company has the right to redeem the Junior Subordinated Debentures
(a) on or after October 21, 2001, in whole or in part, or (b) at any time, in
whole but not in part, upon the occurrence of a Tax Event or an Investment
Company Event (each as defined below, a "Special Event"), subject to the
conditions described under "-- Special Event Redemption or Distribution," below.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If a Special Event shall occur and be continuing with respect to the
Issuer or the Preferred Securities, the Company has the right to (i) redeem the
Junior Subordinated Debentures in whole (but not in part) and thereby cause a
mandatory redemption of the Preferred Securities in whole (but not in part) at
the Redemption Price within 90 days following the occurrence of such Special
Event, or (ii) terminate the Issuer and cause the Junior Subordinated Debentures
to be distributed, subject to the receipt of an Opinion of Counsel experienced
in such matters to the effect that the holders of the Preferred Securities will
not recognize gain or loss for United States federal income tax purposes as a
result of such distribution, to the holders of the Preferred Securities in
liquidation of the Issuer. If at any time the Issuer is not or will not be taxed
as a grantor trust, but a Tax Event has not occurred, the Company has the right
to terminate the Issuer and cause the Junior Subordinated Debentures to be
distributed, subject to the receipt of an Opinion of Counsel experienced in such
matters to the effect that the holders of the Preferred Securities will not
recognize gain or loss for United States federal income tax purposes as a result
of such distribution, to the holders of the Preferred Securities in liquidation
of the Issuer. Under current United States federal income tax law and
interpretations, if the Issuer is treated as a grantor trust at the time of the
distribution,
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such a distribution should not be a taxable event to holders of the Preferred
Securities. Should there be a change in law, a change in legal interpretation, a
Special Event or other circumstances, however, the termination could be a
taxable event to holders of the Preferred Securities. See "United States
Taxation -- Receipt of Junior Subordinated Debentures Upon Liquidation of the
Issuer." If the Company does not elect either option (i) or (ii) above, the
Preferred Securities will remain outstanding.
"Tax Event" means the receipt by the Issuer or the Company, as the
case may be, of an Opinion of Counsel (which may be counsel to the Issuer, the
Company or an affiliate, and which must be reasonably acceptable to the Property
Trustee) experienced in such matters to the effect that a relevant tax law
change has occurred after October 16, 1996. For purposes of the preceding
sentence a relevant tax law change is any amendment or change to (or officially
proposed amendment or change to) the laws (including regulations thereunder) of
the United States or any political subdivision or taxing authority thereof, or
the publication of any judicial opinion interpreting such laws (or regulations)
or any written interpretation of such laws (or regulations) by any governmental
authority having jurisdiction to enforce or administer such laws (or
regulations) (including official and unofficial opinions purporting to apply
such laws and regulations to other persons who have issued securities similar to
the Junior Subordinated Debentures), which amendment, change, proposed amendment
or change, opinion or interpretation could, if valid and enacted or applied to
the Issuer or the Company, result in (i) the Issuer, either currently or within
90 days of the date thereof, becoming subject to United States federal income
tax with respect to interest received on the Junior Subordinated Debentures,
(ii) interest payable by the Company on the Junior Subordinated Debentures
attributable to the Preferred Securities, either currently or within 90 days of
the date thereof, becoming nondeductible for United States federal income tax
purposes or (iii) the Issuer, either currently or within 90 days of the date
thereof, becoming subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a change in the interpretation or application of any law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that the Issuer is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended, which Change in 1940 Act Law
becomes effective after October 16, 1996.
"Like Amount" means (i) with respect to a redemption of the Preferred
Securities and the Common Securities (together, the "Trust Securities"), Trust
Securities having an aggregate Liquidation Amount equal to the principal amount
of Junior Subordinated Debentures to be contemporaneously redeemed in accordance
with the Indenture and the proceeds of which will be used to pay the Redemption
Price of such Trust Securities and (ii) with respect to a distribution of Junior
Subordinated Debentures to holders of Trust Securities in connection with a
termination or liquidation of the Issuer upon the bankruptcy, dissolution or
liquidation of a holder of Common Securities, the occurrence of a Special Event
or in the event that the Issuer is not or will not be taxed as a grantor trust
but a Tax Event has not occurred, Junior Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Trust
Securities in exchange for which such Junior Subordinated Debentures are
distributed.
RIGHTS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES
The Guarantee will be a full guarantee with respect to the Preferred
Securities from the time of issuance of the Preferred Securities, but will not
apply to any payments of distributions or other amounts due to the extent the
Issuer does not have sufficient available funds to pay such distributions or
other amounts due (which would occur in the event that the Company has failed to
make a payment of principal or interest on the Junior Subordinated Debentures).
There are no preconditions to a holder of Preferred Securities instituting a
legal proceeding directly against the Company to enforce such holder's rights
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 such holder's rights under the Guarantee without
first instituting a legal proceeding against the Issuer, the Guarantee Trustee
or any other person or entity. To the extent the Company was to default on its
obligation to pay
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amounts payable on the Junior Subordinated Debentures, the Issuer would lack
sufficient available funds for the payment of distributions on or amounts
payable on redemption of the Trust Securities and, in such event, holders of the
Preferred Securities would not be able to rely on the Guarantee for payment of
such amounts. Instead, the remedy of a holder of Preferred Securities would be
to enforce the rights of the Issuer under the Junior Subordinated Debentures
held by such Issuer. The above mechanisms and obligations relating to the
Guarantee and the Junior Subordinated Debentures and the obligations of the
Company under the other Surety Obligations, taken together, constitute a full
and unconditional guarantee by the Company of payments due on the Preferred
Securities. See "Certain Terms of the Guarantee" and "Certain Terms of the
Junior Subordinated Debentures."
CERTAIN TERMS OF THE GUARANTEE
GENERAL
The following summary description of the Guarantee sets forth certain
portions of the description of the terms and provisions of the Guarantee
included in the accompanying Prospectus under the heading, "Description of
Guarantee," to which description reference is hereby made. This summary of
certain terms and provisions of the Guarantee does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the Guarantee.
The form of Guarantee has been filed as an exhibit to the Registration Statement
of which this Prospectus Supplement and the accompanying Prospectus are a part.
The Company will fully guarantee, on a subordinated basis, the
obligations of the Issuer with respect to the Preferred Securities; provided
that the Guarantee will not apply to any payment of distributions if and to the
extent that the Issuer does not have funds sufficient to make such payments. If
the Company does not make interest payments on the Junior Subordinated
Debentures held by the Issuer, it is expected that the Issuer will not pay
distributions on the Preferred Securities. The Guarantee will rank subordinate
and junior in right of payment to all liabilities of the Company (except trade
credit and any liabilities that may be made pari passu with or subordinate to
the Guarantee expressly by their terms). See "Description of the Guarantee --
Status of the Guarantee" in the accompanying Prospectus.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payment obligations 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 such holder's rights under the Guarantee without first
instituting a legal proceeding against the Issuer, the Guarantee Trustee or any
other person or entity. The Guarantee is a guarantee of payment, not of
collection.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect
upon full payment of the Redemption Price of all Preferred Securities, the
distribution of Junior Subordinated Debentures to holders of Preferred
Securities in exchange for all of the Preferred Securities or upon payment in
full of the amounts payable upon liquidation of the Issuer.
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CERTAIN TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
GENERAL
The following summary description of the Junior Subordinated
Debentures sets forth certain portions of the description of the terms and
provisions of the Junior Subordinated Debentures included in the accompanying
Prospectus under the heading "Description of Junior Subordinated Debentures," to
which description reference is hereby made. This summary of certain terms and
provisions of the Junior Subordinated Debentures does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the Indenture,
including the Supplemental Indenture. The forms of Indenture and Supplemental
Indenture have been filed as exhibits to the Registration Statement of which
this Prospectus Supplement and the accompanying Prospectus are a part.
Concurrently with the issuance of the Preferred Securities, the Issuer
will invest the proceeds thereof, together with the Common Securities, in the
Junior Subordinated Debentures issued by the Company to the Issuer. The Junior
Subordinated Debentures will bear interest at the annual rate of 7.85%, payable
quarterly in arrears, except in the event of an extension, on March 1, June 1,
September 1, and December 1 of each year, commencing December 1, 1996. Interest
which is accrued and unpaid after the quarterly payment date therefor will bear
additional interest on the amount thereof (to the extent permitted by law) at
the rate per annum of 7.85%, compounded quarterly. The term "interest" as used
herein shall include quarterly interest payments, interest on quarterly interest
payments in arrears and Additional Interest (as defined below), as applicable.
The Junior Subordinated Debentures will be issued under the Indenture
and the Supplemental Indenture. The Junior Subordinated Debentures will mature
on September 1, 2036. The Junior Subordinated Debentures will be unsecured and
will rank junior and be subordinate in right of payment to all Senior
Indebtedness of the Company. See "Description of Junior Subordinated Debentures
- -- Subordination" in the accompanying Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right at any time and from time to time, so long
as an Event of Default under the Indenture has not occurred and is continuing,
to extend the interest payment period for the Junior Subordinated Debentures for
up to 20 consecutive quarters; provided that no Extension Period shall extend
beyond the stated maturity date or date of redemption of the Junior Subordinated
Debentures. At the end of the Extension Period, the Company is obligated to pay
all interest then accrued and unpaid (together with interest thereon to the
extent permitted by law). The Company may not defer the interest payment period
with respect to Additional Interest Attributable to Taxes (as defined in the
Prospectus) and shall make payment thereof on the relevant interest payment
date. During any Extension Period, the Company may not declare or pay any
dividends or distributions (other than dividends or distributions payable in
capital stock of the Company or other securities, including other indebtedness,
such as notes or debentures, ranking junior in right of payment to the Junior
Subordinated Debentures) on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of its capital stock or any security ranking pari
passu with or junior in right of payment to the Junior Subordinated Debentures,
or make any guarantee payment (other than pro rata payments under the Guarantee
and other than payments upon redemptions of capital stock pursuant to any
mandatory or optional sinking fund provisions) or repurchase, or cause any of
its subsidiaries to repurchase, any security of the Company ranking pari passu
with or junior in right of payment to the Junior Subordinated Debentures (except
for payments made on any series of Junior Subordinated Debentures upon the
stated maturity of such Junior Subordinated Debentures); provided that the
Company may redeem, purchase, acquire or make a liquidation payment with respect
to any of its capital stock, make any guarantee payment with respect to the
foregoing or repurchase, or cause any of its subsidiaries to repurchase, any
security of the Company ranking pari passu with or junior in right of payment to
the Junior Subordinated Debentures with securities (or the proceeds from the
issuance of securities) having no higher ranking than the capital stock or the
other securities which are to be redeemed, purchased, or acquired, with respect
to which a liquidation payment is to be made, to which a guarantee payment is to
be made with respect to the foregoing or which are to be repurchased. This
covenant
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requires that an interest payment on the Junior Subordinated Debentures may be
extended only if the interest payments on all other series of Junior
Subordinated Debentures that may be outstanding at the time are likewise
extended. Prior to the termination of any Extension Period, the Company may
further extend the interest payment period, provided that such Extension Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarters or extend beyond the maturity or redemption date of the
Junior Subordinated Debentures. 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. Except for Additional Interest
Attributable to Taxes, no interest shall be due and payable during an Extension
Period.
So long as the Property Trustee shall be the sole holder of the Junior
Subordinated Debentures, the Company is required to give the Property Trustee,
the Administrative Trustee and the Debenture Trustee (as defined in the
accompanying Prospectus) notice of its selection of such Extension Period at
least one Business Day prior to the earlier of (i) the date that the
distribution on the Preferred Securities is payable or (ii) the date the
Property Trustee or the Company is required to give notice to any national
securities exchange on which any of the Preferred Securities are listed or to
other applicable self-regulatory organization or to holders of the Preferred
Securities on the record date, but in any event not less than one Business Day
prior to such record date. The Debenture Trustee will be required to give notice
of the Company's selection of such Extension Period to the holders of the
Preferred Securities and the Administrative Trustees.
REDEMPTION
The Junior Subordinated Debentures are redeemable prior to maturity at
the option of the Company (i) at any time on or after the date set forth on the
cover page of this Prospectus Supplement, in whole or in part, and (ii) if a
Special Event occurs and is continuing, in whole, but not in part, in each case
at a Redemption Price equal to 100% of the principal amount thereof plus accrued
interest to the redemption date. The Junior Subordinated Debentures will be
subject to optional redemption in whole, but not in part, upon the termination
and liquidation of the Issuer pursuant to an order for the dissolution,
termination or liquidation of the Issuer entered by a court of competent
jurisdiction. For so long as the Trust is the holder of all Junior Subordinated
Debentures outstanding, the proceeds of any redemption described in this section
shall be used by the Issuer to redeem the Preferred Securities and the Common
Securities in accordance with their terms.
The Company shall not redeem the Junior Subordinated Debentures in
part unless all accrued and unpaid interest (including any Additional Interest)
has been paid in full on all Junior Subordinated Debentures outstanding for all
quarterly interest periods on or prior to the Redemption Date.
UNITED STATES TAXATION
GENERAL
The following is a summary of certain United States federal income tax
considerations that may be relevant to prospective purchasers of Preferred
Securities that acquire the Preferred Securities on original issuance and
represents the opinion of Cahill Gordon & Reindel, counsel to the Company,
insofar as it relates to matters of law and legal conclusions. This section is
based upon current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing and proposed regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Subsequent changes may cause tax consequences to investors to vary substantially
from the consequences described below. Unless otherwise stated, this summary
deals only with Preferred Securities held as capital assets and not with special
classes of holders, such as dealers in securities or currencies, life insurance
companies, persons holding Preferred Securities as a hedge against or which are
hedged against currency risks or as a part of a straddle, or persons whose
functional currency is not the United States dollar.
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POTENTIAL INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF PREFERRED SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES,
AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX LAWS.
While the Company believes, based upon the advice of its counsel, that
the Junior Subordinated Debentures will be treated as indebtedness for United
States federal income tax purposes, holders of Preferred Securities should note
that the Internal Revenue Service (the "IRS") may attempt to treat the Junior
Subordinated Debentures as equity rather than indebtedness for tax purposes. If
the IRS were successful in such attempt, the Junior Subordinated Debentures
would be subject to redemption at the option of the Company as described under
"Description of Preferred Securities -- Redemption."
INCOME FROM PREFERRED SECURITIES
In connection with the issuance of the Preferred Securities, Cahill
Gordon & Reindel will render its opinion generally to the effect that under then
current law, and assuming full compliance with the terms of the Trust Agreement
and the Indenture (and certain other documents), the Issuer will be classified
for United States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation.
As a consequence, each holder of Preferred Securities will be
considered the owner of a pro rata portion of the Junior Subordinated Debentures
held by the Issuer. As a further consequence, each holder of Preferred
Securities will be required to include in gross income his or her pro rata share
of the income accrued on the Junior Subordinated Debentures held by the Issuer.
Such income should not exceed distributions received by the holders of Preferred
Securities on the Preferred Securities except in the case of an extension of the
interest payment period as described under "Description of Preferred Securities
- -- Distributions." No portion of such income received by corporate holders will
be eligible for the dividends-received deduction.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Whether the Junior Subordinated Debentures are issued with original
issue discount ("OID") depends upon whether the Company's option to defer
payments of interest is taken into account for this purpose. Under new income
tax regulations issued on June 14, 1996, which apply to all debt instruments
that are issued on or after August 13, 1996, "remote" contingencies are ignored
in determining whether a debt instrument is issued with OID.
The Company believes that the likelihood of its exercising its option
to defer payments of interest is "remote" because exercising that option would
prevent the Company from declaring dividends on its Common Stock, and the
Company has paid regular quarterly dividends on its Common Stock for several
years. Thus, subject to the discussion set forth in the following paragraph, the
Company intends to take the position that the Junior Subordinated Debentures
will not include OID under the new regulations, and holders of the Preferred
Securities should report interest income under the Junior Subordinated
Debentures using their usual method of accounting (e.g., cash or accrual)
instead of under the accrual rules for OID instruments.
Under the new regulations, however, if the Company exercises its right
to defer payments of interest, the Junior Subordinated Debentures will become
OID instruments, and a holder of Preferred Securities will be required to accrue
interest on a daily basis during the extended interest period, even if such
holder generally uses the cash method of accounting. A holder who disposes of
the Preferred Securities during an extended interest period may suffer a loss
because the market value of the Preferred Securities likely will fall if the
Company exercises its option to defer payments of interest on the Junior
Subordinated Debentures. Furthermore, the market value of the Preferred
Securities may not reflect the accumulated distributions that will be paid at
the end of the extended interest period, and a holder who sells the Preferred
Securities during the extended interest period will not receive from the Company
any cash related to the interest income the holder accrued and included in its
taxable income under the OID rules (because that cash will be paid to the holder
of record at the end of the extended interest period).
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If the Junior Subordinated Debentures become OID instruments (i.e., if
the Company ever exercises its right to defer payments of interest), the Junior
Subordinated Debentures will be taxed as OID instruments for as long as they
remain outstanding. Thus, even after the end of the extended interest period,
all holders will be required to continue accruing interest on the Junior
Subordinated Debentures on a daily basis, regardless of their method of
accounting. Under the OID rules, a holder would accrue an amount of interest
income each year that approximates the stated interest payments called for under
the terms of the Junior Subordinated Debentures, and actual cash payments of
interest on the Junior Subordinated Debentures would not be reported separately
as taxable income.
The new regulations have not yet been addressed in any ruling or other
interpretation by the IRS, and it is possible that the IRS could take a position
contrary to Cahill Gordon & Reindel's interpretation.
DISPOSITION OF PREFERRED SECURITIES
Gain or loss will be recognized on a sale, including a redemption for
cash, of Preferred Securities in an amount equal to the difference between the
amount realized (not including any amount attributable to accrued interest that
has not yet been paid) and the tax basis of a holder of the Preferred Securities
in his or her Preferred Securities. Gain or loss recognized by a holder of
Preferred Securities on the sale or exchange of Preferred Securities held for
more than one year generally will be taxable as long-term capital gain or loss.
Amounts allocated to accrued interest will be treated as ordinary income upon
sale or redemption (unless previously included in income).
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder or beneficial owner who or which is (i) a nonresident alien individual or
(ii) a foreign corporation, foreign partnership, foreign estate or foreign
trust, in any such case not subject to United States federal income tax on a net
income basis in respect of the Preferred Securities.
Under present United States federal income tax law, subject to the
discussion below with respect to backup withholding:
(i) Payments by the Issuer or any of its Paying Agents to any
United States Alien Holder will not be subject to United States
withholding tax provided that (a) the beneficial owner of the
Preferred Securities does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company, (b) the beneficial owner of the Preferred Securities is not a
"controlled foreign corporation" for United States tax purposes that
is related to the Company through stock ownership, and (c) either (1)
the beneficial owner of the Preferred Securities certifies to the
Issuer or its agent, under penalties of perjury, that it is a United
States Alien Holder and provides its name and address or (2) the
holder of the Preferred Securities is a securities clearing
organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business
(a "financial institution"), and such statement has been received from
the beneficial owner by such financial institution or by a financial
institution intermediary between it and the beneficial owner, and such
financial institution furnishes the Issuer with a copy thereof; and
(ii) a United States Alien Holder of the Preferred Securities
will not be subject to United States federal income or withholding tax
on any gain realized on the sale or exchange of the Preferred
Securities unless (a) such person is present in the United States for
183 days or more in the taxable year of sale and (b) such person has a
"tax home" in the United States or certain other requirements are met.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments
to noncorporate United States Holders of interest on, and proceeds of the sale
of, the Preferred Securities within the United States, and "backup withholding"
at a rate of 31% will apply to such payments unless the holder complies with
certain certification requirements.
Payments of the proceeds from the sale by a United States Alien Holder
of Preferred Securities made to or through a foreign office of a broker will not
be subject to information reporting or backup withholding, except that, if the
broker is a United States person, a "controlled foreign corporation" for United
States tax purposes or a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period, information reporting may apply to such payments. Payments of
the proceeds from the sale of Preferred Securities to or through the United
States office of a broker is subject to information reporting and backup
withholding unless the holder or beneficial owner certifies as to its non-United
States status or otherwise establishes an exemption from information reporting
and backup withholding.
The IRS has issued proposed regulations which, if enacted in their
current form, would require backup withholding on payments with respect to the
Junior Subordinated Debentures that are made outside the United States if the
payor has actual knowledge that the recipient is a United States Holder. The
proposed regulations are proposed to be effective for payments made after
December 31, 1997, and current law would remain in effect until then. United
States Holders should consult with their tax advisors as to compliance with the
new rules so as to avoid possible backup withholding on payments after 1997.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES UPON LIQUIDATION OF THE ISSUER
Under certain circumstances as described in "Description of Preferred
Securities -- Special Event Redemption or Distribution," the Company may cause
the Issuer to be terminated and the Junior Subordinated Debentures to be
distributed to the holders of Preferred Securities in liquidation of such
holders' interests in the Issuer. Under current United States federal income tax
law and interpretations, if the Trust is treated as a grantor trust at the time
of the distribution, such a distribution should not be treated as a taxable
event to holders of the Preferred Securities. Such a tax-free transaction would
result in a holder of Preferred Securities retaining an aggregate tax basis in
the Junior Subordinated Debentures equal to such holder's aggregate tax basis in
the holder's pro rata share of the Junior Subordinated Debentures prior to the
distribution. A holder's holding period for such Junior Subordinated Debentures
would include the period for which the Preferred Securities were held by such
holder.
If the Trust were not treated as a grantor trust at the time of the
distribution, the distribution could be a taxable event to holders of the
Preferred Securities, in which case the principles discussed above under "--
Disposition of the Preferred Securities" would apply, and the holders would have
a new tax basis and holding period in the Junior Subordinated Debentures.
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UNDERWRITING
The names of the underwriters (the "Underwriters") of the Preferred
Securities offered hereby and the aggregate number of shares each has severally
agreed to purchase from the Trust, subject to the terms and conditions specified
in the Underwriting Agreement, are as follows:
Number of
Preferred
Underwriters Securities
------------ ----------
Dillon, Read & Co. Inc.................................... 534,200
Dean Witter Reynolds Inc.................................. 534,160
A.G. Edwards & Sons, Inc.................................. 534,160
PaineWebber Incorporated.................................. 534,160
Prudential Securities Incorporated........................ 534,160
Smith Barney Inc.......................................... 534,160
Bear, Stearns & Co. Inc................................... 55,000
Everen Securities, Inc.................................... 55,000
Goldman, Sachs & Co....................................... 55,000
Lehman Brothers Inc....................................... 55,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated........ 55,000
Morgan Stanley & Co. Incorporated......................... 55,000
J.P. Morgan Securities Inc................................ 55,000
Oppenheimer & Co., Inc.................................... 55,000
Salomon Brothers Inc...................................... 55,000
Interstate/Johnson Lane Corporation....................... 30,000
Janney Montgomery Scott Inc............................... 30,000
McDonald & Company Securities, Inc........................ 30,000
Morgan Keegan & Company, Inc.............................. 30,000
Piper Jaffray Inc......................................... 30,000
Principal Financial Securities, Inc....................... 30,000
Rauscher Pierce Refsnes, Inc.............................. 30,000
Raymond James & Associates, Inc........................... 30,000
The Robinson-Humphrey Company, Inc........................ 30,000
Wheat, First Securities, Inc.............................. 30,000
-------
Total ............................................... 4,000,000
=========
The Managing Underwriters are Dillon, Read & Co. Inc., Dean Witter
Reynolds Inc., A.G. Edwards & Sons, Inc., PaineWebber Incorporated, Prudential
Securities Incorporated and Smith Barney Inc.
If any Preferred Securities offered hereby are purchased by the
Underwriters, all such shares will be so purchased. The Underwriting Agreement
contains certain provisions whereby if any Underwriter defaults in its
obligation to purchase such securities and the aggregate obligations of the
Underwriters so defaulting do not exceed 10% of the securities offered hereby,
the remaining Underwriters, or some of them, must assume such obligations.
The Preferred Securities offered hereby are being initially offered by
the several Underwriters for sale at the price set forth on the cover page
hereof, or at such price less a concession not to exceed $0.50 per Preferred
Security on sales to certain dealers. The Underwriters may allow, and such
dealers may reallow, a concession not to exceed $0.35 per Preferred Security on
sales to certain other dealers. The offering of the Preferred Securities is made
for delivery when, as, and if accepted by the Underwriters and subject to prior
sale and to withdrawal, cancellation, or modification of the offer without
notice. The Underwriters reserve the right to reject any order for
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the purchase of the Preferred Securities. After the Preferred Securities are
released for sale to the public, the public offering price, the concession, and
the reallowance may be changed by the Managing Underwriters.
In view of the fact that the proceeds from the sale of the Preferred
Securities (together with the delivery by the Issuer to the Company of the
Common Securities) will be used to purchase the Junior Subordinated Debentures
issued by the Company, the Underwriting Agreement provides that the Company will
pay, as Underwriters' compensation for the Underwriters arranging the investment
therein of such proceeds, an amount of $0.7875 per Preferred Security or ($0.50
per Preferred Security sold to certain institutions) for the accounts of the
several Underwriters.
The Company and the Issuer have agreed, during the period beginning
from the date of the Underwriting Agreement and continuing to and including the
earlier of (i) the date on which the distribution of the Preferred Securities
ceases, as determined by the Underwriters, or (ii) 30 days after the issuance of
the Preferred Securities, not to offer, sell, contract to sell or otherwise
dispose of any Preferred Securities, any other interests of the Issuer or any
other issuer of a series of Preferred Securities or the Company which are
substantially similar to the Preferred Securities (including any Guarantee of
such securities) or any securities convertible into or exchangeable for
Preferred Securities, preferred stock or such substantially similar securities
of the Issuer or the Company, without the prior written consent of the
representatives of the Underwriters.
Prior to this offering, there has been no market for the Preferred
Securities. The Preferred Securities have been approved for listing on the New
York Stock Exchange, subject to notice of issuance, under the symbol "SPS PrT."
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. If approved
for listing, trading of the Preferred Securities on the New York Stock Exchange
is expected to commence within a fourteen-day period after the initial delivery
of the Preferred Securities. The representatives have advised the Company that
they intend to make a market in the Preferred Securities prior to the
commencement of trading on the New York Stock Exchange, but are not obligated to
do so and may discontinue any such market-making at any time without notice.
The Company and the Issuer have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments that the
Underwriters may be required to make in respect thereof.
Certain of the Underwriters engage in transactions with, and from time
to time have performed services for, the Company in the ordinary course of
business.
S-19
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PROSPECTUS
$100,000,000
SOUTHWESTERN PUBLIC SERVICE CAPITAL I
TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED BY
SOUTHWESTERN PUBLIC SERVICE COMPANY
Southwestern Public Service Capital I, a statutory business trust
formed under the laws of the State of Delaware (the "Issuer"), may offer, from
time to time, its preferred securities (the "Preferred Securities") representing
preferred undivided beneficial interests in the assets of the Issuer.
Southwestern Public Service Company, a New Mexico corporation (the "Company"),
will be the sole owner of the beneficial interests represented by common
securities (the "Common Securities") of the Issuer. The payment of periodic cash
distributions with respect to the Preferred Securities and payments on
liquidation or redemption with respect to such Preferred Securities are each
guaranteed by the Company pursuant to several contractual arrangements of the
Company comprised of the Guarantee, the Junior Subordinated Debentures, the
Indenture, the Trust Agreement and the Expense Agreement (collectively, the
"Surety Obligations"), as more fully described herein. The Company's obligations
under its guarantee (the "Guarantee") for the benefit of holders of Preferred
Securities will be subordinate and junior in right of payment to all Senior
Indebtedness of the Company. Concurrently with the issuance by the Issuer of its
Preferred Securities, such Issuer will invest the proceeds thereof and any
contributions made in respect of the Common Securities in a corresponding series
of the Company's junior subordinated deferrable interest debentures (the "Junior
Subordinated Debentures") having terms corresponding to the Issuer's Preferred
Securities. The Junior Subordinated Debentures will be unsecured and subordinate
and junior in right of payment to the Senior Indebtedness of the Company. The
Junior Subordinated Debentures held by the Issuer will be its sole asset and
payments of principal and interest under such Junior Subordinated Debentures
will be its only revenue. Upon the occurrence of certain events, the Company may
redeem the Junior Subordinated Debentures or may terminate the Issuer and cause
the Junior Subordinated Debentures to be distributed to the holders of the
corresponding Preferred Securities in liquidation of their interest in such
Issuer.
The Preferred Securities may be offered in amounts, at prices and on
terms to be determined at the time of offering; provided that the aggregate
initial public offering price of all Preferred Securities shall not exceed
$100,000,000. Specific terms of the Preferred Securities in respect of which
this Prospectus is being delivered will be set forth in an accompanying
Prospectus Supplement with respect to such series, including, without limitation
and where applicable, the specific title, aggregate amount, dividend rate or
rates (or method of determining such rate or rates), the initial public offering
price and any other rights, preferences, privileges, limitations and
restrictions.
The Prospectus Supplement relating to the Preferred Securities will
contain information concerning certain United States federal income tax
considerations, if applicable to the Preferred Securities.
<PAGE>
The Preferred Securities may be sold to or through underwriters or
dealers as designated from time to time. The names of such dealers or
underwriters and any applicable commissions or discounts will be set forth in
the Prospectus Supplement with respect to such Preferred Securities. See "Plan
of Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENT ON THE PREFERRED SECURITIES AND THE
JUNIOR SUBORDINATED DEBENTURES MAY BE DEFERRED AND THE RELATED FEDERAL INCOME
TAX CONSEQUENCES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS AUGUST 28, 1996.
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<PAGE>
AVAILABLE INFORMATION
Southwestern Public Service Company (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and in accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission") which may be inspected and
copied at the offices of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and Seven World Trade Center, Suite 1300, New York, New York 10048, and
copies of such material can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549, at prescribed rates. (The Commission
maintains a site on the World Wide Web containing reports, proxy materials,
information statements and other items. The address is http://www.sec.gov.)
Certain securities of the Company are listed on the New York, Chicago and
Pacific Stock Exchanges. Reports, proxy and information statements, and other
information concerning the Company can be inspected at such exchanges.
The Company and the Issuer have filed with the Commission a
registration statement on Form S-3 (herein, together with all amendments and
exhibits thereto, referred to as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement.
No separate financial statements of the Issuer are included herein.
The Company considers that such financial statements would not be material to
holders of the Preferred Securities because: (i) all of the Common Securities of
the Issuer will be owned by the Company, a reporting company under the Exchange
Act; (ii) the Issuer has no independent operations, but exists for the sole
purpose of issuing the Preferred Securities and investing the proceeds thereof
(plus the Common Securities) in the Junior Subordinated Debentures; and (iii)
the obligations of the Issuer under the Preferred Securities are fully and
unconditionally guaranteed by the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 1-3789) pursuant to the Exchange Act are incorporated herein by reference as
of their respective dates of filing and shall be deemed to be a part hereof:
1. The Company's Annual Report on Form 10-K for the year ended August
31, 1995 (the "1995 Form 10-K").
2. The Company's Quarterly Report on Form 10-Q for the quarters ended
November 30, 1995 (the "November Quarterly Report"), February 29, 1996 (the
"February Quarterly Report") and May 31, 1996 (the "May Quarterly Report").
3. The Company's Current Reports on Form 8-K filed February 2, 1996,
February 26, 1996 and July 1, 1996.
4. Joint Proxy Statement/Prospectus for the Annual Meeting held
January 31, 1996 included in the Registration Statement on Form S-4 of New
Century Energies, Inc. (Registration No. 33-64951).
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of this offering shall also be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
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<PAGE>
The Company hereby undertakes to provide without charge to each
person, including any beneficial owner, to whom a copy of this Prospectus has
been delivered, on the request of any such person, a copy of any or all
documents referred to above which have been or may be incorporated by reference
in this Prospectus (not including exhibits to such incorporated information that
are not specifically incorporated by reference into such information). Requests
for such copies should be directed to Secretary, Southwestern Public Service
Company, Tyler at Sixth, Amarillo, Texas 79101.
THE COMPANY
The Company, incorporated under the laws of the State of New Mexico in
1921, is principally engaged in the generation, transmission, distribution and
sale of electric energy in portions of Texas, New Mexico, Oklahoma and Kansas.
The electric properties comprise an interconnected system. A major portion of
the Company's electric operating revenues is derived from operations in Texas.
The Company has two wholly owned non-utility subsidiaries, Utility Engineering
Corporation and Quixx Corporation. The principal executive offices of the
Company are located at Tyler at Sixth, Amarillo, Texas 79101 (Tel:
806-378-2121).
At the annual meeting of the Company's shareholders held on January
31, 1996, the shareholders approved the proposed "merger of equals" of the
Company and Public Service Company of Colorado ("PSCo") (the "merger"). Pursuant
to the terms of the merger upon satisfaction or waiver of the terms and
conditions thereof, the Company and PSCo will become wholly owned subsidiaries
of a new holding company called New Century Energies, Inc. The Company and PSCo
will maintain their separate identities and continue to serve customers in their
respective service areas. The Company's obligations, such as guarantees, debt
and any preferred stock (including the Guarantee and the Junior Subordinated
Debentures) of the Company outstanding at the time of effectiveness of the
merger will remain outstanding obligations, debt and preferred stock of the
Company and the terms and conditions thereof will not change. However, because
of this merger, the securities of the Company are subject to review by various
rating agencies and may be downgraded which could adversely affect the market
value of the securities. The transaction is subject to various conditions
including the receipt of approvals from various state and federal regulators.
The Company has a targeted completion date for the merger in early 1997.
THE ISSUER
Southwestern Public Service Capital I is a statutory business trust
formed under the Delaware Business Trust Act pursuant to (i) a trust agreement
executed by David M. Wilks, President and Chief Operating Officer of the Company
(together with his successors, the "Depositor"), as the depositor of the Issuer,
and the Issuer Trustees (as defined herein) and (ii) the filing of a certificate
of trust with the Delaware Secretary of State on June 5, 1996. Such trust
agreement will be amended and restated in its entirety (as so amended and
restated, the "Trust Agreement") substantially in the form filed as an exhibit
to the Registration Statement of which this Prospectus is a part. The Trust
Agreement has been qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Issuer exists for the
exclusive purpose of (i) issuing its Preferred Securities and Common Securities,
(ii) purchasing the Junior Subordinated Debentures with the Common Securities
and the proceeds from the sale of the Preferred Securities and (iii) engaging
only in those activities necessary or incidental thereto. All of the Common
Securities will be 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 the occurrence and continuance of an Event of
Default (as defined herein) under the Trust Agreement, the rights of the holders
of the corresponding Common Securities to payment in respect of distributions
and payments upon liquidation, redemption or other acquisition of Common
Securities will be subordinated to the rights of the holders of Preferred
Securities. The Company will acquire Common Securities of the Issuer in an
aggregate Liquidation Amount equal to 3% of the total capital of the Issuer and,
at that time, also become the Depositor. The Issuer will have a term of more
than 20 and not less than 50 years, as specified in the applicable Prospectus
Supplement, but may terminate
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<PAGE>
earlier as provided in the Trust Agreement. The Issuer's business and affairs is
conducted by its trustees, each appointed by the Company as holder of the Common
Securities: Wilmington Trust Company (the "Property Trustee") and three
individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with the Company (collectively, the "Issuer
Trustees"). The Depositor of the Issuer or the holders of a majority in
Liquidation Amount of the Preferred Securities and Common Securities, if an
event of default under the Trust Agreement has occurred and is continuing, will
be entitled to appoint, remove or replace the Issuer Trustees. Unless an event
of default under the Trust Agreement shall have occurred and is continuing, the
holders of the Preferred Securities and Common Securities shall not have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Depositor of the Issuer. The duties
and obligations of each of the Issuer Trustees are governed by the Trust
Agreement. The Company has agreed to pay all fees and expenses related to the
Issuer and the offering of the Preferred Securities and has agreed to pay,
directly or indirectly, all ongoing costs, expenses and liabilities, limited to
the extent provided herein, of the Issuer.
The principal executive office of the Issuer is Tyler at Sixth,
Amarillo, Texas 79101, Attention: Secretary (Tel: (806) 378-2121).
RISK FACTORS
PROSPECTIVE PURCHASERS OF PREFERRED SECURITIES SHOULD CAREFULLY REVIEW
THE INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND IN THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING MATTERS:
SUBORDINATION OF GUARANTEE AND JUNIOR SUBORDINATED DEBENTURES. The
Company's obligations under the Guarantee and under the Junior Subordinated
Debentures are subordinate and junior in right of payment to all Senior
Indebtedness other than indebtedness that may be made pari passu with or
subordinate to the Guarantee and the Junior Subordinated Debentures expressly by
their terms. As of May 31, 1996, the Company had approximately $771 million
principal amount of indebtedness for borrowed money and other obligations
constituting Senior Indebtedness outstanding. There are no terms of the
Preferred Securities, the Junior Subordinated Debentures or the Guarantee that
limit the Company's ability to incur additional Senior Indebtedness. See
"Description of Guarantee -- Status of the Guarantee" and "Description of Junior
Subordinated Debentures -- Subordination."
The ability of the Issuer to pay amounts due on its Preferred
Securities is solely dependent upon the Company making payments on the Junior
Subordinated Debentures held by such Issuer as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES. The
Company has the right under the Indenture (as defined herein) to extend, from
time to time, the interest payment period on the Junior Subordinated Debentures
for a period not exceeding 20 consecutive quarters. Upon the termination of any
such extended interest payment period and the payment of all amounts then due,
the Company may select a new extended interest payment period, subject to the
requirements described herein and in the accompanying Prospectus Supplement.
During any such extended interest payment period, quarterly distributions on the
Preferred Securities would be deferred (but would continue to accrue with
additional distributions thereon to the extent permitted by law) by the Issuer.
In the event that the Company exercises this right, during such period it may
not declare or pay dividends or distributions (other than dividends or
distributions payable in capital stock of the Company or other securities
ranking junior in right of payment to the Junior Subordinated Debentures) on, or
redeem, purchase, acquire, or make a liquidation payment with respect to any of
its capital stock or any security ranking pari passu with or junior in right of
payment to the Junior Subordinated Debentures, or make any guarantee payment
with respect to the foregoing (other than pro rata payments under the Guarantee)
or repurchase, or cause any of its subsidiaries to repurchase, any security of
the Company ranking pari passu with or junior in right of payment to the Junior
Subordinated Debentures (except for payments made on any series of Junior
Subordinated Debentures upon the stated maturity of such Junior Subordinated
Debentures); provided that the Company may redeem, purchase, acquire or make a
liquidation
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<PAGE>
payment with respect to any of its capital stock, make any guarantee payment
with respect to the foregoing or repurchase, or cause any of its subsidiaries to
repurchase, any security of the Company ranking pari passu with or junior in
right of payment to the Junior Subordinated Debentures with securities (or the
proceeds from the issuance of securities) having no higher ranking than the
capital stock or the other securities which are to be redeemed, purchased, or
acquired, with respect to which a liquidation payment is to be made, to which a
guarantee payment is to be made with respect to the foregoing or which are to be
repurchased. Prior to the termination of any such extended interest payment
period, the Company may further extend the interest payment period, provided
that such extended interest payment period, together with all previous and
further extensions thereof, may not exceed 20 consecutive quarters and that such
extended interest payment period may not extend beyond the maturity or
redemption date of the Junior Subordinated Debentures. Upon the termination of
any extended interest payment period and the payment of all amounts then due,
the Company may select a new extended interest payment period, subject to the
foregoing requirements. If the Company should determine to exercise its
extension right in the future, the market price of the Preferred Securities is
likely to be affected. The Issuer and the Company believe that such an extension
of an interest payment period on the Junior Subordinated Debentures is unlikely
to occur. See "Certain Terms of the Preferred Securities -- Distributions" and
"Certain Terms of the Junior Subordinated Debentures -- Option to Extend
Interest Payment Period" set forth in the accompanying Prospectus Supplement.
Should an interest payment period be extended, Preferred Securities
holders will continue to recognize interest income for United States federal
income tax purposes. As a result, such holders will be required to include
accruing interest in gross income for United States federal income tax purposes
in advance of the actual receipt of such interest. Furthermore, such holders
will not receive the related actual interest payments from the Issuer if they
dispose of their Preferred Securities prior to the record date for payment of
distributions. See "United States Taxation -- Potential Extension of Interest
Payment Period and Original Issue Discount" set forth in the accompanying
Prospectus Supplement.
RIGHTS UNDER THE GUARANTEE. The Guarantee has been qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Wilmington Trust Company will act as indenture trustee under
the Guarantee for the purposes of compliance with the Trust Indenture Act (the
"Guarantee Trustee"). The Guarantee Trustee will hold the Guarantee for the
benefit of the holders of the Preferred Securities and will also be the trustee
for the Junior Subordinated Debentures and the Property Trustee (as defined
herein).
The Guarantee is limited to a guarantee, on a subordinated basis, to
the holders of the Preferred Securities, of the payment (but not the collection)
of (i) any accrued and unpaid distributions required to be paid on the Preferred
Securities, if and only to the extent that the Issuer has funds sufficient to
make payment therefor, (ii) the Redemption Price (as defined herein) with
respect to Preferred Securities called for redemption by the Issuer, if and only
to the extent that the Issuer has funds sufficient to make payment therefor and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Issuer (other than in connection with a redemption of all of the Preferred
Securities), the lesser of (a) the aggregate Liquidation Amount and all accrued
and unpaid distributions on the Preferred Securities to the date of payment, to
the extent the Issuer has funds sufficient to make such payment, and (b) the
amount of assets of the Issuer remaining available for distribution to holders
of the Preferred Securities in liquidation of the Issuer. 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 Guarantee Trustee or to direct the exercise of any trust
or power conferred upon the Guarantee Trustee under the Guarantee. There are no
preconditions to any holder of Preferred Securities instituting a legal
proceeding directly against the Company to enforce such holder's rights under
the Guarantee. There is no requirement that a holder of Preferred Securities
first institute a legal proceeding against the Issuer, the Guarantee Trustee or
any other person or entity. If the Company were to default on its obligations
under the Junior Subordinated Debentures, the Issuer 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. In such event, the holders of at least 25% in aggregate Liquidation
Amount of the Preferred Securities then outstanding shall have the right to
enforce directly
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<PAGE>
the rights of the Issuer under the Junior Subordinated Debentures. See
"Description of Guarantee -- Status of the Guarantee" and "Description of Junior
Subordinated Debentures -- Subordination."
SPECIAL EVENT REDEMPTION. Upon the occurrence of a Special Event (as
defined herein), the Company has the right to redeem the Junior Subordinated
Debentures, in whole but not in part, in which event the Issuer will redeem the
Preferred Securities. See "Certain Terms of the Preferred Securities --
Redemption" and "-- Special Event Redemption or Distribution" set forth in the
accompanying Prospectus Supplement.
RECENT TAX LAW PROPOSALS. If the tax law changed, as a result of the
Proposed Legislation as described under "Recent Developments" below or
otherwise, so that in the Company's judgment it would be precluded from
deducting interest on the Junior Subordinated Debentures, the Company could
redeem the Junior Subordinated Debentures, thereby causing a mandatory
redemption of the Preferred Securities. The Company presently anticipates that,
as permitted by the terms of the Junior Subordinated Debentures and subject to
market and other conditions, it would cause such redemption of the Preferred
Securities if the tax law changed, as a result of the Proposed Legislation or
otherwise, in a manner that would not permit the interest deduction. The Company
also has the option of distributing Junior Subordinated Debentures or of leaving
the Preferred Securities outstanding should such a tax law change occur as
described under "Certain Terms of the Preferred Securities -- Special Event
Redemption or Distribution" set forth in the accompanying Prospectus Supplement.
If the Preferred Securities are redeemed, holders would receive $25 per
Preferred Security plus accrued and unpaid distributions to the redemption date.
Gain or loss will be recognized on a redemption for cash of Preferred Securities
in an amount equal to the difference between the amount realized and the tax
basis of a holder of the Preferred Securities in his or her Preferred
Securities. Gain or loss recognized by a holder of Preferred Securities on the
redemption of Preferred Securities held for more than one year generally will be
taxable as long-term capital gain or loss. In addition, the holder would have
the ability to reinvest the proceeds received in an alternate investment;
however, there can be no assurance that the rate of return on any alternative
investment would be as favorable to a holder as an investment in the Preferred
Securities. If the Company chose to distribute the Junior Subordinated
Debentures to the holders of the Preferred Securities, under current United
States federal income tax law and interpretations, if the Trust is treated as a
grantor trust at the time of the distribution, such a distribution should not be
treated as a taxable event to holders of the Preferred Securities. Such a
tax-free transaction would result in a holder of Preferred Securities retaining
an aggregate tax basis in the Junior Subordinated Debentures equal to such
holder's aggregate tax basis in the holder's pro rata share of the Junior
Subordinated Debentures prior to the distribution. A holder's holding period for
such Junior Subordinated Debentures would include the period for which the
Preferred Securities were held by such holder. If the Trust were not treated as
a grantor trust at the time of the distribution, the distribution could be a
taxable event to holders of the Preferred Securities, in which case the
principles discussed above with respect to a redemption of Preferred Securities
would apply, and the holders would have a new tax basis and holding period in
the Junior Subordinated Debentures.
LIMITED VOTING RIGHTS. Holders of Preferred Securities will have
limited voting rights, and, except upon the occurrence of an Event of Default
(as defined herein) under the Trust Agreement, will not be entitled to vote to
appoint, remove or replace the Property Trustee or the Administrative Trustees
or to increase or decrease the number of the Administrative Trustees. Such
voting rights are vested exclusively in the Depositor, unless and until an Event
of Default has occurred and is continuing. See "Description of Preferred
Securities -- Events of Default; Notice."
TRADING CHARACTERISTICS OF PREFERRED SECURITIES. The Preferred
Securities have been approved for listing on the New York Stock Exchange,
subject to notice of issuance, under the symbol "SPS PrT." If approved for
listing, the Preferred Securities are expected to trade at a price that takes
into account the value, if any, of accrued and unpaid distributions; thus,
purchasers will not pay and sellers will not receive any accrued and unpaid
interest with respect to their undivided interests in Junior Subordinated
Debentures owned through the Preferred Securities that is not included in the
trading price of the Preferred Securities. However, interest on the Junior
Subordinated Debentures will be included in the gross income of U.S. Holders (as
defined herein) of Preferred Securities as it
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accrues, rather than when it is paid. See "United States Taxation -- Income from
Preferred Securities" and "-- Disposition of Preferred Securities" set forth in
the accompanying Prospectus Supplement.
Because the Preferred Securities pay a dividend at a fixed rate based
upon the fixed interest rate payable on the Junior Subordinated Debentures, the
trading price of the Preferred Securities may decline if interest rates rise.
RECENT DEVELOPMENTS
On March 19, 1996, President Clinton proposed certain tax law changes
that would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the "Proposed Legislation") if such debt obligations have a maximum term
of in excess of 20 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. In addition, the Proposed Legislation
would deny issuers an interest deduction on any debt instrument with a weighted
average maturity of more than 40 years. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued a joint statement (the "Joint Statement") indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress would have an effective date
that is no earlier than the date of "appropriate Congressional action." There
can be no assurances, however, that the effective date guidance contained in the
Joint Statement will be incorporated into the Proposed Legislation, if enacted,
or that other legislation enacted after the date hereof will not otherwise
adversely affect the ability of the Company to deduct the interest payable on
the Junior Subordinated Debentures.
If the tax law changed, as a result of the Proposed Legislation or
otherwise, so that in the Company's judgment it would be precluded from
deducting interest on the Junior Subordinated Debentures, the Company could,
subject to receiving an Opinion of Counsel to the effect that a relevant tax law
change (as described in the accompanying Prospectus) had occurred, redeem the
Junior Subordinated Debentures in whole, thereby causing a mandatory redemption
of the Preferred Securities in whole at a price of $25 per Preferred Security,
plus accrued but unpaid distributions. The Company presently anticipates that,
as permitted by the terms of the Junior Subordinated Debentures and subject to
market and other conditions, it would cause such redemption of the Preferred
Securities if the tax law changed, as a result of the Proposed Legislation or
otherwise, in a manner that would not permit the interest deduction. The Company
also has the option, subject to receiving an Opinion of Counsel, of distributing
Junior Subordinated Debentures or the option of leaving the Preferred Securities
outstanding should such a tax law change occur as described under "Description
of Preferred Securities -- Special Event Redemption or Distribution."
USE OF PROCEEDS
The Issuer will use the proceeds from the Offering of its Preferred
Securities, together with its Common Securities, to purchase Junior Subordinated
Debentures. The proceeds received by the Company from the sale of the Junior
Subordinated Debentures will be used as described in the Prospectus Supplement
by which such securities are offered.
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EARNINGS RATIOS
The Company's Ratio of Earnings to Fixed Charges for each of the
periods indicated is as follows:
Twelve Months Ended
------------------------------------------
May 31, August 31,
1996 1995 1994 1993 1992 1991
------ ---- ---- ---- ---- ----
Ratio of Earnings
to Fixed Charges: 4.59 5.10 4.76 4.82 4.53 4.67
The Company's Ratios for future periods will be included in the
Company's Reports on Forms 10-K and 10-Q. Such Reports are incorporated by
reference into this Prospectus at the time they are filed.
DESCRIPTION OF PREFERRED SECURITIES
GENERAL
An original trust agreement between David M. Wilks, President and
Chief Operating Officer of the Company, as Depositor, and Wilmington Trust
Company, as the Property Trustee, has been used to authorize and create the
Issuer. The original trust agreement is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Preferred Securities and the
Common Securities of the Issuer (together, the "Issuer Securities") will be
issued by the Administrative Trustees on behalf of the Issuer pursuant to the
terms of the Trust Agreement (as amended and restated from the original trust
agreement). The Preferred Securities represent undivided preferred beneficial
interests in the assets of the Issuer and entitle the holders thereof to a
preference over the Common Securities of such Issuer, in certain circumstances,
with respect to distributions and amounts payable on redemption or liquidation
as well as to other benefits as described in the Trust Agreement. The following
summary of certain provisions of the Trust Agreement does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of the Trust Agreement and the Trust Indenture Act. Wherever
particular sections or defined terms of the Trust Agreement are referred to,
such sections or defined terms are incorporated herein by reference. Section
references used herein are references to provisions of the Trust Agreement
unless otherwise stated.
All of the Common Securities of the Issuer will be owned by the
Company. The Common Securities of the Issuer rank pari passu, and payments will
be made thereon pro rata, with the Preferred Securities of the Issuer except as
described under "-- Subordination of Common Securities." (Section 4.03). Legal
title to the Junior Subordinated Debentures will be held in the name of the
Property Trustee and held in trust for the benefit of the holders of the Issuer
Securities. (Section 2.09). The Guarantee is a full and unconditional guarantee
on a subordinated basis with respect to the Preferred Securities but does not
guarantee payment of distributions or amounts payable on redemption or
liquidation of the Preferred Securities when the Issuer does not have funds
sufficient to make such payments.
The Preferred Securities will initially be offered in denominations of
$25 (based on Liquidation Amount) and integral multiples of $25 in excess
thereof.
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LIQUIDATION AMOUNT
The amount payable on the Preferred Securities in the event of any
liquidation of the Issuer is $25 per Preferred Security (the "Liquidation
Amount"), plus accumulated and unpaid distributions unless, in connection with
such liquidation, the Junior Subordinated Debentures are distributed to the
holders of the Preferred Securities.
DISTRIBUTIONS
The distributions payable on the Preferred Securities will be fixed at
the rate per annum set forth in the Prospectus Supplement. Distributions in
arrears after the quarterly payment date therefor will accumulate additional
distributions thereon compounded quarterly at the same rate per annum, to the
extent permitted by law. The term "distributions" as used herein includes any
such additional distributions (the "Additional Amounts"), unless otherwise
stated, with respect to the Preferred Securities. The amount of distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months and, for any period shorter than a full month, shall be computed
on the basis of the actual number of days elapsed in such period. (Section
4.01(b)). See "Description of Junior Subordinated Debentures -- Additional
Interest."
Distributions on the Preferred Securities will be cumulative, will
accrue from the date of the initial issuance thereof, and will be payable
quarterly in arrears, on the payment dates set forth in the applicable
Prospectus Supplement of each year, except in the event of an extension of the
interest payment period by the Company on the corresponding series of Junior
Subordinated Debentures. In the event that any date on which distributions are
otherwise payable on Preferred Securities is not a Business Day, payment of the
distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect to any
such delay) except that, if such Business Day is in the next succeeding calendar
year, payment of such distribution shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date (each date on which distributions are otherwise payable in accordance with
the foregoing, a "Distribution Date"). A "Business Day" shall mean any day other
than (x) a Saturday or a Sunday, (y) a day on which banks in New York are
authorized or obligated by law or executive order to remain closed or (z) a day
on which the Corporate Trust Office of the Property Trustee or the principal
office of the Company is closed for business. (Sections 1.01 and 4.01(a)).
So long as an Event of Default under the Deferrable Interest
Subordinated Debenture Indenture (the "Indenture") has not occurred and is not
continuing, the Company has the right under the Indenture, as supplemented by a
supplemental indenture relating to the Junior Subordinated Debentures (a
"Supplemental Indenture"), to extend, at any time and from time to time, the
interest payment period on each series of Junior Subordinated Debentures issued
thereunder for a period not exceeding 20 consecutive quarters, with the
consequence that quarterly distributions on the corresponding Preferred
Securities would be deferred (but would continue to accrue distributions
thereon, including additional distributions payable on unpaid distributions to
the extent permitted by law at the rate per annum set forth in the Prospectus
Supplement, compounded quarterly) by the Issuer during any such extended
interest payment period; provided that any such extension period shall not
extend beyond the maturity date or redemption date of the Junior Subordinated
Debentures. During any extension period quarterly distributions on the Preferred
Securities would be deferred by the Issuer, would continue to accrue, and
holders of Preferred Securities would be required to accrue interest income for
United States federal income tax purposes. See "Description of Junior
Subordinated Debentures -- Option to Extend Interest Payment Period" herein and
"United States Taxation -- Potential Extension of Interest Payment Period and
Original Issue Discount" in the accompanying Prospectus Supplement. In the event
the Company exercises this right, during such period the Company may not declare
or pay any dividends or distributions (other than dividends or distributions
payable in capital stock of the Company or other securities ranking junior in
right of payment to the Junior Subordinated Debentures) on or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of its capital stock
or any security ranking pari passu with or junior in right of payment to the
Junior Subordinated Debentures, or make any guarantee payments with respect to
the foregoing (other than pro rata payments under the Guarantee) or repurchase,
or cause any of its subsidiaries to repurchase, any security of the Company
ranking pari passu with or
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junior in right of payment to the Junior Subordinated Debentures (except for
payments made on any series of Junior Subordinated Debentures upon the stated
maturity of such Junior Subordinated Debentures); provided that the Company may
redeem, purchase, acquire or make a liquidation payment with respect to any of
its capital stock or any security ranking pari passu with or junior in right of
payment to the Junior Subordinated Debentures, make any guarantee payment with
respect to the foregoing or repurchase, or cause any of its subsidiaries to
repurchase, any security of the Company ranking pari passu with or junior in
right of payment to the Junior Subordinated Debentures with securities (or the
proceeds from the issuance of securities) having no higher ranking than the
capital stock or the other securities which are to be redeemed, purchased, or
acquired, with respect to which a liquidation payment is to be made, to which a
guarantee payment is to be made with respect to the foregoing or which are to be
repurchased. This covenant requires that an interest payment period on the
Junior Subordinated Debentures may be extended only if the interest payment
periods on all other series of Junior Subordinated Debentures that may be
outstanding at the time are likewise extended. Prior to the termination of any
such extended interest payment period, the Company may further extend the
interest payment period, provided that such extended interest payment period,
together with all previous and further extensions thereof, may not exceed 20
consecutive quarters or extend beyond the maturity or the redemption date of the
series of the Junior Subordinated Debentures in question. Upon the termination
of any extended interest payment period and the payment of all amounts then due,
the Company may select a new extended interest payment period subject to the
foregoing requirements. See "Description of Junior Subordinated Debentures --
Interest" and "-- the Company's Option to Extend Interest Payment Periods"
herein and "United States Taxation -- Potential Extension of Interest Payment
Period and Original Issue Discount" in the accompanying Prospectus Supplement.
It is anticipated that the income of the Issuer available for
distribution to the holders of the Preferred Securities will be limited to the
payments under the Junior Subordinated Debentures which the Issuer will purchase
with the Common Securities and the proceeds from the issuance and sale of the
Preferred Securities. See "Description of Junior Subordinated Debentures." If
the Company does not make interest payments on the Junior Subordinated
Debentures, the Property Trustee will not have funds available to pay
distributions on the Preferred Securities. The payment of distributions (if and
to the extent an Issuer has funds sufficient to make such payments) is
guaranteed on a subordinated basis by the Company to the extent set forth herein
under "Description of Guarantee." The Company's obligations under the Guarantee,
the Trust Agreement, the Expense Agreement, the Junior Subordinated Debentures
and the Indenture constitute, in the aggregate, a full and unconditional
guarantee with respect to the Preferred Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee."
Distributions on the Preferred Securities will be payable to the
holders thereof as they appear on the register of the Issuer 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
Distribution Date. Subject to any applicable laws and regulations and the
provisions of the Trust Agreement, 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 remain in book-entry-only form,
the relevant record date shall be the date 15 days prior to the relevant
Distribution Date. (Section 4.01(d)).
REDEMPTION
Upon the repayment of any series of Junior Subordinated Debentures,
whether at maturity or upon earlier redemption as provided in the Indenture, the
proceeds from such repayment shall be applied by the Property Trustee to redeem
a Like Amount (as defined herein) of Issuer Securities, upon not less than 30
nor more than 90 days' notice, at a redemption price equal to the aggregate
Liquidation Amount plus accumulated and unpaid distributions, plus additional
distributions thereon, if any, to the extent permitted by law, to the redemption
date (the "Redemption Price"). See "Description of Junior Subordinated
Debentures -- Optional Redemption."
The Company will have the right to redeem the Junior Subordinated
Debentures (a) on or after a date to be specified in the Prospectus Supplement,
in whole or in part, or (b) at any time, in whole but not in part, upon
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occurrence of a Tax Event or an Investment Company Event (each as defined below,
a "Special Event"), subject to the conditions described under "-- Special Event
Redemption or Distribution" and "Description of Junior Subordinated Debentures
- -- Optional Redemption."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If a Special Event shall occur and be continuing with respect to the
Issuer or the Preferred Securities, the Company has the right to (i) redeem the
Junior Subordinated Debentures in whole, but not in part, and thereby cause a
mandatory redemption of the Preferred Securities in whole, but not in part, at
the Redemption Price within 90 days following the occurrence of such Special
Event, or (ii) terminate the Issuer and cause the Junior Subordinated Debentures
to be distributed, subject to the receipt of an Opinion of Counsel experienced
in such matters to the effect that the holders of the Preferred Securities will
not recognize gain or loss for United States federal income tax purposes as a
result of such distribution, to the holders of the Preferred Securities in
liquidation of the Issuer. If at any time the Issuer is not or will not be taxed
as a grantor trust, but a Tax Event has not occurred, the Company has the right
to terminate the Issuer and cause the Junior Subordinated Debentures to be
distributed, subject to the receipt of an Opinion of Counsel experienced in such
matters to the effect that the holders of the Preferred Securities will not
recognize gain or loss for United States federal income tax purposes as a result
of such distribution, to the holders of the Preferred Securities of the Issuer.
Under current United States federal income tax law and interpretations, if the
Issuer is treated as a grantor trust at the time of the distribution, such a
distribution should not be a taxable event to holders of the Preferred
Securities. Should there be a change in law, a change in legal interpretation, a
Special Event or other circumstances, however, the termination could be a
taxable event to holders of the Preferred Securities. See "United States
Taxation -- Receipt of Junior Subordinated Debentures Upon Liquidation of the
Issuer" in the accompanying Prospectus Supplement. If the Company does not elect
either option (i) or (ii) above, the Preferred Securities will remain
outstanding.
"Tax Event" means the receipt by the Issuer or the Company, as the
case may be, of an Opinion of Counsel (which may be counsel to the Issuer, the
Company or an affiliate, and which must be reasonably acceptable to the Property
Trustee) experienced in such matters to the effect that a relevant tax law
change has occurred after a date specified in the accompanying Prospectus
Supplement. For purposes of the preceding sentence, a relevant tax law change is
any amendment or change to (or officially proposed amendment or change to) the
laws (including regulations thereunder) of the United States or any political
subdivision or taxing authority thereof, or the publication of any judicial
opinion interpreting such laws (or regulations) or any written interpretation of
such laws (or regulations) by any governmental authority having jurisdiction to
enforce or administer such laws (or regulations) (including official and
unofficial opinions purporting to apply such laws and regulations to other
persons who have issued securities similar to the Junior Subordinated
Debentures), which amendment, change, proposed amendment or change, opinion or
interpretation could, if valid and enacted or applied to the Issuer or the
Company, result in (i) the Issuer, either currently or within 90 days of the
date thereof, becoming subject to United States federal income tax with respect
to interest received on the Junior Subordinated Debentures, (ii) interest
payable by the Company on the Junior Subordinated Debentures attributable to the
Preferred Securities, either currently or within 90 days of the date thereof,
becoming nondeductible for United States federal income tax purposes or (iii)
the Issuer, either currently or within 90 days of the date thereof, becoming
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a change in the interpretation or application of any law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that the Issuer is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
1940 Act Law becomes effective after a date specified in the accompanying
Prospectus Supplement.
"Like Amount" means (i) with respect to a redemption of Issuer
Securities, Issuer Securities having an aggregate Liquidation Amount equal to
the principal amount of Junior Subordinated Debentures to be
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contemporaneously redeemed in accordance with the Indenture and the proceeds of
which will be used to pay the Redemption Price of such Issuer Securities and
(ii) with respect to a distribution of Junior Subordinated Debentures to holders
of the Preferred Securities in connection with the termination or liquidation of
the Issuer upon the bankruptcy, dissolution or liquidation of a holder of the
Common Securities, the occurrence of a Special Event or in the event that the
Issuer is not or will not be taxed as a grantor trust but a Tax Event has not
occurred, Junior Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Preferred Securities of the holders to whom
such series of Junior Subordinated Debentures is distributed.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each date fixed for redemption (the
"Redemption Date") shall be redeemed at the Redemption Price with the proceeds
from the contemporaneous redemption of the Junior Subordinated Debentures.
Redemptions of Preferred Securities shall be made, and the Redemption Price
shall be deemed payable, on each Redemption Date only to the extent that an
Issuer has funds immediately available for the payment of such Redemption Price.
(Section 4.02(d)). See "-- Subordination of Common Securities."
If the Property Trustee gives a notice of redemption in respect of
Preferred Securities of a particular series (which notice will be conditioned
upon the redemption of the related series of Junior Subordinated Debentures),
then, by 12:00 noon, New York time, on the Redemption Date, the Property Trustee
will, so long as such Preferred Securities are in book-entry-only form,
irrevocably deposit with The Depository Trust Company ("DTC") funds sufficient
to pay the applicable Redemption Price and, at the direction of the Depositor,
will give DTC irrevocable instructions and authority to pay the Redemption Price
to the holders of such Preferred Securities. See "-- Book-Entry-Only Issuance --
The Depository Trust Company." If such Preferred Securities are no longer in
book-entry-only form, the Property Trustee will irrevocably deposit with the
Paying Agent for such Preferred Securities funds sufficient to pay the
applicable Redemption Price and will give such Paying Agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing Preferred Securities.
Notwithstanding the foregoing, distributions payable on or prior to the
Redemption Date for any Preferred Securities called for redemption shall be
payable to the holders of such Preferred Securities on the relevant record date
for the related Distribution Date. If notice of redemption shall have been given
and funds deposited as required, then upon the date of such deposit, 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, and such
Preferred Securities will cease to be outstanding. 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 which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Preferred
Securities called for redemption is not paid either by the Issuer or by the
Company pursuant to the Guarantee described herein under "Description of
Guarantee," the Preferred Securities shall be considered to remain outstanding
and distributions on such Preferred Securities will continue to accrue at the
rate set forth on the face of such securities, 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.
Failure to deposit the Redemption Price with the Property Trustee (and/or
irrevocably direct the Property Trustee to apply money held by it to the
redemption of Preferred Securities) in the case of an optional redemption shall
not be an Event of Default but shall be deemed to be a rescission of the call
for redemption. (Section 4.02(e)).
Subject to applicable law (including, without limitation, United
States federal securities law), the Company or its subsidiaries may at any time
and from time to time purchase outstanding Preferred Securities by tender, in
the open market or by private agreement.
Payment of the Redemption Price on Preferred Securities to holders of
such Preferred Securities shall be made to the record holders thereof as they
appear on the register for such Preferred Securities on the relevant record
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date, which shall be one Business Day prior to the relevant Redemption Date,
provided, however, that in the event that such Preferred Securities do not
remain in book-entry-only form, the relevant record date shall be the date 15
days prior to the Redemption Date. (Section 4.02(f)).
If less than all the outstanding Issuer Securities are to be redeemed
on a Redemption Date, then the aggregate amount payable shall be allocated 3% to
the Common Securities and 97% to the Preferred Securities. The particular
Preferred Securities to be redeemed shall be selected not more than 90 days
prior to the Redemption Date by the Property Trustee from the outstanding
Preferred Securities not previously called for redemption, by such method as the
Property Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $25 and integral multiples in
excess thereof) of the aggregate Liquidation Amount of Preferred Securities of a
denomination larger than $25. The Property Trustee shall promptly notify the
Securities Registrar in writing of the Preferred Securities selected for partial
redemption and, in the case of any such Preferred Securities selected for
partial redemption, the aggregate Liquidation Amount thereof to be redeemed. For
all purposes of the Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of a series of Preferred Securities shall
relate, in the case of any Preferred Securities redeemed or to be redeemed only
in part, to the portion of the aggregate Liquidation Amount of the Preferred
Securities that has been or is to be redeemed. (Section 4.02(g)).
SUBORDINATION OF COMMON SECURITIES
Payment of distributions (including Additional Amounts, if applicable)
on, and the Redemption Price of, Issuer Securities, as applicable, shall be made
pro rata based on the aggregate Liquidation Amount of both the Preferred
Securities and the Common Securities; provided, however, that if on any
Distribution Date or Redemption Date an Event of Default (as defined herein, see
"-- Events of Default; Notice," below) under the Indenture shall have occurred
and be continuing, with respect to the Preferred Securities, no payment of any
distribution (including Additional Amounts, if applicable) on, or the Redemption
Price of, any Common Security corresponding thereto, and no other payment on
account of the redemption, liquidation or other acquisition of the corresponding
Common Securities shall be made unless payment in full in cash of all
accumulated and unpaid distributions (including Additional Amounts, if
applicable) on all outstanding Preferred Securities for all distribution periods
terminating on or prior thereto, or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all such outstanding Preferred
Securities called for redemption, shall have been made or provided for, and all
funds available to the Property Trustee shall first be applied to the payment in
full in cash of all distributions (including Additional Amounts, if applicable)
on, or the Redemption Price of such Preferred Securities then due and payable.
(Section 4.03(a)).
In the case of any Event of Default under the Trust Agreement, the
holder of the Common Securities will be deemed to have waived any right to act
with respect to any such Event of Default under such Trust Agreement until the
effect of all such Events of Default with respect to the Preferred Securities
have been cured, waived or otherwise eliminated. Until all such Events of
Default under the Trust Agreement have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
the Preferred Securities and not the holder of the Common Securities, and only
the holders of such Preferred Securities will have the right to direct the
Property Trustee to act on their behalf. (Section 4.03(b)).
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Issuer shall be liquidated on the
first to occur of: (i) the expiration of the term of the Trust; (ii) the
bankruptcy, dissolution or liquidation of a holder of Common Securities; (iii)
the election by the Depositor to cause the Trust to be dissolved after the
occurrence of a Special Event or in the event that the Trust is not or will not
be taxed as a grantor trust but a Tax Event has not occurred; (iv) the
redemption of all of the Preferred Securities; and (v) the issuance of an order
for dissolution of the Trust by a court of competent jurisdiction. (Sections
9.01 and 9.02).
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If an early termination occurs as described in clause (iii) of the
immediately preceding paragraph, the Issuer shall be liquidated as expeditiously
as practicable by having the Property Trustee distribute, subject to the receipt
of an Opinion of Counsel experienced in such matters to the effect that the
holders of the Preferred Securities will not recognize gain or loss for United
States federal income tax purposes as a result of such distribution, to each
holder of Preferred Securities and Common Securities a Like Amount of Junior
Subordinated Debentures held by such Issuer (a "Final Distribution"). However,
in the event that the Property Trustee determines that such Final Distribution
is impractical, the holders of such Issuer Securities will be entitled to
receive, out of the assets of the Issuer available for distribution to holders
after satisfaction of all liabilities of creditors, an amount equal to the
aggregate of the stated Liquidation Amount of $25 per Issuer Security plus
accrued and unpaid distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"). If such Liquidation Distribution can be
paid only in part because the Issuer has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by such Issuer on the Issuer Securities shall be paid on a pro rata basis.
However, if an Event of Default has occurred and is continuing, the holders of
the Common Securities will be entitled to receive distributions upon any such
dissolution only after the holders of the Preferred Securities. If the Junior
Subordinated Debentures are distributed to the holders of the corresponding
Preferred Securities, the Company will use reasonable efforts to have such
Junior Subordinated Debentures listed on such stock exchanges, if any, on which
the Preferred Securities are then listed. If the Company defaults on its payment
obligations under the Indenture, a holder will have the right to take action
directly against the Company for enforcement of payment of principal of or
interest on the Junior Subordinated Debentures having a principal amount equal
to the aggregate Liquidation Amount of the Preferred Securities of such holder.
If an early termination occurs as described in clause (ii) of the immediately
preceding paragraph, a liquidating trustee (the "Liquidating Trustee") may be
appointed by a majority of the aggregate Liquidation Amount of the Issuer
Securities or by a court of competent jurisdiction. Any such Liquidating Trustee
shall (unless otherwise instructed by a court of competent jurisdiction) make a
Final Distribution or, if deemed appropriate by such Liquidating Trustee, make a
Liquidation Distribution, in substantially the same manner as described above.
(Section 9.04).
EVENTS OF DEFAULT; NOTICE
The occurrence of an "Event of Default" as defined in Section 501 of
the Indenture (see "Description of Junior Subordinated Debentures -- Events of
Default") constitutes an "Event of Default" under the Trust Agreement.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and the Depositor, unless such Event of Default shall
have been cured or waived. (Section 8.02).
Unless an Event of Default shall have occurred and be continuing, any
Trustee with respect to the Issuer Securities may be removed at any time by act
of the Depositor of the Issuer. If an Event of Default has occurred and is
continuing, any Trustee with respect to the Issuer Securities may be removed at
such time by act of the holders of a majority in aggregate Liquidation Amount of
the outstanding Issuer Securities, delivered to such Trustee (in its individual
capacity and on behalf of the relevant Issuer). No resignation or removal of a
Trustee and no appointment of a successor Trustee shall be effective until the
acceptance of appointment by the successor Trustee in accordance with the
provisions of the Trust Agreement. (Section 8.10).
If an Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the corresponding Common Securities upon
dissolution of the Issuer as described above. See "-- Liquidation Distribution
Upon Dissolution."
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MERGER OR CONSOLIDATION OF A TRUSTEE
Any corporation into which either the Property Trustee or any
Administrative Trustee that is not a natural person may be merged or with which
it may be consolidated or any corporation resulting from any merger, conversion
or consolidation to which any such Trustee shall be a party shall be the
successor to such Trustee under the Trust Agreement, provided such corporation
is otherwise qualified and eligible. (Section 8.12).
VOTING RIGHTS
Except as provided below and under "Description of Guarantee --
Amendments and Assignments" and as otherwise required by law, the holders of the
Preferred Securities will have no voting rights. (Section 6.01(a)).
So long as any Junior Subordinated Debentures are held by the Issuer,
the Property Trustee shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Debenture Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default which is
waivable under Section 513 of the Indenture, (iii) exercise any right to rescind
or annul any declaration that the principal of all the Junior Subordinated
Debentures shall be due and payable or (iv) consent to any amendment,
modification of termination of the Indenture or the Junior Subordinated
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of at least a majority in aggregate
Liquidation Amount of the outstanding Issuer Securities; provided, however, that
where a consent under the Indenture would require the consent of each holder of
Junior Subordinated Debentures affected thereby, no such consent shall be given
by the Property Trustee without the prior written consent of each holder of the
Issuer Securities. The Property Trustee shall not revoke any action previously
authorized or approved by a vote of the holders of the Issuer Securities, except
pursuant to a subsequent vote of the outstanding Issuer Securities. The Property
Trustee shall notify all holders of Issuer Securities of any notice of default
received from the Debenture Trustee. In addition to obtaining the foregoing
approvals of the holders of the Issuer Securities, prior to taking any of the
foregoing actions, the Property Trustee shall obtain an Opinion of Counsel
experienced in such matters to the effect that the Issuer will not be classified
as an association taxable as a corporation for United States federal income tax
purposes on account of such action. (Section 6.01(b)).
If any proposed amendment to the Trust Agreement provides for, or the
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the holders of the Issuer
Securities, whether by way of amendment to the Trust Agreement relating to such
Issuer Securities or otherwise, or (ii) the dissolution, winding-up or
termination of the Issuer, other than pursuant to the Trust Agreement, then the
holders of the outstanding Issuer Securities will be entitled to vote on such
amendment or proposal, and such amendment or proposal shall not be effective
except with the approval of the holders of at least a majority in aggregate
Liquidation Amount of such outstanding Issuer Securities. (Section 6.01(c)).
No amendment to the Trust Agreement may be made if, as a result of
such amendment, the Issuer would be classified as an association taxable as a
corporation for United States federal income tax purposes. (Section 6.01(c)).
Any required approval of the holders of Issuer Securities may be given
at a meeting of the holders of Issuer Securities convened for such purpose or
pursuant to the written consent of such holders. The Administrative Trustees
will cause a notice of any meeting at which holders of such Issuer Securities
are entitled to vote, or of any matter upon which action by written consent of
such holders is to be taken, to be given to each holder of record of such Issuer
Securities in the manner set forth in the Trust Agreement. (Section 6.02).
No vote or consent of the holders of Issuer Securities will be
required for the Issuer to redeem and cancel Issuer Securities in accordance
with the Trust Agreement.
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Notwithstanding that holders of Issuer Securities are entitled to vote
or consent under any of the circumstances described above, any of the Issuer
Securities that are owned by the Company, any Trustee or any affiliate of the
Company or any Trustee, shall, for purposes of such vote or consent, be treated
as if they were not outstanding.
CO-PROPERTY TRUSTEES AND SEPARATE PROPERTY TRUSTEES
Unless an Event of Default under the Trust Agreement shall have
occurred and be continuing, at any time or times, for the purpose of meeting the
legal requirements of the Trust Indenture Act or of any jurisdiction in which
any part of the Trust Property (as defined in the Trust Agreement) may at the
time be located, the Depositor and the Administrative Trustees shall have power
to appoint, and upon the written request of the Administrative Trustees, the
Depositor shall for such purpose join with the Administrative Trustees in the
execution, delivery and performance of all instruments and agreements necessary
or proper to appoint one or more persons approved by the Property Trustee either
to act as co-property trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to act as separate trustee of any such Trust
Property, in either case with such powers as may be provided in the instrument
of appointment, and to vest in such person or persons in such capacity, any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. If the Depositor does not join in such
appointment within 15 days after the receipt by it of a request to do so, or in
case an Event of Default under the Indenture has occurred and is continuing, the
Administrative Trustees and the Property Trustee shall have power to make such
appointment. (Section 8.09).
PAYMENT AND PAYING AGENTS
Payments in respect of the Preferred Securities shall be made to DTC,
which shall credit the relevant accounts at DTC on the applicable Distribution
Dates or, if the Preferred Securities are not held by DTC, such payments shall
be made by check mailed to the address of the holder entitled thereto as such
address shall appear on the securities register. The Paying Agent shall
initially be Wilmington Trust Company. The Paying Agent shall be permitted to
resign as Paying Agent upon 30 days' written notice to the Administrative
Trustees, the Property Trustee and the Depositor. In the event that Wilmington
Trust Company chooses no longer to be the Paying Agent, the Administrative
Trustees shall appoint a successor acceptable to the Property Trustee and the
Company to act as Paying Agent (which shall be a bank or trust company or the
Company). (Sections 4.04 and 5.08).
BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
DTC 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. (DTC's nominee). One or more
fully-registered global Preferred Security certificates will be issued,
representing in the aggregate the total number of Preferred Securities, and will
be deposited with Wilmington Trust Company, as custodian for DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds the securities that its participants ("Participants") deposit with it. DTC
facilitates the settlement of securities transactions among Participants through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers, securities dealers, banks, trust
companies, clearing corporations and certain other organizations ("Direct
Participants"). DTC is owned by a number of its Direct Participants, as well as
by the New York Stock Exchange, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers, securities dealers, banks
and trust companies that clear through or maintain a custodial relationship with
a Direct Participant, either directly or indirectly ("Indirect Participants").
The
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underwriters with respect to the Preferred Securities may be Direct or Indirect
Participants. The rules applicable to DTC and its Participants are on file with
the Commission.
Purchases of Preferred Securities within the DTC system must be made
by or through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is, in turn, recorded on a Direct
or Indirect Participant's records, as the case may be. Beneficial Owners will
not receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
respective Direct or Indirect Participants through which the Beneficial Owners
purchased Preferred Securities. Transfers of ownership interests in the
Preferred Securities are also effected 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 Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC'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 are responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
the arrangements made among them, subject to any statutory or regulatory
requirements as may be in effect from time.
Redemption notices, if any, will be sent to DTC. If less than all of
the Preferred Securities of a particular series are being redeemed, DTC's
practice is to determine by lot the amount of the Preferred Securities held by
each Direct Participant in such series to be redeemed.
Although voting with respect to the Preferred Securities is limited to
the holders of record of the Preferred Securities, in those cases where a vote
is required neither DTC nor Cede & Co. will itself consent or vote with respect
to any Preferred Securities. Under its usual procedures, DTC would mail an
Omnibus Proxy to the Issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants (identified in a listing attached to the Omnibus Proxy) to whose
accounts the Preferred Securities are credited on the record date.
Distribution payments on the Preferred Securities will be made by the
Issuer to DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings as shown on
DTC's records, unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices and will be
the responsibility of such Participants and not of DTC, the Issuer or the
Company, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of distributions to DTC is the responsibility of the
Issuer, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of the Direct or Indirect Participants in whose
accounts the Preferred Securities are held, respectively.
DTC may discontinue providing its services as securities depositary
with respect to the Preferred Securities at any time by giving reasonable notice
to the Issuer. If DTC stops providing such services and a successor securities
depositary is not obtained, Preferred Security certificates must be printed and
delivered. Additionally, the Administrative Trustees (with the consent of the
Company) could decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). In that event, definitive certificates
for the Preferred Securities would be printed and delivered.
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The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company and the Issuer believe to
be reliable. Neither the Company nor the Issuer have responsibility for the
performance by DTC or its Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
REGISTRAR AND TRANSFER AGENT
Wilmington Trust Company will act as Securities Registrar and transfer
agent for the Issuer Securities. (Section 5.04).
Registration of transfers of Issuer Securities will be effected
without charge by or on behalf of the Issuer, but upon payment (with the giving
of such indemnity as the Issuer or the Company may require) in respect of any
tax or other governmental charges which may be imposed in connection therewith.
(Section 5.04).
The Securities Registrar will not be required to register or cause to
be registered any transfer of Issuer Securities after they have been called for
redemption. (Section 5.04).
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee undertakes to perform only such duties as are
specifically set forth in the Trust Agreement and, after an Event of Default
under the Indenture, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
holder of Preferred Securities or Junior Subordinated Debentures unless the
Property Trustee is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby. (Sections 8.01 and 8.03(g)).
MODIFICATION OF THE TRUST AGREEMENT
From time to time, the Company and the Trustees may, without the
consent of any holders of the Preferred Securities, amend the Trust Agreement
for specified purposes, including, among other things, (i) to cure ambiguities,
correct or supplement any provision of the Trust Agreement which may be
inconsistent with any other provision thereof or to make any other provisions
with respect to matters or questions arising under the Trust Agreement which
shall not be inconsistent with the other provisions of the Trust Agreement, or
(ii) to ensure that the Trust will not be classified for United States federal
income tax purposes as an association taxable as a corporation and will not be
required to register as an "investment company" under the 1940 Act; provided,
however, that such amendment or action shall not adversely affect the rights of
any holder of the Issuer Securities. The Trust Agreement contains provisions
permitting the Company and the Trustees, with the consent of the holders of not
less than a majority in aggregate Liquidation Amount of the outstanding Issuer
Securities related thereto and upon receipt of an appropriate Opinion of
Counsel, to modify the Trust Agreement in a manner affecting the rights of the
holders of such Issuer Securities; provided that no such modification may,
without the consent of the holder of each such outstanding Issuer Security
affected by the proposed modification (i) change the amount or timing of any
distribution on such Issuer Securities or otherwise adversely affect the amount
of any distribution required to be made in respect of such Issuer Securities as
of a specified date, (ii) restrict the right of any holder of such Issuer
Securities to institute suit for the enforcement of any payment under such Trust
Agreement or (iii) change the percentage of Issuer Securities required to
consent to any modification to the Trust Agreement. (Section 10.02).
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GOVERNING LAW
The Trust Agreement will be governed by, and construed in accordance
with, the laws of the State of Delaware. (Section 10.05).
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of the Issuer and to operate the Issuer so that the Issuer will not be
deemed to be an "investment company" required to be registered under the 1940
Act or be taxed as a corporation for United States federal income tax purposes
and so that the Junior Subordinated Debentures will be treated as indebtedness
of the Company for United States federal income tax purposes. In this
connection, the Depositor or any of the Administrative Trustees are authorized
to take any action, not inconsistent with applicable law, the certificate of
trust of the Issuer or the Trust Agreement, that the Depositor or any of the
Administrative Trustees determine in its discretion to be necessary or desirable
for such purposes, as long as such action does not adversely affect the interest
of the holders of the Preferred Securities. (Section 2.07).
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF GUARANTEE
GENERAL
Set forth below is certain 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 Guarantee has been qualified as
an indenture under the Trust Indenture Act. Wilmington Trust Company will act as
indenture trustee (the "Guarantee Trustee") under the Guarantee for purposes of
compliance with the Trust Indenture Act. The terms of the Guarantee will be
those set forth in such Guarantee and those made part of such 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 Guarantee, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part, and of the Trust
Indenture Act. The Guarantee Trustee will hold the Guarantee for the benefit of
the holders of the Preferred Securities. Whenever particular provisions of or
defined terms in the Guarantee are referred to, such sections or defined terms
are incorporated herein by reference. Section references used herein are
references to provisions of the Guarantee unless otherwise stated.
The Company will agree, on a subordinated basis, to the extent set
forth below, to make the Guarantee Payments (as defined below) in full to the
holders of the Preferred Securities (without duplication of amounts theretofore
paid by the Issuer with respect thereto), as and when due, regardless of any
defense, right of set-off or counterclaim that such Issuer may have or assert
other than the defense of payment. (Section 5.1). The following payments with
respect to the Preferred Securities, to the extent not paid by or on behalf of
the Issuer (the "Guarantee Payments"), will be subject to the related Guarantee
(without duplication): (i) any accrued and unpaid distributions required to be
paid on the Preferred Securities, if and only to the extent that the Issuer has
funds sufficient to make such payment; (ii) the Redemption Price with respect to
any such Preferred Securities called for redemption by the Issuer, if and only
to the extent that the Issuer has funds sufficient to make such payment; and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
such Issuer (other than in connection with a redemption of all of the
corresponding Preferred Securities), the lesser of (a) the aggregate Liquidation
Amount and all accrued and unpaid distributions on such Preferred Securities to
the date of payment, to the extent the Issuer has funds sufficient to make such
payment, and (b) such amount of assets of such Issuer remaining available for
distribution to holders of such Preferred Securities in liquidation of such
Issuer. (Section 1.1). The Company's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts
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by the Company to the holders of the Preferred Securities or by causing the
Issuer to pay such amounts to such holders. (Section 5.1).
The Guarantee will be a guarantee on a subordinated basis with respect
to the Preferred Securities from the time of the issuance of such Preferred
Securities, but will not apply (i) to any payment of distributions if and to the
extent that the Issuer does not have funds sufficient to make such payments or
(ii) to the collection of payment. If the Company does not make interest
payments on a series of Junior Subordinated Debentures held by the Issuer, it is
expected that such Issuer will not pay distributions on such Preferred
Securities. The Guarantee will rank subordinate and junior in right of payment
to all liabilities of the Company (except trade credit and any liabilities made
pari passu with, or subordinate to, the Guarantee by their terms). See "--
Status of the Guarantee."
With respect to the Preferred Securities, the mechanisms and
obligations relating to the Guarantee, the Indenture and the Junior Subordinated
Debentures and the obligation of the Company under the Trust Agreement to pay
all obligations, costs and expenses (other than obligations of the Trust to pay
to holders of the Preferred Securities the amounts due such holders pursuant to
the terms of the Preferred Securities) of the Issuer (the "Expense Agreement"),
taken together, are a full and unconditional subordinated guarantee by the
Company of payment due of such Preferred Securities. See "Description of Junior
Subordinated Debentures" and "Relationship Among the Preferred Securities, the
Junior Subordinated Debentures and the Guarantee."
AMENDMENTS AND ASSIGNMENTS
Except with respect to any changes that do not adversely affect the
rights of the holders of Preferred Securities (in which case no consent of such
holders will be required), the terms of the Guarantee may be changed only with
the prior approval of the holders of not less than a majority in aggregate
Liquidation Amount of such outstanding Preferred Securities. All guarantees and
agreements contained in the Guarantee will be binding upon the successors,
assigns, receivers, trustees and representatives of the Company, and shall inure
to the benefit of the holders of the corresponding Preferred Securities then
outstanding. (Sections 8.1 and 8.2).
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payment obligations thereunder. (Section 1.1).
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 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. (Section 5.4).
Any holder of the Preferred Securities may institute a legal
proceeding directly against the Company to enforce such holder's rights under
the Guarantee without first instituting a legal proceeding against the Issuer,
the Guarantee Trustee or any other person or entity. (Section 5.4).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and
continuance of a default by the Company in the performance of the Guarantee,
undertakes to perform only such duties as are specifically set forth in the
Guarantee and, after default with respect to the Guarantee, shall exercise such
of the rights and powers vested in it by the Guarantee and must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee (i) 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 the
Guarantee Trustee is offered reasonable indemnity against the costs (including
attorneys' fees and expenses), expenses and liabilities that might be incurred
thereby and (ii) may rely and be fully protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent order, bond, debenture, note, other evidence
of indebtedness or other paper or document believed
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by it to be genuine and to have been signed, sent or presented by the proper
party or parties. (Sections 3.1 and 3.2).
The Company agreed to indemnify the Guarantee Trustee for, and to hold
it harmless against, any and all loss, damage, claim, liability or expense,
including certain taxes, incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
Guarantee, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers of duties thereunder. (Section 3.2).
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect
upon full payment of the Redemption Price of all Preferred Securities, the
distribution of Junior Subordinated Debentures to the holders of such Preferred
Securities in exchange for all of such Preferred Securities or upon payment in
full of the amounts payable upon liquidation of the Issuer. Notwithstanding the
foregoing, 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 such Preferred Securities or the Guarantee.
(Section 7.1).
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of payment to all Senior
Indebtedness (as defined below) of the Company. (Section 6.1). The Trust
Agreement provides that each holder of Preferred Securities by acceptance
thereof agrees to the subordination provisions and other terms of the Guarantee.
The Guarantee will rank pari passu with any similar guarantees issued
by the Guarantor on behalf of the holders of Preferred Securities issued by any
other issuer holding Junior Subordinated Debentures issued under the Indenture.
(Section 6.2).
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). (Section
5.5).
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
laws of the State of New York. (Section 8.5).
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
GENERAL
Set forth below is a description of certain terms of the Junior
Subordinated Debentures which the Issuer will purchase with its Common
Securities and the proceeds of the issuance and sale of such Issuer's Preferred
Securities. The following summary does not purport to be complete and is subject
in all respects to, and is qualified in its entirety by reference to, the
Indenture, as supplemented by a supplemental indenture creating the series of
Junior Subordinated Debentures (the "Supplemental Indenture"), from the Company
to Wilmington Trust Company, as trustee with respect to the Junior Subordinated
Debentures (the "Debenture Trustee"), the forms of which are filed as exhibits
to the Registration Statement of which this Prospectus is a part, and the Trust
Indenture Act. Whenever particular provisions of or defined terms in the
Indenture or the Supplemental Indenture are referred to,
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such sections or defined terms are incorporated herein by reference. Section
references used herein are references to provisions of the Indenture unless
otherwise stated.
Concurrently with the issuance of Preferred Securities, the Issuer
will invest the proceeds thereof in a corresponding series of Junior
Subordinated Debentures newly issued by the Company. The Junior Subordinated
Debentures will mature on a date that is more than 20 and less than 50 years
from the date of issuance, as specified in the Prospectus Supplement. The Junior
Subordinated Debentures will be unsecured subordinated obligations of the
Company issued under the Indenture. The Junior Subordinated Debentures will be
in a principal amount equal to the aggregate stated Liquidation Amount of the
Preferred Securities plus the Company's concurrent investment in the Common
Securities and will rank pari passu with any other series of Junior Subordinated
Debentures that may be issued. The Indenture does not limit the aggregate
principal amount of Junior Subordinated Debentures which may be issued
thereunder.
OPTIONAL REDEMPTION
The Company will have the right, at any time and from time to time, as
set forth in the Supplemental Indenture, to redeem the Junior Subordinated
Debentures, in whole or in part, at a redemption price as set forth in such
Supplemental Indenture, together with any accrued but unpaid interest thereon,
including any Additional Interest (as defined below) to the Redemption Date.
If a Special Event shall occur and be continuing or upon the event of
the termination or liquidation of the Issuer pursuant to an order for the
dissolution, termination or liquidation of the Issuer entered by a court of
competent jurisdiction, the Company shall have the right to redeem any series of
Junior Subordinated Debentures in whole but not in part, at 100% of the
principal amount thereof plus any accrued and unpaid interest on such Junior
Subordinated Debentures, including any Additional Interest, if any, to the
Redemption Date fixed for redemption for such series. (Section 102 of the
Supplemental Indenture).
For so long as the Issuer is the holder of all the outstanding Junior
Subordinated Debentures, the proceeds of any such redemption will be used by
such Issuer to redeem Preferred Securities and the Common Securities in
accordance with their terms. The Company may not redeem Junior Subordinated
Debentures in part unless all accrued and unpaid interest thereon (including any
Additional Interest) has been paid in full on all outstanding Junior
Subordinated Debentures for all interest periods terminating on or prior to the
redemption date. (Section 102 of the Supplemental Indenture).
Any optional redemption of Junior Subordinated Debentures shall be
made upon not less than 30 nor more than 90 days' notice to the holders thereof.
If at the time of mailing of any notice of redemption the Company shall not have
deposited with the Debenture Trustee (and/or irrevocably directed the Debenture
Trustee to apply, from money held by it available to be used for the redemption
of Junior Subordinated Debentures) an amount in cash sufficient to redeem all of
the Junior Subordinated Debentures to be redeemed, including accrued interest to
such Redemption Date, such notice shall state that the proposed redemption to
which such notice relates is subject to the deposit of such amount with the
Debenture Trustee on or before the Redemption Date. Failure to have so deposited
such amount (or directed such payment) shall not constitute an Event of Default
but shall be deemed to be a rescission of the call for redemption. (Sections 501
and 1204).
After notice of redemption is given and the Company has on or before
the Redemption Date deposited with the Debenture Trustee (and/or has irrevocably
directed the Debenture Trustee to apply, from money held by it available to be
used for the redemption of Junior Subordinated Debentures) an amount in cash
sufficient to redeem all of the Junior Subordinated Debentures to be redeemed,
the Junior Subordinated Debentures so to be redeemed will, on the Redemption
Date, become due and payable and from and after such date, such Junior
Subordinated Debentures will cease to bear interest. (Section 1206).
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DISTRIBUTIONS OF DEBENTURES
Under certain circumstances involving the termination of the Issuer,
Junior Subordinated Debentures held by such Issuer may be distributed to the
holders of the Preferred Securities in liquidation of the Issuer, after
satisfaction of all liabilities to creditors of the Issuer as provided by
applicable law. If distributed to holders of Preferred Securities in
liquidation, the Junior Subordinated Debentures will initially be issued in the
form of one or more global securities, and DTC, or any successor depositary for
the Preferred Securities, will act as depositary for the Junior Subordinated
Debentures. It is anticipated that the depositary arrangements for the Junior
Subordinated Debentures, if distributed, would be substantially identical to
those in effect for the Preferred Securities. Neither the Company, the Debenture
Trustee, any Paying Agent nor any other agent of the Company or the Debenture
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of persons holding Junior Subordinated
Debentures in the form of a global security for the Junior Subordinated
Debentures or for maintaining, supervising or reviewing any records relating to
such holders.
A global security shall be exchangeable for Junior Subordinated
Debentures registered in the names of persons other than DTC or its nominee only
if (i) DTC notifies the Company that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have been
appointed, or if at any time DTC ceases to be a clearing agency registered under
the Exchange Act at a time when DTC is required to be so registered to act as
such depositary, (ii) the Company in its sole discretion determines that such
global security shall be so exchangeable, or (iii) there shall have occurred and
be continuing an Event of Default with respect to such global security. Any
global security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants with respect to the ownership of
beneficial interests in such global security. In the event that Junior
Subordinated Debentures are issued in definitive form, such Junior Subordinated
Debentures will be issued in denominations of $25 and integral multiples thereof
and may be transferred or exchanged at the offices described below.
Payments on Junior Subordinated Debentures represented by a global
security will be made to DTC, as the depositary for the Junior Subordinated
Debentures. In the event Junior Subordinated Debentures are issued in definitive
form, principal and interest will be payable, the transfer of the Junior
Subordinated Debentures will be registrable, and Junior Subordinated Debentures
will be exchangeable for Junior Subordinated Debentures of other denominations
of a like aggregate principal amount, at the corporate office of the Debenture
Trustee in Wilmington, Delaware, or at the offices of any paying or transfer
agent appointed by the Company, provided that payment of interest may be made,
at the option of the Company, by check mailed to the address of the persons
entitled thereto or by wire transfer. In addition, if the Junior Subordinated
Debentures are issued in certificated form, the record dates for payment of
interest will be the 15th day preceding the end of each quarter. For a
description of DTC and the terms of the depositary arrangements relating to
payments, transfers, voting rights and other matters, see "Description of
Preferred Securities -- Book-Entry-Only Issuance -- The Depository Trust
Company."
If the Junior Subordinated Debentures are distributed to the holders
of Preferred Securities upon the liquidation of the Issuer, the Company will use
its best efforts to list the Junior Subordinated Debentures on such stock
exchanges, if any, as the Preferred Securities are then listed.
INTEREST
The Junior Subordinated Debentures shall bear interest at the rate per
annum set forth in the applicable Supplemental Indenture and from the date
specified therein. Such interest shall be payable in arrears on the dates of
each year specified in the Supplemental Indenture (each, an "Interest Payment
Date"), subject to certain exceptions, to the person in whose name such Junior
Subordinated Debentures are registered, at the close of business on the Business
Day next preceding such Interest Payment Date. (Section 307 of the Indenture and
Section 101 of the Supplemental Indenture). It is anticipated that the Junior
Subordinated Debentures issued with respect to an issue
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of Preferred Securities will be held in the name of the Property Trustee in
trust for the benefit of the holders of the Issuer Securities.
Except as otherwise specified in the Indenture, the amount of interest
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months and, for any period shorter than a full monthly period, shall be
computed on the basis of the actual number of days elapsed in such period.
(Section 310). In the event that any date on which interest is payable on the
Junior Subordinated Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date the payment was
originally payable. (Section 101 of the Supplemental Indenture).
Interest which is accrued and unpaid after the interest payment date
therefor will bear additional interest on the amount thereof (to the extent
permitted by law) at the rate specified for the Junior Subordinated Debentures.
The term "interest" as used herein shall include interest payments, interest on
interest payments in arrears and Additional Interest, as applicable.
THE COMPANY'S OPTION TO EXTEND INTEREST PAYMENT PERIODS
The Company shall have the right, at any time and from time to time
while the Junior Subordinated Debentures are outstanding, so long as an Event of
Default has not occurred or is continuing, to extend the interest payment period
on such Junior Subordinated Debentures for a period not exceeding 20 consecutive
quarters (the "Extension Period") during which period interest will compound
quarterly. At the end of any such Extension Period, the Company must pay all
interest then accrued and unpaid (together with interest thereon at the rate
specified for such Junior Subordinated Debentures to the extent permitted by
applicable law). The Company may not defer the interest payment period with
respect to Additional Interest Attributable to Taxes (as hereinafter defined)
and shall make payment thereof on the relevant interest payment date. During any
such Extension Period, the Company may not declare or pay any dividends or
distributions (other than dividends or distributions payable in capital stock of
the Company or other securities ranking junior in right of payment to the Junior
Subordinated Debentures) on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of its capital stock or any security ranking pari
passu with or junior in right of payment to the Junior Subordinated Debentures,
or make any guarantee payment with respect to the foregoing (other than pro rata
payments under the Guarantee) or repurchase, or cause any of its subsidiaries to
repurchase, any security of the Company ranking pari passu with or junior in
right of payment to the Junior Subordinated Debentures (except for payments made
on any series of Junior Subordinated Debentures upon the stated maturity of such
Junior Subordinated Debentures); provided that the Company may redeem, purchase,
acquire or make a liquidation payment with respect to any of its capital stock
or any security ranking pari passu with or junior in right of payment to the
Junior Subordinated Debentures, make any guarantee payment with respect to the
foregoing or repurchase, or cause any of its subsidiaries to repurchase, any
security of the Company ranking pari passu with or junior in right of payment to
the Junior Subordinated Debentures with securities (or the proceeds from the
issuance of securities) having no higher ranking than the capital stock or the
other securities which are to be redeemed, purchased, or acquired, with respect
to which a liquidation payment is to be made, to which a guarantee payment is to
be made with respect to the foregoing or which are to be repurchased. This
covenant requires that an interest payment period on the Junior Subordinated
Debentures may be extended only if the interest payment periods on all other
series of Junior Subordinated Debentures that may be outstanding at the time are
likewise extended. Prior to the termination of any Extension Period, the Company
may further extend the interest payment period, provided that such Extension
Period together with all such previous and further extensions thereof may not
exceed 20 consecutive quarters or extend beyond the maturity date or redemption
date of such Junior Subordinated Debentures. Upon the termination of any such
Extension Period and the payment of all amounts then due, the Company may select
a new Extension Period, subject to the foregoing requirements. Except for
Additional Interest Attributable to Taxes, no interest shall be due and payable
during an Extension Period, except at the end thereof. So long as the Property
Trustee shall be the sole holder of the Junior
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Subordinated Debentures, the Company must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its selection of
such Extension Period at least one Business Day prior to the earlier of (i) the
date that the distribution on the Preferred Securities is payable or (ii) the
date the Administrative Trustees are required to give notice to the New York
Stock Exchange or other applicable self-regulatory organization or to holders of
the Preferred Securities of the record date for the payment of such distribution
or the date such distribution is payable, but in any event not less than one
Business Day prior to such record date. The Debenture Trustee will be required
to give prompt notice of the Company's selection of such Extension Period to the
holders of the Preferred Securities and the Administrative Trustees. (Section
101 of the Supplemental Indenture).
RIGHT OF SET-OFF
Notwithstanding anything to the contrary in the Indenture, the Company
shall have the right to set off any payment it is otherwise required to make
thereunder to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee. (Section 311).
ADDITIONAL INTEREST
If at any time the Issuer shall be required to pay any interest on
distributions in arrears in respect of the Preferred Securities pursuant to the
terms thereof, the Company will pay as interest to such Issuer, as the holder of
the corresponding Junior Subordinated Debentures, an amount of additional
interest ("Additional Interest Attributable to Deferral") equal to interest on
distributions in arrears. Accordingly, in such circumstances the Company will,
to the fullest extent permitted by applicable law, pay interest upon interest in
order to provide for quarterly compounding on such Junior Subordinated
Debentures. In addition, if the Issuer 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 each
case, the Company will also pay such amounts as shall be required so that the
net amounts received and retained by such Issuer after paying such taxes,
duties, assessments or governmental charges will be not less than the amounts
such Issuer would have received had no such taxes, duties, assessments or
governmental charges been imposed ("Additional Interest Attributable to Taxes,"
and, together with Additional Interest Attributable to Deferral, "Additional
Interest"). (Section 101 of the Indenture and Section 101 of the Supplemental
Indenture).
SUBORDINATION
The Junior Subordinated Debentures will be subordinate and junior in
right of payment to the prior payment, in full in cash or cash equivalents, of
all Senior Indebtedness (as defined below). (Sections 101 and 1101). In the
event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to the Company or to its assets, or (b) any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or (c) any
assignment for the benefit of creditors or any other marshalling of assets and
liabilities of the Company (except a distribution in connection with a
consolidation of the Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company following
conveyance, transfer or lease of its properties and assets substantially as an
entirety to another corporation upon the terms and conditions described below
under "-- Consolidation, Merger and Sale"), the holders of all Senior
Indebtedness will be entitled to receive payment in full in cash or cash
equivalents of all amounts due or to become due thereon, before the holders of
Junior Subordinated Debentures are entitled to receive any payment on account of
the principal of or interest on the Junior Subordinated Debentures; and any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, by set-off or otherwise, to which the
holders of the Junior Subordinated Debentures or the Debenture Trustee would be
entitled but for the provisions of the Indenture relating to subordination shall
be paid by the Liquidating Trustee or agent or other person making such payment
or distribution directly to the holders of Senior Indebtedness ratably according
to the aggregate amounts remaining unpaid on account of the Senior Indebtedness
to the extent necessary to make payment in full in cash or cash equivalents of
all Senior Indebtedness remaining unpaid. In the event that, notwithstanding the
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foregoing, the Debenture Trustee or any holder of the Junior Subordinated
Debentures shall have received payment or distribution of assets of the Company
of any kind or character (excluding certain permitted subordinated securities)
before all Senior Indebtedness is paid in full or payment thereof is provided
for, then such payment or distribution will be paid over or delivered to the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent
or other person making payment or distribution of the assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all Senior Indebtedness in full in cash or cash
equivalents. (Section 1102).
The Company is prohibited from making payments on account of the
principal of or interest on the Junior Subordinated Debentures or on account of
the purchase or redemption or other acquisition of the Junior Subordinated
Debentures if there shall have occurred and be continuing: (a) a default in any
payment with respect to any Senior Indebtedness or (b) any other event of
default with respect to any Senior Indebtedness resulting in the acceleration of
the maturity thereof. (Section 1103). In the event that the Company makes any
payment to the Debenture Trustee or any holder of Junior Subordinated Debentures
which payment is prohibited by the foregoing, then such payment is required to
be paid over to the representative of the holders of the Senior Indebtedness
then outstanding to the extent necessary to pay in full, in cash or cash
equivalents, all Senior Indebtedness. (Section 1103).
Subject to the payment in full of all Senior Indebtedness, the holders
of the Junior Subordinated Debentures shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments and distributions of assets
of the Company applicable to the Senior Indebtedness until the Junior
Subordinated Debentures are paid in full. (Section 1105).
If the Company fails to make any payment on the Junior Subordinated
Debentures when due or within any applicable grace period, such failure will
constitute an Event of Default under the Indenture. See "-- Events of Default."
As of May 31, 1996, the Senior Indebtedness of the Company was
approximately $771 million.
The term "Senior Indebtedness" shall mean the principal of, interest
on and any other payment due pursuant to any of the following, whether
outstanding at the date of execution of any Supplemental Indenture or thereafter
incurred, created or assumed:
(a) all indebtedness of the Company on a consolidated basis
(other than any obligations to trade creditors) evidenced by notes,
debentures, bonds or other securities sold by the Company for money
borrowed and capitalized lease obligations;
(b) all indebtedness of others of the kinds described in the
preceding clause (a) assumed by or guaranteed in any manner by the
Company or in effect guaranteed by the Company;
(c) 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);
(d) certain obligations of the Company for the reimbursement of
any obligor on any letter of credit, banker's acceptance, security
purchase facility, surety bond or similar credit transaction entered
into in the ordinary course of business of the Company; and
(e) all renewals, extensions or refundings of indebtedness of the
kinds described in any of the preceding clauses (a) through (d);
unless, in the case of any particular indebtedness, capitalized lease
obligation, guarantee, renewal, extension or refunding, the instrument creating
or evidencing the same or the assumption or guarantee of the same expressly
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provides that such indebtedness, capitalized lease obligation, guarantee,
renewal, extension or refunding is made pari passu with or subordinate to the
Junior Subordinated Debentures. (Section 101).
Notwithstanding the foregoing, the Junior Subordinated Debentures will
rank pari passu with each other series of Junior Subordinated Debentures that
may be issued under the Indenture.
The Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued. (Section 301).
CERTAIN COVENANTS
The Junior Subordinated Debentures will not be secured by any
properties or assets and will represent unsecured debt of the Company.
Unless otherwise indicated in a Prospectus Supplement, the covenants
contained in the Indenture and the Junior Subordinated Debentures do not afford
holders of the Junior Subordinated Debentures special protection in the event of
a highly leveraged or other transaction involving the Company that may adversely
affect holders of the Junior Subordinated Debentures.
In the Indenture, the Company covenants that it will not declare or
pay any dividends or distributions (other than dividends or distributions
payable in capital stock of the Company or other securities ranking junior in
right of payment to the Junior Subordinated Debentures) on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
or any security ranking pari passu with or junior in right of payment to the
Junior Subordinated Debentures, or make any guarantee payments with respect to
the foregoing (other than pro rata payments under the Guarantee) or repurchase,
or cause any of its subsidiaries to repurchase, any security of the Company
ranking pari passu with or junior in right of payment to the Junior Subordinated
Debentures (except for payments made on any series of Junior Subordinated
Debentures upon the stated maturity of such Junior Subordinated Debentures) if
at such time (i) there shall have occurred any event of which the Company has
actual knowledge that (a) with the giving of notice or the lapse of time, or
both, would constitute an Event of Default with respect to such Junior
Subordinated Debentures and (b) which the Company shall not have taken
reasonable steps to cure, (ii) the Company shall have given notice of its
selection of an Extension Period as provided in the Indenture, and such
Extension Period, or any extension thereof, shall have commenced and be
continuing, or (iii) the Company shall be in default with respect to its payment
of any obligations under the Guarantee. Notwithstanding the foregoing, the
Company may redeem, purchase, acquire or make a liquidation payment with respect
to any of its capital stock or any security ranking pari passu with or junior in
right of payment to the Junior Subordinated Debentures, make any guarantee
payment with respect to the foregoing or repurchase, or cause any of its
subsidiaries to repurchase, any security of the Company ranking pari passu with
or junior in right of payment to the Junior Subordinated Debentures with
securities (or the proceeds from the issuance of securities) having no higher
ranking than the capital stock or the other securities which are to be redeemed,
purchased, or acquired, with respect to which a liquidation payment is to be
made, to which a guarantee payment is to be made with respect to the foregoing
or which are to be repurchased. (Section 1005).
The Company also covenants (i) not to transfer ownership of Common
Securities of the Issuer to which Junior Subordinated Debentures have been
issued to any person other than an affiliate of the Company as permitted under
the Indenture; provided that no such transfer will result in (x) the Issuer
being considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended, or (y) the Issuer not being
taxed as a grantor trust for United States federal income tax purposes, (ii) not
to voluntarily dissolve, wind up or terminate the Issuer, except in connection
with the distribution of the Junior Subordinated Debentures to the holders of
the Preferred Securities of the Issuer in liquidation of the Issuer or in
connection with certain mergers, consolidations or amalgamations permitted by
the Trust Agreement and (iii) to use its reasonable efforts, consistent with the
terms and provisions of the Trust Agreement, to cause the Issuer to remain a
grantor
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trust and otherwise not to be classified as an association taxable as a
corporation for United States federal income tax purposes. (Section 1005).
EVENTS OF DEFAULT
The Indenture will provide that any one or more of the following
described events with respect to Junior Subordinated Debentures that has
occurred and is continuing constitutes an "Event of Default" with respect to the
Junior Subordinated Debentures:
(a) failure for 30 days to pay any interest on the Junior
Subordinated Debentures, including any Additional Interest in respect
thereof, when due (subject to the deferral of any due date in the case
of an Extension Period);
(b) failure to pay any principal on the Junior Subordinated
Debentures when due whether at maturity, upon redemption, by
declaration of acceleration or otherwise; except that, in the case of
an optional redemption, the failure to redeem any Junior Subordinated
Debenture which is the result of the Company's failure to deposit on
or before the Redemption Date with the Debenture Trustee (and/or
having irrevocably directed the Debenture Trustee to apply, from money
held by it available to be used for the redemption of Junior
Subordinated Debentures) an amount in cash sufficient to redeem all of
the Junior Subordinated Debentures to be redeemed, shall not be an
Event of Default, but shall be deemed a rescission of the call for
redemption;
(c) failure to observe or perform in any material respect any
other covenant relating to such series of Junior Subordinated
Debentures contained in the Indenture for 90 days after written notice
to the Company from the Debenture Trustee or the holders of at least
25% in principal amount of the outstanding Junior Subordinated
Debentures; or
(d) certain events in bankruptcy, insolvency or reorganization of
the Company. (Section 501).
If an Event of Default has occurred and is continuing, the holders of
a majority in outstanding principal amount of the Junior Subordinated Debentures
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Debenture Trustee, provided such direction may
not be in conflict with the Indenture and the Debenture Trustee may take any
other action deemed proper by the Debenture Trustee which is not inconsistent
with such directions. (Section 512). The Debenture Trustee or the holders of not
less than 25% in aggregate outstanding principal amount of the Junior
Subordinated Debentures may declare the principal and interest due and payable
immediately upon an Event of Default. In addition, the holders of at least 25%
in aggregate Liquidation Amount of the Preferred Securities shall have such
right. The holders of a majority in outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default has been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration and any Additional
Interest has been deposited with the Debenture Trustee. (Section 502).
The holders of a majority in outstanding principal amount of the
Junior Subordinated Debentures may, on behalf of the holders of all the Junior
Subordinated Debentures, waive any past default, except a default in the payment
of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture. (Section 513). The Company is required to file
annually with the Debenture Trustee a certificate as to whether or not the
Company is in compliance with all the conditions and covenants applicable to it
under the Indenture and, if the Company shall be in default, specifying all such
defaults. (Section 1004).
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Unless otherwise provided in a Prospectus Supplement, a voluntary or
involuntary dissolution of the Issuer prior to the redemption or maturity of the
Junior Subordinated Debentures held by the Issuer will not constitute an Event
of Default with respect to such Junior Subordinated Debentures. If the Issuer is
dissolved, an event the possibility of which the Company and the Issuer consider
to be remote, any of the following, among other things, could occur: (i) a
distribution of the Junior Subordinated Debentures held by the Issuer to the
holders of the Preferred Securities, (ii) a cash distribution to the holders of
such Preferred Securities out of the sale of assets of such Issuer, after
satisfaction of all liabilities to creditors, or (iii) a permitted redemption at
par of the Junior Subordinated Debentures, and a consequent redemption of a like
amount of such Preferred Securities, at the option of the Company under the
circumstances described under "-- Optional Redemption" or (iv) the rollover of
Trust Property (as defined in the Trust Agreement) into another entity with
similar characteristics.
FORM, EXCHANGE AND TRANSFER
The Junior Subordinated Debentures, if issued in certificated form,
will be issuable only in registered form, without coupons and only in
denominations of $25 and integral multiples thereof. (Section 302).
Subject to the terms of the Indenture, the Junior Subordinated
Debentures may be presented for registration of transfer or exchange (duly
endorsed or accompanied by satisfactory instruments of transfer) at the office
of the securities registrar or at the office of any transfer agent designated by
the Company for such purpose. No service charge will be made for any
registration of transfer or exchange of Junior Subordinated Debentures, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Such transfer or exchange
will be effected upon the securities registrar or such transfer agent, as the
case may be, being satisfied with the documents of transfer, title and identity
of the person making the request. The Company has appointed the Debenture
Trustee as the initial securities registrar. (Section 305). The Company may at
any time designate additional transfer agents, rescind the designation of any
transfer agent or approve a change in the office through which any transfer
agent acts. (Section 1002).
If the Junior Subordinated Debentures are to be redeemed in part, the
Company will not be required to issue, register the transfer of or exchange any
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of mailing of the notice of redemption for such
Junior Subordinated Debentures that may be selected for redemption and ending at
the close of business on the day of such mailing. (Section 305).
PAYMENT AND PAYING AGENTS
Payment of interest on a Junior Subordinated Debenture on any interest
payment date will be made to the person in whose name such Junior Subordinated
Debenture (or one or more predecessor Junior Subordinated Debentures) is
registered at the close of business on the regular record date for such
interest. (Section 307).
Principal of and any interest on the Junior Subordinated Debentures
will be payable at the office of such Paying Agent or Paying Agents as the
Company may designate for such purpose from time to time, except that at the
option of the Company, payment of any interest may be made by check mailed to
the address of the person entitled thereto as such address appears in the
securities register or by wire transfer. The corporate trust office of the
Debenture Trustee in the City of Wilmington, Delaware is designated as the
Company's initial sole Paying Agent for payments with respect to the Junior
Subordinated Debentures. The Company may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent or approve a change in the
office through which any Paying Agent acts. (Section 1002).
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SUPPLEMENTAL INDENTURES; MODIFICATION OF THE INDENTURE
From time to time the Company and the Debenture Trustee may, without
the consent of the holders of the Junior Subordinated Debentures, amend, waive
or supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act,
or making any other change that does not adversely affect the rights of any
holder of Junior Subordinated Debentures. (Section 901). The Indenture will
contain provisions permitting the Company and the Debenture Trustee, with the
consent of the holders of not less than a majority in principal amount of the
Junior Subordinated Debentures, to modify the Indenture in a manner affecting
the rights of the holders of such Junior Subordinated Debentures; provided that
no such modification may, without the consent of the holder of each outstanding
Junior Subordinated Debenture so affected, (i) change the fixed maturity of the
Junior Subordinated Debentures, reduce the principal amount thereof, or reduce
the rate or extend the time for payment of interest thereon (otherwise than as
permitted under the Indenture), (ii) reduce the percentage of the principal
amount of Junior Subordinated Debentures, the holders of which are required to
consent to any such modification of the Indenture or (iii) modify certain
provisions of the Indenture relating to the waiver of past defaults or
compliance by the Company with certain covenants set forth therein. The
Indenture also requires the consent of the holders of the affected Preferred
Securities, if any, in respect of certain amendments to or termination of the
Indenture and in respect to compliance by the Company with certain covenants in
the Indenture. (Section 902). In addition, the Company and the Debenture Trustee
may execute, without the consent of any holders of Junior Subordinated
Debentures, Supplemental Indentures for the purpose of creating new series of
Junior Subordinated Debentures. (Section 901).
CONSOLIDATION, MERGER AND SALE
The Company may not consolidate with, merge into, or convey, transfer
or lease its properties and assets substantially as an entirety to, any person
(a "Successor Person"), and may not permit any person to merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to the
Company, unless: (i) the Successor Person (if any) is a corporation,
partnership, trust or other entity organized and validly existing under the laws
of any United States jurisdiction and assumes the Company's obligations on the
Junior Subordinated Debentures, the Indenture, the Guarantee and the Expense
Agreement; (ii) immediately after giving effect to the transaction and treating
any indebtedness which becomes an obligation of the Company or any subsidiary as
a result of the transaction as having been incurred by it at the time of the
transaction, no Event of Default, and no event which, after notice or lapse of
time, would become an Event of Default, shall have occurred and be continuing;
(iii) such transaction does not give rise to any breach or violation of the
Trust Agreement or the Guarantee; and (iv) the Company has delivered to the
Debenture Trustee an Officers' Certificate and an Opinion of Counsel as to
certain matters. (Section 801).
SATISFACTION AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from
any and all obligations in respect of the Junior Subordinated Debentures
(except, in each case, for certain obligations to register the transfer or
exchange of such Junior Subordinated Debentures, replace stolen, lost or
mutilated Junior Subordinated Debentures and hold moneys or U.S. Government
Obligations (as defined in the Indenture) for payment in trust) if (i) the
Company deposits with the Debenture Trustee, in trust, moneys or U.S. Government
Obligations in an amount sufficient to pay all the principal of, and interest
on, such Junior Subordinated Debentures on the dates such payments are due in
accordance with the terms of such Junior Subordinated Debentures, (ii) the
Company has paid all other sums payable under the Indenture and (iii) the
Company delivers to the Debenture Trustee an Officers' Certificate and an
Opinion of Counsel, stating that all conditions precedent to the satisfaction
and discharge of the Indenture have been complied with. (Section 401).
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GOVERNING LAW
The Indenture, any Supplemental Indenture and the Junior Subordinated
Debentures will be governed by, and construed in accordance with, the laws of
the State of New York. (Section 112).
MISCELLANEOUS
The Company will have the right at all times to assign any of its
rights or obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of the Company and certain other persons in accordance with the
Indenture, provided that, in the event of any such assignment, the Company will
remain liable for such obligations. Subject to the foregoing, the Indenture will
be binding upon and inure to the benefit of the parties thereto and their
respective successors and assigns. (Section 109).
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As long as payments of interest and other payments are made when due
on the Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities because: (i)
the aggregate principal amount of the Junior Subordinated Debentures will be
equal to the sum of the aggregate stated Liquidation Amount of the Issuer
Securities; (ii) the interest rate and interest and other payment dates on the
Junior Subordinated Debentures will correspond to the distribution rate and
distribution and other payment dates on the Preferred Securities; (iii) the
Expense Agreement entered into by the Company pursuant to the Trust Agreement
provides that the Company shall pay for all, and the Issuer shall not be
obligated to pay, directly or indirectly, for any, costs, expenses or
liabilities of the Issuer, including any income taxes, duties and other
governmental charges, and all costs and expenses with respect thereto, to which
such Issuer may become subject, except for United States withholding taxes and
the Issuer's payment obligations to holders of the Preferred Securities under
such Preferred Securities; and (iv) the Trust Agreement further provides that
the Trustees shall not cause or permit the Issuer to, among other things, engage
in any activity that is not consistent with the limited purposes of the Issuer.
The Company's obligations under the Guarantee, the Trust Agreement, the Expense
Agreement, the Junior Subordinated Debentures and the Indenture constitute, in
the aggregate, a full and unconditional guarantee with respect to the Preferred
Securities.
Payments of distributions and other amounts due on Preferred
Securities (to the extent the Issuer has funds sufficient for the payment of
such distributions) are guaranteed by the Company as and to the extent set forth
under "Description of Guarantee." If and to the extent that the Company does not
make payments on the Junior Subordinated Debentures, the Issuer will not pay
distributions or other amounts due on the Preferred Securities.
A holder of a Preferred Security to which such Guarantee applies may
institute a legal proceeding directly against the Company to enforce such
holder's rights under such Guarantee without first instituting a legal
proceeding against the Issuer of such Preferred Security or any other person or
entity. In addition, if the Company defaults on its obligations under the
Indenture, the holders of at least 25% in the aggregate Liquidation Amount of
the Preferred Securities then outstanding shall have the right to enforce the
rights of the Issuer under the Junior Subordinated Debentures.
The Preferred Securities will evidence the rights of the holders
thereof to the benefits of the Issuer, a trust that exists for the sole purpose
of issuing its Issuer Securities and investing the proceeds of its Preferred
Securities in the corresponding Junior Subordinated Debentures of the Company,
while the Junior Subordinated Debentures represents indebtedness of the Company.
A principal difference between the rights of a holder of a Preferred Security
and a holder of a Junior Subordinated Debenture is that a holder of a Junior
Subordinated Debenture will accrue, and (subject to the permissible extensions
of the interest payment period) is entitled to receive, interest on
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the principal amount of Junior Subordinated Debentures held, while a holder of
Preferred Securities is only entitled to receive distributions if and to the
extent the Issuer has funds sufficient for the payment of such distributions.
Upon any voluntary or involuntary dissolution, winding-up or
termination of the Issuer involving the distribution of Junior Subordinated
Debentures, the holders of Preferred Securities will be entitled to receive, out
of assets legally available for distribution to such holders, the Final
Distribution or a Liquidation Distribution; provided, however, that if an Event
of Default under the Trust Agreement shall have occurred and be continuing, the
holders of the Common Securities shall be entitled to receive, out of assets
legally available for distribution to such holders, distributions only after the
holders of the Preferred Securities. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Issuer, as a holder of
Junior Subordinated Debentures, would be a subordinated creditor of the Company,
subordinated in right of payment to all Senior Indebtedness, but entitled to
receive payment in full of principal and interest before any stockholders of the
Company receive any payments or distributions. Since the Company has agreed to
pay for all costs, expenses and liabilities of the Issuer (other than United
States withholding taxes and other than the Issuer's obligations to the holders
of Preferred Securities under the Preferred Securities, which obligations are
independently covered by the Guarantee), the positions of a holder of Preferred
Securities and a holder of Junior Subordinated Debentures relative to other
creditors and to stockholders of the Company in the event of a liquidation or
bankruptcy of the Company would be substantially the same.
A default or event of default under any Senior Indebtedness will not
constitute a default or Event of Default under the Junior Subordinated
Debentures. However, in the event of payment defaults under, or acceleration of,
Senior Indebtedness, the subordination provisions of the Junior Subordinated
Debentures provide that no payments may be made in respect of the Junior
Subordinated Debentures until such Senior Indebtedness has been paid in full or
any payment default thereunder has been cured or waived.
Failure to make required payments on the Junior Subordinated
Debentures would constitute an Event of Default under the Indenture.
PLAN OF DISTRIBUTION
The Preferred Securities may be sold in a public offering to or
through underwriters or dealers designated from time to time. The Issuer may
sell its Preferred Securities as soon as practicable after the effectiveness of
the Registration Statement of which this Prospectus is a part. The names of any
underwriters or dealers involved in the sale of the Preferred Securities in
respect of which this Prospectus is delivered, the number of Preferred
Securities to be purchased by any such underwriters or dealers and the
applicable commissions or discounts will be set forth in the applicable
Prospectus Supplement.
Underwriters may offer and sell Preferred Securities at a fixed price
or prices, which may be changed, or from time to time at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. In connection with the sale of Preferred
Securities, underwriters will be deemed to have received compensation from the
Company and the Issuer in the form of underwriting discounts or commissions.
Underwriters may sell Preferred Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters.
Any underwriting compensation paid by the Company to underwriters in
connection with the offering of the Preferred Securities, and any discounts,
concessions or commissions allowed by such underwriters to participating
dealers, will be set forth in the applicable Prospectus Supplement. Underwriters
and dealers participating in the distribution of Preferred Securities may be
deemed to be underwriters, and any discounts and commissions received by them,
and any profit realized by them on resale of such Preferred Securities, may be
deemed to constitute underwriting discounts and commissions under the Securities
Act. Underwriters and dealers
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may be entitled, pursuant to their agreement with the Company and the Issuer, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by the
Company for certain expenses.
In connection with the offering of the Preferred Securities, the
Issuer thereof may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as set forth in the
applicable Prospectus Supplement.
Underwriters and dealers may engage in transactions with, or perform
services for, the Company, the Issuer and any of their respective affiliates.
The Issuer's Preferred Securities will be a new issue of securities
and will have no established trading market. Any underwriters to whom the
Issuer's Preferred Securities are sold by such Issuer for public offering and
sale may make a market in such Preferred Securities, but such underwriters will
not be obligated to do so and may discontinue any market-making at any time
without notice. Such Preferred Securities may or may not be listed on a national
securities exchange. No assurance can be given as to the liquidity of or the
existence of meaningful trading markets for any Preferred Securities.
LEGAL OPINIONS
Certain legal matters in connection with the Preferred Securities are
being passed upon for the Company and the Issuer by Hinkle, Cox, Eaton, Coffield
& Hensley, L.L.P., Amarillo, Texas, and Cahill Gordon & Reindel, a partnership
including a professional corporation, New York, New York, and for the Issuer by
Richards, Layton & Finger, special Delaware counsel to the Company and the
Issuers. Cahill Gordon & Reindel and Richards, Layton & Finger are not passing
upon the incorporation of the Company and are relying upon the opinions of
Hinkle, Cox, Eaton, Coffield & Hensley, L.L.P. as to matters of New Mexico and
Texas law; Rainey, Ross, Rice & Binns, Oklahoma City, Oklahoma as to matters of
Oklahoma law; and Foulston & Siefkin, Topeka, Kansas as to matters of Kansas
law. Gary W. Wolf, a partner in the law firm of Cahill Gordon & Reindel, is a
director of the Company.
EXPERTS
The consolidated financial statements of Southwestern Public Service
Company and subsidiaries as of August 31, 1995 and 1994 and for the years then
ended included in the Company's 1995 Form 10-K, which is incorporated herein by
reference, have been audited by Deloitte & Touche LLP ("Deloitte & Touche"),
independent certified public accountants, as stated in their report, which is
also incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
With respect to any unaudited interim financial information included
in the Company's quarterly reports on Form 10-Q that are or will be incorporated
herein by reference, Deloitte & Touche applies limited procedures in accordance
with professional standards for reviews of such information. As stated in any of
its reports that are included in the Company's quarterly reports on Form 10-Q
that are or will be incorporated herein by reference, Deloitte & Touche did not
audit and did not express an opinion on such interim financial information.
Accordingly, the degree of reliance on any of Deloitte & Touche's reports on
such information should be restricted in light of the limited nature of the
review procedures applied. Deloitte & Touche is not subject to the liability
provisions of Section 11 of the Securities Act for any of its reports on such
unaudited interim financial information because those reports are not "reports"
or a "part" of the Registration Statement filed under the Securities Act with
respect to the
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Preferred Securities or the Junior Subordinated Debentures prepared or certified
by an accountant within the meaning of Sections 7 and 11 of the Securities Act.
The consolidated financial statements of Southwestern Public Service
Company and subsidiaries for the year ended August 31, 1993 included in the
Company's 1995 Form 10-K, which is incorporated herein by reference, are
incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, included in the 1995 Form 10-K, and
upon the authority of that firm as experts in accounting and auditing.
To the extent that a firm of certified public accountants audits and
reports on the financial statements of the Company issued at future dates, and
consents to the use of its report thereon, such financial statements also will
be incorporated by reference herein in reliance upon its report and said
authority.
The statements and legal conclusions as to all matters of law in the
Company's 1995 Form 10-K, the November Quarterly Report, the February Quarterly
Report, the May Quarterly Report and this Prospectus (except as to matters of
Kansas and Oklahoma law and United States federal income tax matters in such
documents) have been reviewed by Hinkle, Cox, Eaton, Coffield & Hensley, L.L.P.
Statements and legal conclusions as to matters of Oklahoma law in such documents
have been reviewed by Rainey, Ross, Rice & Binns. Statements and legal
conclusions as to matters of Kansas law in such documents have been reviewed by
Foulston & Siefkin. Statements and legal conclusions in the accompanying
Prospectus Supplement as to United States federal income tax matters have been
reviewed by Cahill Gordon & Reindel. All such statements and legal conclusions
are set forth in such documents and incorporated by reference herein or set
forth herein in reliance upon said firms, respectively, as experts.
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<S> <C>
No dealer, salesperson, or other person has been
authorized to give any information or to make any
representation other than those contained in this SOUTHWESTERN PUBLIC
Prospectus, including any prospectus supplement; in SERVICE CAPITAL I
connection with the offer contained herein, and if given or
made, such information or representation must not be
relied upon as having been authorized by the Company or
any Underwriter. This Prospectus, including any
prospectus supplement, does not constitute an offer to sell,
or a solicitation of an offer to buy, any of these securities
in any jurisdiction to any person to whom it is not lawful
to make such offer or solicitation in such jurisdiction or in 4,000,000
which the person making such offer or solicitation is not Preferred Securities
qualified to do so. Neither the delivery of this Prospectus,
including any prospectus supplement, nor any sale made
hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of
the Company since the date hereof.
__________________ 7.85% Trust
Preferred Securities, Series A
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page Fully and Unconditionally
Guaranteed by
The Company............................................... S-4
The Issuer................................................ S-4
Summary Capitalization.....................................S-6 SOUTHWESTERN PUBLIC
Earnings Ratio.............................................S-6 SERVICE COMPANY
Recent Developments....................................... S-7
Use of Proceeds........................................... S-9 PROSPECTUS SUPPLEMENT
Certain Terms of the Preferred Securities..................S-9
Certain Terms of the Guarantee............................S-12
Certain Terms of the Junior Subordinated
Debentures..............................................S-13
United States Taxation....................................S-14
Underwriting..............................................S-18
PROSPECTUS
Available Information....................................... 3
Incorporation of Certain Documents by
Reference............................................... 3
The Company................................................. 4
The Issuer.................................................. 4
Risk Factors................................................ 5
Recent Developments......................................... 8
Use of Proceeds............................................. 8 Dillon, Read & Co. Inc.
Earnings Ratios............................................. 9 Dean Witter Reynolds Inc.
Description of Preferred Securities......................... 9 A.G. Edwards & Sons, Inc.
Description of Guarantee................................... 20 PaineWebber Incorporated
Description of Junior Subordinated Debentures.............. 22 Prudential Securities Incorporated
Relationship Among the Preferred Securities, Smith Barney Inc.
the Junior Subordinated Debentures
and the Guarantee........................................ 32 October 16, 1996
Plan of Distribution....................................... 33
Legal Opinions............................................. 34
Experts.....................................................34
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